CNYCA’S COVID-19 Economic Update: Job market behavior in a pandemic—no easy answers

Disclaimer: Content in this article was obtained from NYC Employment + Training Coalition’s (NYCETC) NYC Workforce Weekly and the Center for New York City Affairs (CNYCA) to serve as a resource for job seekers and those who are curious/interested in learning more about the current economy of the workforce.

Original article HERE / Past installments on CNYCA’S COVID-19 Economic Update HERE

We’ve all seen the “Help Wanted” signs in the windows of our neighborhood businesses. It’s a reassuring sign that business is coming back, and that our sequestered days might be waning. On the other hand, how can it be that jobs are going unfilled when we know that three-quarters of a million New Yorkers are jobless or have exited the labor market over the past year?

Many businesses are right to ask whether the extra $300 in weekly unemployment benefits available through September 6 is keeping workers home. But as journalist Greg David noted in a recent article in The City on this issue, “it’s complicated.” David cited a recent Brooklyn Chamber of Commerce survey in which 42 percent of businesses felt that federal unemployment benefits were discouraging return to work. Yet, the Brooklyn survey, according to a report in the Post, also found that 41 percent of businesses said they couldn’t provide enough hours to employees, 28 percent said employees had moved on to other jobs, workers had safety concerns in 12 percent of the cases, and employee health issues were cited by five percent of businesses. And several businesses also noted that lack of child care was keeping some workers home.

Clearly, a multiplicity of factors is influencing job market behavior as pandemic business restrictions are eased, Covid case rates decline, and vaccinations become more widespread. It is not so clear cut that unemployment benefits are the primary cause for some jobs going unfilled, although the availability of benefits likely does make it possible for many of the unemployed to exercise greater latitude in making decisions in the best interests of their families, personal health, and career choices. But isn’t that appropriate considering that the unemployed lost their jobs due to a public health emergency not of their making, and that the pandemic has upended livelihoods and family circumstances for millions?

Beyond survey perceptions there are various economic indicators that reinforce the notion that there are no simple or easy answers on this question. Even though an earlier $600 weekly federal unemployment supplement ended at the beginning of August last summer, there was no local job surge in ensuing months. Rather, the second wave of Covid infections beginning in October kept the city’s overall job level flat for several months. Jobs didn’t start to rebound strongly until February and March (NYC added 90,000 jobs over those two months), even though the new $300 weekly federal supplement began in early January.

Employment in restaurants—where unfilled job openings are most common—rebounded some in the fall, fell off again during the winter, and started hiring again in February. This erratic pattern may have signaled an instability that deterred workers from returning. (April payroll data for New York City will be released on May 20.)

The fact that employment in child care centers has not risen appreciably since November also supports the notion that the lack of child care capacity has been preventing some parents from returning to work. The March 2021 employment level was still 21 percent below the pre-pandemic level, and there was a severe crisis in child care accessibility and affordability before the pandemic. The very slow pace with which the State has been moving to disburse emergency federal child care funding has further exacerbated the child care situation.

Since most neighborhood businesses are not back to full capacity, many are not able to offer their employees full-time schedules. Unlike other states, New York State’s partial unemployment system is particularly antiquated and confusing for workers to navigate. There are “cliff effects” as the figure below indicates, where an additional hour of part-time work can dramatically reduce partial unemployment benefits, unduly complicating a worker’s decision about returning to work part-time. State legislators and the governor have had proposals to remedy the problem since January but have not yet reached agreement on a resolution. Meanwhile, an estimated 25 percent of the two million-plus UI recipients in New York State are receiving partial benefits.

Several news reports indicate that some restaurant businesses have raised pay offers or enhanced benefits to attract workers back. That is what labor economists would expect to happen when recruitment problems persist. The need for higher pay is particularly warranted given that New York State pay regulations permit a “subminimum wage” for tipped restaurant workers of $10 an hour whereas the wage floor for most New York City workers has been $15 since the beginning of 2019. Since most restaurants are far below pre-pandemic business levels, tips are likely a fraction of what they previously were.

Workforce Confidence Levels Drop in the U.S.

Workforce confidence levels have been improving in many states by the end of June compared to the beginning of March; and to name a few: Ohio, New York, Illinois and Pennsylvania. Many small and medium sized businesses are slowly getting back up and bustling. For the most part, these states have been reopening cautiously.

However, due to the rapid reopening of some states such as Texas, California and Florida – their employment recovery has been shifting backwards recently. Their workforce confidence levels have dropped significantly due to the sudden spikes of COVID-19 cases in June.

Below, you will find a more specific chart illustrated by George Anders from his LinkedIn article to show the confidence levels across the U.S. that are heavily affected by this pandemic.

Table of 12 large states, showing their June COVID-19 cases as well as the workplace confidence levels of residents in those states

Image via George Anders’ article

Once the workforce confidence level has been exhausted, this can trigger setbacks in causing rollbacks of the reopening plans – delaying the economy and businesses as well as weakening our consumer spending.

While there are still huge spikes in confirmed cases, the unemployment rate in many states are still continuing to rise slowly if not rapidly.

Many Americans are still unemployed, however more are slowly becoming employed again as the unemployment rate has decreased from 14.7% on April 2020 to 11.1% on June 2020. Due to economic reasons, over 9 million are employed as part-time workers or working with significantly reduced hours.

According to the U.S. Private Sector Job Quality Index (JQI), over 37 million jobs in the U.S. are more susceptible to layoffs in the short-term. These jobs are the hardest hit by this economic and health crisis, which include the following that are in the service sector: those in retail, hospitality, food service, real estate, education, etc. It is stated that “most of these were front-line, customer-facing jobs that offer both low hourly wages and a limited number of hours of work per week.

These low-wage workers are hit in multiple fronts since many of them do not have health insurance from their employers, many of them are underrepresented and underpaid, some of them are in debt, and some do not have enough money in their savings to secure their living expenses. In addition, some of them are ineligible to claim unemployment insurance because there are also those who work off the books and do not pay taxes.

It is also becoming more transparent that many who were supposedly temporary layoffs, are becoming permanent layoffs. This means that there will be a longer extension period of unemployment benefits and we will soon – see a significant increase in new filing claims, surpassing 30 million unemployed Americans as of the week ending July 4th.

With the expansion of unemployment benefits, in addition to the new federal funding of the $600 Pandemic Unemployment Assistance during this recession – many find that it creates a disincentive for the unemployed to return to work, since it is argued that these individuals earn more from unemployment benefits than they did from employment.

However, these unemployment benefits are actually a good thing since it helps keep the economy running. With the coverage and payouts, this will permit individuals to continue paying their rent, groceries, utilities, Internet, other insurance and consuming goods while the economy is still playing its role. While some states are shifting back to their normality, not all of them are confident enough to financially support their citizens, residents as well as businesses. After all, the federal government has the power to generate resources and twist things around to inhibit this exacerbation.

While the $600 Pandemic Emergency Unemployment Compensation is running out and is set to expire on July 26, 2020, all 49 states except for South Dakota are offering an extra 20 weeks of regular extended unemployment insurance benefits until December 31, 2020. In addition, our second stimulus bill which was approved by the House of Representatives – offers an extension of $600 Pandemic Unemployment Benefits until 2021, however it has not been passed by the Senate yet.

Chart via U.S. Bureau of Labor Statistics (To see the number values for each state, refer to the source.)

Based on the chart above, this depicts where the 50 states are currently standing as of June 2020 over a 12-month period since June 2019. It is affirmed that “Massachusetts had the highest unemployment rate in June, 17.4 percent, followed by New Jersey, 16.6 percent, and New York, 15.7 percent.

Due to the prolonged joblessness, it is necessary that these unemployment benefits continue even if the economy picks up. Right now, supporting those low wage workers who are now jobless, will be obligatory in ensuring a resilient economy once there is a solution to this public health crisis.

Once everything normalizes, this will be the approach to economic recovery as we will continue to see that there are more available job seekers than job openings.