May Analysis: A Fragile Recovery
This analysis is focused on May 2020 data.
In March, in response to outbreaks of Covid-19, the US took dramatic steps to stop the spread of the disease. Many states issued stay-at-home orders and the economy contracted dramatically. Jobs fell away and unemployment spiked.
After the dramatic collapse in March, the economy has improved with more jobs and unemployment slightly down. However, the additions are insufficient and fragile, and full recovery remains far off. Working Wisconsin is still well behind where it was before the coronavirus crisis began in February 2020. Additionally, in the context of increasing spread of the disease in Wisconsin (and nationally) reopenings are being reversed. For some workers, then, the call back to work may be a brief respite. Finally, and critically, it is the disease that is the problem (the shut down orders are a response to that problem, not the problem itself); as long as the disease is spreading people will need to stay home when possible and distant when not. This means that a true and complete “recovery” is likely to be a long ways off.
There are two important aspects of these data to note. Given the scale of the collapse, it is critical that we provide information to make clear how Wisconsin is doing relative the last “normal” month (February 2020, before the economic collapse). At the same time, it is also critical to see the month-to-month changes to demonstrate the trajectory of the recovery. Hopefully a steady recovery started in April, and we’ll see progress on indicators each month, with more jobs and lower unemployment. That is certainly true from April to May. National data on June suggests that growth may continue for another month. But the surge in cases of late June and early July, and the necessary restrictions on the economy as a result also portend some contraction in July. The end of unemployment supplements in late July and likely lay-offs in the public sector in response to declining revenues will also exert a negative pull, especially if the federal government does not respond to the growing need in communities.
Wisconsin Job Loss: -400,700 (jobs in May relative to February 2020)
Wisconsin’s labor market is more than 400,000 jobs behind the pre-COVID-19 benchmark (February 2020). Fewer jobs means less economic opportunity and lower bargaining power for all workers. A weak labor market tips the balance of power toward the employer who knows that it is easier to replace workers. For working people, the loss of power means that it is harder to secure overtime or ask for time off, harder to complain about sexual harassment or racist treatment, and harder to secure wage increases. Presently there is some evidence that employers are actually seeking wage reductions through furloughs or other means.
In May, the Wisconsin labor market has 13% fewer jobs than it had in February.
Context
- At the depth of the COVID-19 economic collapse (April), Wisconsin was down more than 465,000 jobs or 15.5% of jobs.
- At the depth of the 2007 Great Recession, Wisconsin was down 5.8% of its jobs.
- The scale of losses in this period is three times the Great Recession.
- Recovery in jobs: +74,9000 in May. While Wisconsin’s labor market is well below February jobs, in May Wisconsin had strong job growth, adding 74,900 jobs.
The job hole is substantial and a serious problem for working people in the state. The recovery from April to May appears to be strong but with COVID-19 on the rise, these gains may be impermanent.
Unemployment Rate May 2020: 12 percent
The unemployment rate measures the share of labor force that is actively seeking but unable to secure work. As with the overall job market, this is a measure of the availability of jobs and economic opportunity. When more workers are unemployed, there is more fierce competition for jobs and employers have more choices and greater leverage over work. Unemployment is first and foremost a crisis for the unemployed, and for those who look but cannot find work and give up looking. These are the ones who have no income from work. But high unemployment also lowers the bargaining power of workers with jobs; when there’s a long line at the door looking for jobs, employers can be less interested in keeping the workers they have around.
In May, more than 370,000 Wisconsinites were looking for work resulting in an unemployment rate of 12 percent. More than one-in-ten potential workers in the state is actively seeking work but not in a job. The is more than three times as high as the February rate of 3.5 percent.
The highest level of unemployment in this economic crisis was 14.1% in April 2020.
Recovery in Unemployment: The unemployment rate edged down in the last month from 14.1% in April to 12.0% in May.
Leisure and Hospitality Industry Hardest Hit: 136,600 jobs lost
The Leisure and Hospitality Industry — restaurants, bars, hotels, etc. – has been the hardest hit in the COVID-19 economic collapse. Even before the collapse, the industry’s workforce of waitstaff, bartenders, dishwashers, housekeepers, and others suffered low-wages, volatile and unpredictable hours, and few benefits. These workers – more likely to be women and people of color – are now facing a new reality. Finding steady work in the industry is likely to remain difficult.
In May, just one worker in this industry held a job for every two who held jobs in it in February 2020. Further, this hard hit industry accounts for full one-third of all Wisconsin job losses.
At the other extreme is the least impacted industry which has lost only 2.9% of its jobs: Financial Activities.
Conclusion
There have been promising and strong growth since the March economic contraction, but it is too early to predict that “normal” is on the horizon. This recovery is fragile and increases in infection suggest it may be temporary. Even with the economic growth, the job loss and unemployment remain at extremely high levels. And the policy choices we make, both in economic policy and public health, will have enormous impact on what recovery and even “normal” begin to look like.