Labor Day Reflections on the COVID-19 Recovery

William M. Rodgers III, Vice President and Director, Institute for Economic Equity

Since last year’s Labor Day, the nation’s economy has begun to restore economic security for millions of workers. The stock market and housing market have soared to record levels. Nonfarm payroll employment has climbed by 16.7 million since April 2020. And the nation’s unemployment rate fell to 5.4% in July, well below the postwar high of 14.8% in April 2020.

The CARES, Consolidated Appropriations and American Rescue Plan acts injected unprecedented amounts of relief and recovery funds into the economy. There is strong evidence that emergency unemployment insurance benefits and other worker supports during the pandemic decreased levels of food and housing insecurity and increased household spending, stimulating economic activity.

The Child Tax Credit’s expansion by some estimates could cut childhood poverty in half. In response to demands to address structural racism, some American businesses have begun to implement equity initiatives and policies.

Even with these and other relief and recovery investments, the nation’s businesses and workers still face stiff headwinds; and for many, economic security remains an unmet need.

The Economic Downturn’s Disproportionate Effects

Compared to the pre-pandemic level of February 2020, the U.S. has a jobs deficit of 5.7 million. The nation’s jobless rate also sits above its pre-pandemic level of 3.5% in February 2020. One reason why the labor market has not fully recovered is the severity of the downturn. By early August 2020, an unprecedented 27 million claims had been filed for unemployment insurance benefits. The shock was greatest for women and people of color, who prior to the pandemic had lower incomes than men and whites, respectively.

Focusing on the Eighth Federal Reserve District,The Eighth District includes the entire state of Arkansas, as well as parts of Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee. results from the St. Louis Fed’s 2021 Community Development Outlook Survey included 36% of respondents indicating that it would take more than 12 months to return to pre-COVID conditions. Almost half of the respondents primarily serving communities of color indicated that it would take more than a year for their communities to return to pre-COVID conditions. And 13% of the respondents, regardless of the type of community they served, said that they may never get back to pre-COVID conditions.

Other existing headwinds include inflation, employers’ difficulty finding and hiring workers, and supply constraints. There are also signs of backlash to the implementation of racial equity strategies.

Structural changes in the forms of globalization, evolving technology and now the pandemic continue to change how we work, where we work, when we work and with whom we work. This is leading to a change in attitudes about work: We are in a period that some call the “Great Resignation.”

A mental health crisis that existed prior to the pandemic has taken on even greater significance. Communities with low vaccination rates face a resurgence of coronavirus cases due to the delta variant, particularly in parts of the Fed’s Eighth District. This renewed uncertainty is occurring in an environment where many governmental supports, such as the moratorium on housing evictions and federal pandemic-related unemployment insurance benefits, are expiring. Five Eighth District states withdrew early from the federal expanded unemployment insurance program, whose benefits are set to expire this month for other states.

As the Economy Heals, Gender and Racial Employment Gaps Persist

Given these headwinds, on Labor Day 2021, the recovery faces an uncertain path. Unfortunately, a full economic recovery remains elusive for many parents, millennials, a disproportionate share of women and people of color, and those who could not work at home. Early evidence suggests that even with the economy healing, racial, ethnic and gender differences in income are as large today as they were before the pandemic.

The employment-population ratio of white women increased during the recovery but remains 12 percentage points below that of white men. (See the figure below.) Similarly, the ratios of Black men and Black women have mostly recovered; however, their ratios are 7 percentage points and 11 percentage points, respectively, below that of white men. Although only a small disadvantage, the employment-population ratio of Latinos is still lower than that of white men.

Recovery has nearly occurred for all youth, but the employment-population ratios of Black and Latino youth have not shown an improvement relative to that of white youth. Black youth have employment-population ratios that are 9 to 10 percentage points lower than those of white youths. The ratios of Latino and Asian youth are 7 and 18 percentage points below, respectively, that of their white youth counterparts.

A comparison of median earnings from the Bureau of Labor Statistics shows that throughout the pandemic, white women earned 82% of what white men earned. Black men and Black women earned even less: approximately 77% and 68%, respectively. Latino men and women earned 74% and 64% of what their white male counterparts earned. These estimates indicate that as a nation we have an opportunity to re-imagine the ways we address these persistent economic differences.

The Institute’s Look Ahead

The good news on this Labor Day is that improving the economy’s overall health and addressing the historical and structural challenges that women, people of color and youth face need not be mutually exclusive. Both may be pursued by considering a range of responses, including:

• Addressing and mitigating the economic disruptions created by the COVID-19 pandemic
• Helping families restore or build emergency savings to avoid material hardship
• Expanding infrastructure investments beyond bridges, roads and broadband to invest in social capital, mental health and access to quality child care

These are just a few of the many strategies available to help ensure that the recovery continues and that all workers, their families and their communities are more resilient to the “hazards and vicissitudes of life.” As the Institute celebrates its first Labor Day, we pledge to continue to monitor the economic well-being of workers at all levels and to identify effective strategies that promote equity in housing, employment and the opportunity for wealth creation.

All members of the Institute for Economic Equity team contributed to this blog post.

Notes and References

1. The Eighth District includes the entire state of Arkansas, as well as parts of Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee.