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Covid-19: The Cost in Lost Jobs

With more than 190,000 lives lost and millions infected, Covid-19 has imposed a tragic toll on residents of the United States.  New York State was hit hard early on, and has lost 32,600 residents to the disease as of early September  But strong controls that shut down much of the state’s economy for weeks during Spring have brought infections and deaths down to low levels.

Shutting down businesses and imposing limitations on direct personal interactions has cost millions of jobs nationally and in New York State.  Private Sector employment dipped sharply after the Federal Government recommended and states imposed restrictions on direct personal interactions in an effort to control Covid-19 infections in late March.

Nationally, in April 2020, private sector employment was 15.2% lower than in April 2019.  Since April, with the relaxation of limitations on business operations.  employment has rebounded.  In August, national private sector employment was 8.2% lower than the same month in 2019.  9,757,000 fewer people were were working in private sector jobs in July compared with the same month a year ago.

Although jobs recovered quickly in the first two months after businesses began to reopen, the pace of recovery has slowed substantially.  Between May and June, private sector employment increased by 4.9%, but between July and August, the increase was 0.8%.  Although jobs are returning nationally and in New York, because of the need for continued limits on direct personal interactions that could promote transmission, the increase is likely to continue to slow.

In New York, the year to year job loss was even larger in April – 22.1%.  In July the impact was a 14.2% decrease.   The state’s job loss was 1,185,000 in that month.  August data was not yet available when this post was written.

Much of the difference in the impact of Covid-19 between New York and the nation reflects the state’s more stringent Covid control measures, including the requirement that businesses cease on-site operations, imposed in response to the large number of infections in the state.

Job Impacts in New York State Regions

Although job losses in New York’s metropolitan areas are smaller than they were in April,, they were still substantial as of July, with private sector employment levels in most metropolitan areas more than 10% lower than they were a year ago.  Most metros have recovered about one-third of the peak jobs lost.

Because the New York City metropolitan area was harder hit by Covid-19 and continued to have limitations on business activity for a longer period than did upstate metros, it had a greater employment drop compared to July 2019 – 14,5%. (Data from the Bureau of Labor Statistics, U. S. Department of Labor).

Although unemployment has declined since it peaked in April, the rate in July was greater than 10% in all of the metropolitan areas shown in the chart.  Unemployment increased between June and July in most New York metropolitan areas, perhaps reflecting an increase in the number of people seeking to return to the labor force.

Most upstate metropolitan areas had unemployment rates that were between 12% and 15%.  In January 2020, the unemployment rate for New York State outside New York City was 4%.  The New York Metropolitan area had much more unemployment than other areas, with one in five residents unemployed in July.  At the beginning of 2020, the City’s unemployment rate was less than 4%.

Impact on Industries

The impact of the social distancing controls on jobs has been very uneven.  Employment in some industries has been relatively unscathed, but employment losses are far greater in industries that directly serve customers.  These industries  offer relatively low wages.

Not surprisingly, the hardest hit sectors of the economy have been related to dining, amusements and tourism.  More than 45% of the total job loss was in three relatively low paid industries.  Nearly 30% of all jobs lost in July 2020 were in food and drink establishments, which paid an average annual wage of $19,000.  An additional 8% were lost in related leisure service industries, with an average wage of $28,000, and 8% more were lost in retail trade (average annual wage – $32,500).

Other industries with large employment losses were employment services and health care services.

Because low wage service industries were among the hardest hit by Covid related business restrictions, the average income among the nearly 10,000,000 million Americans whose jobs disappeared between July 2019 and July 2020 was about $41,000, compared with the $51,000 average annual income for all private sector employees in March 2020.


Unemployment Claims:

Because of the need for continuing restrictions on direct personal interactions and public fears of contracting Covid-19,  service employment is likely to continue to suffer.  Month over month private sector employment growth is now less than one percent.  The rate of increase is likely to continue to decline.  Unemployment claims, though lower than their peak in April, continue to be at historically high levels – about 900,000 weekly during September.

The damage to jobs and the economy is likely to persist until immunity  reaches a sufficient level to reduce the risk of direct personal interactions to a very low level – most likely a year or more from now.  Consequently, the failure of Congress and the President to agree on measures to better support unemployed workers and to strengthen the economy is a substantial problem.  With nearly ten million fewer Americans employed than a year ago and employment levels most affected in low-wage industries, an agreement to provide supplemental unemployment assistance for the rest of the year would play an important role on the individual level in easing economic privation, and overall in stimulating economic growth.

Beyond that, without Congressional action, many small service businesses will not survive until demand increases to pre-Covid levels.  General economic stimulus, like the $1,200 payments that were made earlier this year to virtually all residents, would increase the demand for workers by increasing general economic activity.  Revenues of states and localities were hard hit by business restrictions imposed in the spring.  Without assistance from the Federal government, these governments will be forced to curtail services, including reductions in education and police and fire services or to increase taxes to make up for lost revenues.  The stalemate between the Trump Administration, the Senate and the House of Representatives will prolong the suffering.

Note:  All data is from the U. S. Department of Labor, Bureau of Labor Statistics.

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