Editor’s note: This is part of a regular biweekly Covid-19 Economic Update prepared by economist James Parrott of the Center for New York City Affairs with the support of the Consortium for Worker Education and the 21st Century ILGWU Heritage Fund. Read past installments here.
It is certainly encouraging that the U.S. Senate passed the American Rescue Plan on March 6, paving the way for $1.9 trillion in federal funding for unemployed workers, vaccine dissemination, public schools, state and local fiscal relief, public health and child care investments, rental assistance, restaurant aid, increased child tax credits, and numerous other measures. President Biden’s Plan will help contain the pandemic and restore millions of jobs. However, it would be a mistake to think that the economy is going to bounce back to where it was a year ago once vaccines are widespread and business restrictions lifted.
The pandemic has ushered in two types of significant labor market changes: one that involves an acceleration of technology trends, and another involving heightened public health concerns associated with infectious diseases and caution on the part of some regarding engaging in activities that involve close interpersonal contact. Pushing e-commerce into overdrive and nearly half of the workforce into working remotely for months on end will lessen the demand for some industries and occupations and heighten the demand for others. Public health concerns regarding infectious diseases will certainly moderate when vaccinations are widespread but residual apprehensions likely will persist for a few years more and will likewise have an impact in rejiggering the demand for certain jobs.
Economists at the U.S. Bureau of Labor Statistics (BLS) recently examined several specific trends within these two broad categories in order to better understand the implications of pandemic restrictions for employment projections by industry and occupation1. In this update, we take a look at the net effects of these trends at a national level and relate these projections to the New York City job market.
The BLS economists model two pandemic scenarios in relation to a baseline projection developed from 2019 data that projected long-term structural changes in the economy and labor market over a 10-year time horizon to 2029. In a “moderate” scenario, increased telework reduces the demand for office space and commercial construction, with spillover effects in reduced lunchtime restaurant spending and business travel. Increased telework also spurs demand for information technology (IT)-related services and jobs. Heightened apprehension about infectious diseases favors increased e-commerce and boosts funding for public health investments and medical research.
In a “strong” impact scenario, BLS amplifies the individual and business behavioral changes from the moderate impact scenario. Telework expands by a greater degree, as do the associated impacts on the demand for offices, commercial construction, restaurants, hotels, and travel. The greater prevalence of individual health concerns further reduces in-store shopping, dampens audience demand for live performances and sporting events, and also weakens demand for travel services and in-person restaurant dining.
The chart below shows the projected impact in demand compared to the baseline projection for selected industries for the moderate and strong pandemic effects. Not surprisingly, the industries likely to be hardest hit (-7 to -12 percent) over the long term (2019-29) by the pandemic are hotels and restaurants, with potential for a 10 percent reduction in demand in the strong pandemic impact scenario for construction, non-food retailing, and air and ground transportation. The main industries to benefit from the changes in consumer and business behavior wrought by the pandemic are delivery and IT services.
The BLS economists then estimated the implications of the changes in industry demand by occupation. The chart below includes the baseline 2019-29 projections for selected occupations and shows the considerable impact of the pandemic in depressing the demand for waiters and waitresses, hotel desk clerks, and cashiers, and in boosting the demand for epidemiologists and for IT occupations such as web developers and IT security analysts.
While the BLS projections are only ballpark projections at this point, they do point out the likely direction and possible order of magnitude for significant changes in employment demand as a result of the pandemic. This exercise underscores the fact that many of the relative job changes we have seen in New York City over the past year are likely to be long-lasting. Commentators claiming that the latest infusion of federal funds will power a full and complete economic rebound are ignoring the challenges we face in redeploying tens, if not hundreds, of thousands of New York City workers from one set of industries and occupations to a completely different set of industries and occupations.