By Anthony P. Carnevale and Nicole Smith
The coronavirus pandemic has brought on an unprecedented global crisis in industrial production, retail sales, business confidence, and overall economic activity. Since this crisis began, over 19 million jobs¹ have been officially recorded as lost, with 42.6 million workers filing for unemployment benefits. Despite the comparably modest increase of 2.5 million jobs in May, net job losses since March are still abysmal at 19 million.
In just a few months, this recession has highlighted the stark divide between white-collar and blue-collar work. As many businesses turned to telework to avoid interpersonal contact among workers, it became obvious that white-collar work — and, therefore, jobs that require postsecondary education and training — is generally easier to perform from home than blue-collar work. However, being able to telework does not guarantee job security, as business and professional services as well as healthcare services have lost jobs during the pandemic.
The recession has also highlighted the role that automation can play in reducing human interaction in the workplace. As interest in automation technology grows, there likely will be a greater demand for workers who have the education that would be required to invent and use this technology.
The overall impact of the coronavirus pandemic on the economy will depend on policy responses. So far, the Trump administration and Congress have been carrying out stimulus policies to shore up the economy. The Coronavirus Aid, Relief, and Economic Security (CARES) Act, totaling more than $2.2 trillion, was the largest economic relief bill in US history. It could be surpassed by the $3 trillion Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act, which passed the House but faces opposition in the Senate. The HEROES Act would provide hazard pay for essential workers and another round of stimulus checks and extend the duration of unemployment benefits, among other measures.
Will these measures be enough? That’s the question on everyone’s mind. The CARES package alone is larger in nominal terms than the Obama administration’s $787 billion stimulus package, which hastened an end to the Great Recession.² But the job losses during the first days of this recession are already rivaling those that occurred during the worst days of the Great Recession, indicating that this downturn may require more intervention.
Even if this recession is followed by a jobless recovery like the one that followed the Great Recession,³ most economic predictions expect a return to a long-run growth path by 2024.
Figure 1. Job losses during the three most recent recessions lasted between 11 and 21 months.
Source: Georgetown University Center on Education and the Workforce analysis of US Bureau of Labor Statistics Employment Situation Summary, various years.
However, we should be careful about comparing this recession to other recent recessions. The best comparison for the economic crisis that we’re experiencing is the recession caused by the Spanish flu of 1918.⁴ While we don’t have official data that would allow us to compare the economic effects of the 1918 pandemic with those of the coronavirus pandemic, we know that the economy ground to a halt then, as it has over the past two months.
The social distancing restrictions adopted to stop the spread of COVID-19 have effectively put the economy into a coma that will end only when businesses fully reopen. After the economy recovers, we can expect jobs to return slowly, much like the jobless recoveries of the last three recessions. In the end, the timeline for recovery and the return of jobs depends on how well we’re able to prevent the spread of COVID-19.
Figure 2: Unemployment is predicted to return to the natural long-run rate by 2022. GDP is predicted to dive sharply during most of 2020 but to rebound the following year as the economy recovers.
Source: Georgetown University Center on Education and the Workforce analysis of IHS Markit, Forecast Summary.
¹ Of the 701,000 jobs lost in March 2020, 65 percent were in leisure and hospitality. So, we are talking about waiters, waitresses, catering managers, restaurant owners, hotel workers, and workers in the airline industry.
² The Obama stimulus package — the American Recovery and Reinvestment Act (ARRA) — ended the Great Recession, which was the worst economic downturn since the Great Depression.
³ Gross domestic product (GDP) started growing 18 months after the Great Recession began, but job growth didn’t resume until 21 months later. National Bureau of Economic Research, Inc. “US Business Cycle Expansions and Contractions.” September 20, 2010.
⁴ Correia, Sergio, Stephan Luck and Emil Verner. “Pandemics Depress the Economy, Public Health Interventions Do Not: Evidence from the 1918 Flu.” Social Science Research Networks. March 30, 2020.
Dr. Carnevale is the director and research professor and Dr. Smith is the chief economist and research professor at the Georgetown University Center on Education and the Workforce. CEW is an independent, nonprofit research and policy institute affiliated with the Georgetown McCourt School of Public Policy that studies the link between education, career qualifications, and workforce demands.