December 02, 2020
(The monthly Employment Situation is scheduled for release by the Bureau of Labor Statistics on Friday, December 4th at 8:30 AM Eastern Time.)
The resurgence of the pandemic is likely to be the biggest factor driving labor market performance in November, especially in a context where most of the CARES Act supports have ended. We are likely to see weak, if any, job growth for the month as the areas most affected by the spread, such as restaurants and hotels, face weaker demand and/or legal restrictions.
We have seen a sharp upward surge in long-term unemployment (more than 26 weeks), as many of the people who were laid off during the shutdowns have not been reemployed. Long-term unemployment always rises in a downturn, but the increase in the share of long-term unemployed has been extraordinarily rapid in the Pandemic Recession. This matters because people who have been unemployed for more than six months generally have a harder time being reemployed.
Women Leaving the Labor Market
This recession has had a much sharper impact on women than men, as sectors that disproportionately employ women have been hardest hit. One measure of this impact is the drop in women’s labor force participation. The labor force participation rate for women over 20 was down by 2.0 percentage points from its year-ago level in October, compared to a drop of 1.5 percentage points for men. This gap may grow in November.
This is obviously due to the fact that the industries that disproportionately employ women have been hit hard by the pandemic. This also shows up in the sharp decline in the number of people voluntarily working part-time, which is more than 12.0 percent below its pre-pandemic level. These jobs overwhelmingly go to women who don’t want to work full-time because of caregiving responsibilities.
Jobs in Construction and Manufacturing
While large sectors of the economy are hurting due to the pandemic, construction and manufacturing, which traditionally are hard hit in a recession, are doing relatively well. We are seeing a boom in residential construction, which is offsetting weakness in the nonresidential sector. Manufacturing output increased 1.0 percent in October and is only 3.9 percent below the year-ago level. Both sectors are likely to see solid job growth in November.
State and Local Government
The state and local government sectors have already shed more than 1.3 million jobs from their pre-pandemic level. Since these governments are facing massive budget shortfalls, we are likely to see further job loss in the November data.
The monthly wage growth data were hugely distorted by composition effects in the shutdown months and the immediate bounce back in July and August. However, now that we are seeing more normal rates of job growth, trends in the average hourly wage are being driven primarily by actual wage increases rather than changes in the mix of workers. Wages had been growing at slightly more than a 3.0 percent annual rate before the pandemic. (Growth had actually slowed just before February.) It appears as though the rate of wage growth may now be closer to 2.0 percent, given the weakness of the labor market.
In a recession, average weekly hours typically fall, as employers deal with the reduced demand for labor in part by assigning fewer hours to the workers they keep on the payroll. That does not seem to be the case in the Pandemic Recession, as average weekly hours stood at 34.8 in September and October, up from 34.4 hours in the same months of 2019.
Some of this drop is due to a composition effect, as the hardest hit sectors tend to have shorter workweeks. However, the same story of longer workweeks persists even within more narrowly defined sectors. For example, for nonsupervisory workers in full-service restaurants, the average workweek last month was 24.7 hours, the same as the average for 2019. By contrast, in 2009 and 2010 it was just over 24.0 hours, compared to a prerecession average of 25.0 hours. In fast-food restaurants the 24.5 workweek was actually somewhat above the 2019 average of 24.3 hours. (For a visualization of this contrast, see this Beat the Press blog.)
This matters hugely for employment, since longer hours mean fewer jobs. With a given amount of labor demand, a 24-hour workweek, requires 4.2 percent more workers than with a 25-hour workweek. It is not clear why employers would choose to go the route of reducing workers rather than hours in this recession, but from the standpoint of employment, it is very bad news.
One encouraging sign in the summer and fall months was a sharp rise in the share of unemployment due to voluntary quits, from a record low of 2.5 percent in April to 7.0 percent in October. The fact that workers would leave a job without another job arranged is an indication of confidence in their labor market prospects. The October figure was still well below the 14 percent levels seen in pre-pandemic months. We may see some fallback given the resurgence of the pandemic in the last month and a half.
Asian American Unemployment Rate
Typically, the unemployment rate for Asian Americans has been slightly lower than the unemployment rate for whites. In this recession it has been running somewhat higher than the white unemployment rate, although the gap has been closing (1.6 percentage points in October). This likely reflects a larger share of Asian Americans being employed in small businesses that have been hard hit by the pandemic. We may see this gap increase again in the November data.
CEPR produces same-day analyses of government data on inflation, employment, GDP and other topics. Follow @DeanBaker13 on Twitter to get his quick-take analysis of government data immediately upon release.