How Has the COVID-19 Pandemic Affected the U.S. Labor Market?

Social distancing and the partial economic shutdown in response to the COVID-19 pandemic have had a profound impact on the U.S. economy, including on people’s jobs and livelihoods.

The overall immediate effects on the labor market have been easy to see: The unemployment rate shot up in the early months of the COVID-19 crisis in the U.S., and payroll employment numbers show that more than 20 million jobs were lost in April—a record amount for one month. (Employment has increased every month since then, and unemployment declined to 7.9% in September after a 14.7% April peak.)

But these aggregate numbers don’t tell the whole story. There are many ways to dissect data to get a more complete sense of how the pandemic has affected the U.S. labor market, including which workers have felt the most impact.

This post provides a roundup of some recent St. Louis Fed analyses that examined different aspects of unemployment and employment during the pandemic. Some takeaways:

• When other measures of unemployment started declining, the share of those unemployed for at least 15 weeks continued to rise.
• The youngest workers saw the biggest decline in employment.
• The leisure and hospitality sector lost the most jobs in the early months of the pandemic.
• The lowest-earning occupations were hit the hardest by the pandemic.

An Oct. 5 FRED Blog post discussed how six measures of labor underutilization from the U.S. Bureau of Labor Statistics (BLS) changed with the pandemic.

Among the measures included in the above graph from the blog post are the official unemployment rate; a measure of those unemployed 15 weeks or longer; and measures that take into account discouraged workers and others who are marginally attached to the labor force, and those who want full-time work but can only get part-time work.

As noted in the post and seen in the graph, all of the measures increased dramatically, but they didn’t all move in parallel—in other words, the distance between the lines didn’t stay constant.

“The lines fanned out, showing that it wasn’t one particular type of unemployment that was responsible for the overall surge,” said the post, which was suggested by Christian Zimmermann, assistant vice president of research information services.

Of particular note, the share of workers unemployed for at least 15 weeks was still increasing in August while the other unemployment measures were decreasing, the post pointed out. These workers made up 5.1% of the labor force in August, although the share ticked down to 4.6% in September.

(For more information, check out this June 2018 Open Vault blog post on the different measures of unemployment and this August 2020 post on labor force participation.)

An Oct. 8 FRED Blog post, also suggested by Zimmermann, breaks down employment levels by age group using data from the BLS.

As shown in the graph above, the youngest groups were hit the hardest during the COVID-19 related recession. The blog post noted that, from February to April:

• 35% of workers 16-19 years old lost their jobs.
• 30% of those 20-24 years old lost their jobs.
• Job losses for the other age groups ranged from 11% to 16%.

The declines in employment for the older age groups were still sizeable, but much smaller than those of the two youngest groups, the post noted.

“Are the young taking one for the team just for this recession?” the post asked. “Or have they always been first to be let go?”

The youngest group saw the largest decline in employment in each of the three previous recessions, as discussed in the post. In some previous cases, those 55 years and older and/or those 45 to 54 years old even saw employment gains. (See graphs for the 2007-09 recession, the 2001 recession and the 1990-91 recession.)

“All in all, it appears ‘normal’ that the 16- to 19-year-old age group is hit hardest by recessions and that the oldest workers are largely unaffected, at least in terms of employment,” the post said. “The current recession is a little different in that the older groups have also been affected, just not as much as the younger groups.”

In a Regional Economist article published in August, Senior Economist Maximiliano Dvorkin noted that safety measures have impacted businesses that involve direct contact with customers or clients in particular. He examined which industries were the most affected by labor market disruptions during the early months of the pandemic. (He also analyzed which occupations were most affected, but this post focuses on industries.)

Dvorkin looked at several goods-producing industries and service-providing industries. The industries Dvorkin looked at are mining and logging; construction; durable goods manufacturing; nondurable goods manufacturing; trade, transportation and utilities; information; financial activities; professional and business services; education and health services; leisure and hospitality; other services; and government. He found that the leisure and hospitality services sector saw the largest decline from February to April, with nearly half of these jobs being lost. This was followed by the “other services” sector—which includes businesses such as repair and maintenance and beauty shops—where about one in five jobs was lost.

In contrast, the financial activities sector and the government sector saw relatively small declines in employment over this period, he found.

In an Economic Synopses essay published in July, Economist Serdar Birinci and Research Associate Aaron Amburgey looked at how the pandemic has impacted various occupations across the earnings distribution.

Overall, they found that workers in occupations with lower average earnings were disproportionally displaced by the pandemic, whereas workers in occupations with higher average earnings were impacted to a lesser extent.

For their analysis, Birinci and Amburgey broke occupations into five equal groups (quintiles) based on the average earnings of someone in that particular line of work. The table below, which is recreated from their essay, shows some examples that are included in each group.

The authors noted that the majority of the jobs that were furloughed or lost between January and April were in the lower-earnings occupations. In particular, they found that occupations in the lowest and second-lowest earnings groups accounted for 34% and 25%, respectively, of the increase in unemployment over that period.

They also found that the unemployment rates for the lower-earnings groups increased by much more than for the higher-earnings groups. For example, workers in occupations in the lowest-earnings group saw their unemployment rate increase by 20.4 percentage points from January to April. In comparison, workers in occupations in the highest-earnings group experienced only a 3.2 percentage point increase in their unemployment rate over that period.

“These results provide further evidence that the COVID-19 crisis has had an unbalanced effect on different earnings groups in the labor market,” they wrote.

Note

¹ The industries Dvorkin looked at are mining and logging; construction; durable goods manufacturing; nondurable goods manufacturing; trade, transportation and utilities; information; financial activities; professional and business services; education and health services; leisure and hospitality; other services; and government.