COVID-19 Economic Update is a bi-weekly column prepared by economist James Parrott of the Center for New York City Affairs (CNYCA) at The New School, whose research is supported by the Consortium for Worker Education and the 21st Century ILGWU Heritage Fund. Read past installments here.
In testimony before the New York State Assembly Hearing on Employment Trends in New York State Caused by the Covid-19 Pandemic, I recently highlighted several trends that I think are important in understanding the profound Covid-19 economic and employment impact in New York. This Economic Update summarizes the trends I discussed and charts depicting these trends (corresponding to the numbered points below) can be accessed here (scroll down to “presentations”.) I conclude with recommended State policy actions to support recovery and building back better.
- The pandemic economy is best understood in terms of 3 groups of industries: Face-to-Face industries (including, e.g., leisure and hospitality, retail, and arts and entertainment); Essential industries; and Remote-working industries. The pandemic’s economic impact is extremely lopsided in that public health restrictions prevented workers in face-to-face industries from going to work while higher-paid workers in finance, information, professional services and technology were able to work remotely, keeping their jobs, incomes and benefits.
- The pattern of pandemic job losses across these 3 sectors is the opposite of what usually happens in a business cycle downturn when higher-paying industries see the greatest job losses.
- Because the pandemic hit New York first with horrendous consequences, and because we have a concentration of Face-to-Face industries that have borne the brunt of business restrictions, New York’s job losses wre steeper initially, and our recovery has lagged everywhere else in the United States. As of September, NYS’ 8.9 percent job loss – representing 875,000 jobs – was nearly 3 times as great as the national job decline, and our jobs deficit far exceeds that of every other state. As of September, NYS’s jobs deficit accounted for 18.5 percent of the national pandemic jobs deficit. (chart 3 below)
- New York’s nation-leading jobs deficit is not due just to New York City’s 11 percent jobs deficit. As of September, the suburbs had an 8.7 percent jobs deficit, and Upstate a 5.8 percent defict. Upstate’s 5.8 percent jobs deficit puts it on par with the next three hardest hit states—Michigan, Pennsylvania, and Massachusetts. And New York City has a far worse jobs deficit than any other large city in the country.
NYS pandemic jobs deficit nearly three times as great as for the U.S. and greater than in any other large state
- Most of New York’s metro areas are experiencing pandemic jobs deficits more than twice the national average, and all across the state over the past year, the pace of the job rebound has trailed the national average. The second COVID wave last fall, and the more recent third wave pretty much brought New York’s jobs recovery to a halt.
- A handful of industries, led by leisure and hospitality, account for over two-thirds of NYS’s disproportionate job loss. Leisure and hospitality encompasses hotels, restaurants, bars and coffee shops, and arts, entertainment and recreation. Other Face-to-Face industries heavily affected include retail trade, transporation services, personal services, and construction.
- NYS’s current 7.1 percent (September) unemployment rate understates the real extent of unemployment since it excludes those who have left the labor force and it doesn’t reflect that many of those who have returned to work are only working part-time although they want and need full-time work. Even at 7.1 percent, however, we are a long way from the four percent and under range where we were for two years prior to the pandemic’s onset.
- For the third quarter overall, unemployment averaged 7.4 percent but that masks a wide disparity between workers of color and white workers. For Blacks, unemployment in the third quarter was 9 percent, for Latinx workers it was 10.7 percent, and for Asian and other workers it was 7.9 percent, considerably higher than the 5.9 percent unemployment rate for whites.
- Overall, Face-to-Face workers account for 79 percent of those losing jobs due to COVID; remote workers account for 12 percent. Three-quarters of those losing jobs were earning less than $60,000 a year, and 69 percent had less than a 4-year college degree. Nearly half (48 percent) of COVID-dislocated workers were workers of color.
- Latinx workers were 17 percent more likely than workers on average to lose their jobs due to COVID, and young adults ages 18-24 were 32 percent more likely than all workers to be affected since they were heavily concentrated in restaurants and retail trade. Those earning less than $40,000 a year before the pandemic were 17 percent more likely to be dislocated while workers earning $100,000 or more were 31 percent less likely to lose their jobs.
- Over $100 billion in Federal and State unemployment benefits has been paid to New Yorkers since the onset of the pandemic, with over 80 percent funded by the Federal government. But when Federal benefits ran out on September 6, 1.5 million New Yorkers lost benefits that averaged $500-$600 weekly. The loss of the Federal unemployment benefits will mean $4 billion in reduced consumer spending each month, further weakening an already-sluggish recovery. (chart 11 below)
With the expiration of Federal unemployment benefits on September 6, 1.5 million NYS residents lost weekly benefits
- For the first eight months of 2021, New York’s two million-plus UI recipients were fairly evenly divided between NYC, and the rest of the state (the suburbs and Upstate.)
- In the month following the expiration of federal unemployment benefits, over 40 percent of New York’s Black and Latinx households reported difficulty paying for usual household expences, compared to 23 percent of white households, according to the Census Bureau’s Household Pulse survey.
- Medicaid rolls have surged with more than one million enrollees added, about 650,000 in New York City and nearly 500,000 added in the suburbs and Upstate together.
- It took NYS six years to reach the previous employment peak following the 2001-2003 recession, and it took four years following the 2008-09 Great Recession. In both those cases, New York’s peak-to-trough job loss was about 3.5 percent. In the first two months of the pandemic, New York’s job loss was about 20 percent, and after 19 months, it is still 8.9 percent. Without a more concerted economic policy response, our jobs recovery could drag out for several more years. (chart 15 below)
NY’s employment recovery from the last two downturns has taken 4-6 years, and the Covid-19 downturn was much steeper
- The panedmic’s lopsided economic impact is clearly evident in the wide disparity between our job loss and strong state tax collections. State tax collections for the first half of the State’s FY22 (Apr.-Sept. 2021) were up by 24.4 percent vs. the same months of 2019. Withholding tax collections were up by 15 percent. On the other hand, total employment was 10 percent less in the Apr.-Sept. 2021 months that two years ago.
- New York State’s people, businesses, governments, health care providers, and educational institutions have received $272 billion in Federal COVID-19 relief funding since March of
2020. While almost all of the relief funds for individuals and businesses have been paid out, the State budget is now flush with Federal aid that can be used through 2025, and tax collections are far exceeding forecasts of just a few months ago.
Are workers jobless by choice?
Given the fact that New York State has 875,000 fewer jobs than it did pre-pandemic and that hundreds of thousands of New Yorkers report growing economic hardships, it is doubtful that a significant share of the unemployed in the Empire State are jobless by choice. Our jobs deficit is three times the national average—New Yorkers can’t be three times more likely to choose to stay home while they weigh alternative career options. The most recent report from the U.S. Bureau of Labor Statistics on State Job Openings and Labor Turnover indicates that among all states in August, New York had the third lowest job openings rate, one of the lowest new hires rates, and the second lowest quit rate among all states.
New State policy actions are needed
The pandemic’s economic effects have been extremely lopsided. Incomes have risen for the great majority of high-income earners not losing jobs while hundreds of thousands of low-paid workers and small business owners in face-to-face service industries lost their livelihoods to protect public health. State tax revenues have rebounded, and Wall Street and big tech companies are flourishing. But the continuing economic hardships experienced by a substantial number of low-income New Yorkers all across New York State calls for a more targeted response to connecting these workers with promising job openings, and providing additional skills training or education where necessary so that these workers can embody “building back better.”
Hundreds of thousands of New Yorkers are facing a particularly bleak employment outlook for several more months. It would be enormously expensive for New York to replace Federally funded unemployment assistance. A more practical and workable alternative would be to provide wage subsidies on a targeted basis to workers and small businesses most in need, coupled with a greater State investment in workforce retraining programs to enable more residents to trade up to better jobs, including to fill openings in tech-related fields, health care, infrastructure construction, and “green jobs” in clean energy and energy conservation.
# # #