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Slowly but surely, the US labor market is recovering from its Covid-19 recession. But as happens with the disease itself, this recuperation is proving slow and uneven – and could leave side effects which continue to affect the economy for the foreseeable future.
The US economy still has 5.3 million fewer jobs than February 2020, before the pandemic started impacting the economy. The number of jobs is likely to return to prepandemic levels by the end of 2022, but that overall milestone will mask an unbalanced reality: Some industries will still be far from a full job-recovery.
Here are seven reasons why certain sectors are likely to suffer a job “long Covid-19.”
Industries that are well below prepandemic job levels and are unlikely to fully recover in 2022
Source: Bureau of Labor Statistics. *In some industries the most recent data is from July 2021.
1. Covid-19 is not going away. The most likely scenario for 2022 no longer involves eradicating Covid-19. While most consumers are likely to not be impacted by the pandemic, a low-level infection rate will continue to impact some at-risk and risk-averse consumers’ spending on in-person services.
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An ongoing desire to avoid large crowds, especially in indoor settings, may continue to harm industries that depend on such circumstances, including fitness and recreational sports centers, accommodations, restaurants, performing arts and spectator sports, amusement parks and arcades, bars, caterers and so on. That, in turn, will mean fewer workers hired in those sectors. In addition, the virus’s worldwide spread suggests that global tourism will continue to be negatively impacted into 2023 if some travel bans remain in place.
Older Americans’ Covid-19 vulnerability will also have ripple effects. Facing a longer and more isolated period of social distancing, they are likely to cut back on spending on in-person services more than younger people. Older households are responsible for a disproportionately high share of spending in consumption categories such as travel, lodging and restaurants. As a result, full job-recovery will take longer in these industries than the economy overall.
2. Decline in work-related transit and travel. Because of the shift to remote work, fewer people are commuting to the office on a daily basis, impacting transit systems, parking lots and garages. And because workers can collaborate effectively through video conferencing technologies, many companies will likely cut back on business travel, which will impact air and train transportation, taxi and limousine services, hotels, restaurants, conferences and business events as well as food-services contractors and caterers.
3. Fewer people are in the office during the workday, and more are at home. The need for office space will decline, so companies will reduce their office footprint, impacting not only security, cleaning and maintenance jobs but also commercial real estate and construction. Working from home will reduce spending on food around offices. And as people spend more time at home they will need less office attire, as well as dry cleaning and laundry services.
4. Shift to online shopping. Even though retail sales were well above prepandemic levels by August, employment dropped between 9 and 23 percent in retail segments that lend themselves to online shopping, such as electronic and appliances stores, sporting goods, hobby shops, books and music, clothing and accessories stores and cosmetic and beauty supply stores. While these areas will continue to recover, they likely won’t achieve their prepandemic job levels. The long-predicted, e-commerce-driven, retail apocalypse has arrived.
5. Shifts to online customer service. The pandemic forced industries such as food services, health care, banking, and higher education were forced to increasingly shift online, accelerating a pre-existing trend. This resulted in many in-person customer services positions such as health care receptionists, commercial banking tellers and reservation ticket agents being eliminated in favor of online help and even automation.
6. Increased automation and labor productivity. After a decade of historically-slow labor productivity growth, one must be cautious about predicting a coming reversal, but the events of 2020 and 2021 may spur employers to automate and or take other cost-savings actions. 2021’s severe labor shortage and accelerating wages incentivized employers to replace workers with technology or make them more productive through process improvement. In addition, the accelerated digital transformation of both business and consumer activities makes it easier to eliminate routine jobs, such as telemarketing bureaus, information clerks, cashiers and restaurant servers.
In the past decade, office and administrative-support jobs, including many routine ones done by workers typically without a bachelor’s degree, were most likely to be automated. The need to increase the use of contactless payments and transactions during the pandemic only sped up this trend.
7. Shift to online education. Post-secondary education is one of the few white-collar sectors especially hard hit. The pandemic accelerated the shift to online learning in colleges and universities. In July 2021, for example, college and university employment was 6 percent below July 2019 levels. The rise in online education suggests that a full recovery in some segments of higher education employment is unlikely.
The biggest commonality among these affected sectors is that they largely do not require workers to have bachelor’s degrees. In normal times that would mean that these workers will struggle to find a job. But the extreme shortage of such workers during 2021 suggests that supply is unlikely to meet demand any time soon. Longer term, the massive retirement of baby boomers that will occur through the rest of the decade will lower the supply of non-college workers, leading to prolonged labor shortages in blue-collar and manual services.
Net, Covid-19 will persist and will continue to change the US labor market. The realignment of jobs throughout the economy will continue to create supply and demand imbalances for years to come.