Federal Pandemic Assistance Programs End During A ‘Great Reallocation’ Of The American Workforce

In a cruel irony or a sick sense of humor, Congress chose this Labor Day to end most pandemic relief programs, as the country is in the throes of a delta variant “pandemic of the unvaccinated” surge in infections and hospitalizations, resulting in Friday’s below expectations jobs report.

Back in July, 26 states ended federal unemployment benefits early on the Republican/Chamber of Commerce theory that you lazy lucky duckies would rather loaf on the couch watching TV all day with your pandemic unemployment benefits, than get your lazy butts up off that couch to go out and get yourself one of those sweet minimum wage jobs with no benefits, or a sub-minimum wage job working for tips, with an employer that doesn’t protect its employees from Covid-19. “Theres a (cheap) labor shortage, damnit! You are expendable.”

Twenty-six states announced their intent to end federal pandemic-era benefits starting in May. They officially pulled out in waves over June and July.

UKG, a payroll and time-management firm, found that shifts among hourly workers in those states grew at about half the rate as states that continued the benefit — the opposite trend of what one might expect.

Specifically, in states that ended benefits, shifts grew 2.2% from May through July; they grew 4.1% in the others that kept federal aid intact, according to UKG’s analysis.

“Unemployment benefits were not the thing holding people back from going to work,” according to Dave Gilbertson, a vice president at UKG. “There are other elements out there, particularly in their personal lives, making it really difficult to go back to work.”

It doesn’t appear differences in state economies or labor markets influenced the dichotomy, since both groups were growing at similar rates earlier this year, Gilbertson said.

Similarly, employment fell 0.9% in states that ended federal benefits between mid-June and mid-July, but rose 2.3% in states that kept them, according to data published this week by Homebase, another payroll and time-management firm.

This study was confirmed again last week by no less than Rupert Murdoch’s Wall Street Journal. States That Cut Unemployment Benefits Saw Limited Impact on Job Growth: “States that ended enhanced federal unemployment benefits early have so far seen about the same job growth as states that continued offering the pandemic-related extra aid, according to a Wall Street Journal analysis and economists.”

Note: Lawsuit claims Ducey illegally cut off the extra $300 a week for jobless Arizonans.

In any event, federal pandemic unemployment relief ended for more than 7 million Americans on Labor Day. The Washington Post reports, Millions in U.S. lose jobless benefits as federal aid expires, thrusting families and economy onto uncertain path:

More than 7 million out-of-work people across the United States are set to lose all of their jobless benefits this week as three federal programs expired on Monday, in what several experts described as one of the largest and most abrupt ends to government aid in U.S. history.

In addition to the more than 7 million people who will lose all their benefits, nearly 3 million more people will lose a $300 weekly boost to their state unemployment benefits.

The cessation of this jobless aid, first put in place by Congress nearly 18 months ago, could upend the lives of millions of Americans still struggling to find work at a time when the pandemic’s delta variant is wreaking fresh havoc across a number of states. It could also lead to a sharp pullback in spending, particularly in certain areas of the country, impacting a wide range of restaurants and other businesses that rely on consumer dollars.

[T]he White House has wrestled with how to deal with these expiring benefits, an internal debate that exposes the fraught political and economic consequences of inaction. President Biden said in June that it “makes sense” for one of the programs, which boosted unemployment checks by $300 each week, to lapse in September, but senior aides have also called on states to reallocate other money in a way that would continue offering some support. No states appear inclined to take action, though, leading to this week’s sudden cutoff.

Last month, the Biden administration gave states a potential path to helping people who were about to lose benefits: they could use funds provided to states in a March stimulus law, the American Rescue Plan Act, to fill in for some of the lost aid.

The Washington Post asked officials in 24 states and D. C. — the jurisdictions that had continued the federal benefits as long as possible — whether they plan to extend the benefits using the ARPA funds. Of those who responded, nearly all said they had no such plans, or indicated that a decision to do so rested with their state legislatures.

Now there is heightened anxiety, even within the White House, that pulling so many people off government support so abruptly could push millions of people into poverty and cut off access to food or nutrition for people caught on the wrong side of this uneven economy. The jobless rate has fallen and the stock market is near record levels, but many Americans have found themselves unable to recover from the pandemic’s devastating blow.

“I’m predicting a silent type of pain,” said Andrew Stettner, a senior fellow at the Century Foundation think tank and an expert on unemployment insurance, who has estimated that some 7.5 million people will be cut off from aid on the programs’ expiration date. “If past periods have been an indicator, many will be caught in a spiral that will lead to a downward quality of life.”

[O]ver the summer, 26 states announced they would end these benefits early, providing a glimpse of what millions of other Americans will now face. Since then, economists have studied data on job gains and spending to see how local economies have reacted to the withdrawal of benefits amid a pandemic, and to determine whether the extra aid was holding back job growth.

Their conclusions are ominous: one study found that for every eight workers who lost benefits, just one managed to find a new job, and found a dramatic reduction in spending, suggesting the people who lost benefits were left in a precarious financial situation.

[R]ecent research by academic scholars found that in states that cut benefits early, every dollar lost in benefits was offset by about 7 cents in increased earnings. That means the Labor Day weekend cuts could cause “something like $8 billion in reduced spending during September and October,” said Arindrajit Dube, an economist at the University of Massachusetts at Amherst and one of the researchers who analyzed the effect of the early benefits cutoffs.

Michael Strain, director of economic policy studies at the American Enterprise Institute, cautioned that more months of data are needed to make firm conclusions about the effect of the programs on the labor market. He said he would have preferred for the jobless aid to phase out over several months rather than come to an abrupt end, but that overall it is time for the unemployment benefits to “normalize.”

“The unemployment rate is falling, not rising,” Strain said. “Workers clearly are on the whole going to go out and get jobs.”

The Coronavirus Pandemic introduced a great reallocation of resources in the workforce, or what the Washington Post has called the “Great Reassessment” of work in America (“is this really what I want to be doing with my life?“). Why America has 8.4 million unemployed when there are 10 million job openings:

A mystery sits at the heart of the economic recovery: There are 10 million job openings, yet more than 8.4 million unemployed are still actively looking for work.

The job market looks, in some ways, like a boom-time situation. Business owners complain they can’t find enough workers, pay is rising, and customers are greeted with “please be patient, we’re short-staffed” signs at many stores and restaurants.

But the nation remains in the midst of a deadly pandemic with covid-19 hospitalizations back at their highest rates since January. The surge is weighing on the labor market again, with a mere 235,000 jobs added in August. There are still 5 million fewer jobs compared to before the pandemic, reflecting ongoing problems, including child care as some schools and day cares shut down again from outbreaks.

From the White House to the local Waffle House, there’s a struggle to understand what is going on — and what’s likely ahead.

[T]he employment crisis will hit an inflection point as many of the unemployed lose $300 in federal weekly benefits and millions of gig workers and self-employed lose unemployment aid entirely. Some anticipate a surge in job seekers, though in 22 states that already phased out those benefits, workers didn’t flood back to jobs.

At heart, there is a massive reallocation underway in the economy that’s triggering a “Great Reassessment” of work in America from both the employer and employee perspectives. Workers are shifting where they want to work — and how. For some, this is a personal choice. The pandemic and all of the anxieties, lockdowns and time at home have changed people. Some want to work remotely forever. Others want to spend more time with family. And others want a more flexible or more meaningful career path. It’s the “you only live once” mentality on steroids. Meanwhile, companies are beefing up automation and redoing entire supply chains and office setups.

The reassessment is playing out in all facets of the labor market this year, as people make very different decisions about work than they did pre-pandemic. Resignations are the highest on record — up 13 percent over pre-pandemic levels. There are 4.9 million more people who aren’t working or looking for work than there were before the pandemic. There’s a surge in retirements with 3.6 million people retiring during the pandemic, or more than 2 million more than expected. And there’s been a boost in entrepreneurship that has caused the biggest jump in years in new business applications.

“The economy is going through a big shift overall and that has ramifications,” said Ben Bernanke, the Federal Reserve chair from 2006 to 2014. “We are reallocating where we want to work and how we want to work. People are trying to figure out what their best options are and where they want to be.”

It doesn’t help that the abundance of job openings right now are not in the same occupations — or same locations — where people worked pre-pandemic.

There is a fundamental mismatch between what industries have the most job openings now and how many unemployed people used to work in that industry pre-pandemic. For example, there are 1.8 million job openings in professional and business services and fewer than 925,000 people whose most recent job was in that sector. Leisure and hospitality, as well as retail and wholesale trade, also have more openings than prior workers, and many workers who lost jobs in those industries have indicated they don’t want to return.

There’s a similar mismatch in education and health services, where there are 1.7 million job openings and only 1.1 million people whose last job was in that sector.

In recent months, heath care workers and educators – essential workers who have born the brunt of the Coronavirus pandemic – have quit their jobs at the highest rate on record, stretching back to 2002, Labor Department data show. [Burnout.]

“This is typically the time of year we recruit for the upcoming school year, but we literally can’t get enough candidates, and we’re seeing tenured people leave,” said Cindy Lehnhoff, a 36-year veteran of the child care industry who currently heads the National Child Care Association. “If you get one good candidate, there are 10 others contacting that same person. It’s a crisis. People can’t work without child care.”

So pass the $3.5 billion American Families Act, which includes financial assistance for child care.

Nationwide, most industries have more job openings than people with prior experience in that sector, Labor Department data show. That’s a very different situation than after the Great Recession, when the number of unemployed far outstripped jobs available in every sector for years. To find enough workers, companies may need to train workers and entice people to switch careers, a process which generally takes longer, especially in fields that require special licenses.

While companies say they are struggling to find workers, many unemployed say they are having trouble getting hired, especially if they haven’t worked for a year.

The stigma of long-term unemployment has long-term consequences. With long-term unemployment comes long-term challenges:

Forty-three percent of jobless American workers are long-term unemployed, meaning they’ve been actively looking for work for more than 27 weeks (a little over six months), according to the Bureau of Labor Statistics’ April jobs report.

That’s nearly twice as high as the peak in long-term unemployment in any other recession dating back to the late 1940s.

And while there has been a dramatic recovery in employment following the mass layoffs early in the pandemic in spring 2020, many service-sector employers have yet to reopen and rehire, and millions of former workers remain on the sidelines either not working or not yet looking for work. That leads many economists to warn that elevated long-term unemployment may persist for years after the pandemic recession is behind us.

“It is likely to be even longer and more problematic than the long-term unemployment that was so catastrophically associated with the Great Recession,” said labor economist Arthur Goldsmith at Washington and Lee University[.]

The Post continues:

Companies across the economy are raising pay at a rapid pace in an effort to entice more people back to work. It’s helped, but the pandemic and reallocation pains are still significant barriers.

Average pay for rank-and-file workers is up 2.8 percent in the past five months, outside the pandemic that’s the fastest rate of increase since 1981.

There has been especially fierce wage competition for lower-paid positions, especially since many former service sector workers say they won’t return at any price due to long hours, grueling work and increased exposure to the virus.

Pay is up 8.8 percent for nonmanagerial workers in the restaurant-and-hospitality sector and 6.1 percent for warehouse workers in the past five months. It appears to be helping lure some workers back. Of the 3.1 million jobs gained since March, almost half are in hospitality, though hiring in the sector stalled in August as the delta variant surged.

Some Americans are being forced to shift careers whether they want to or not. The pandemic has lingered longer than anyone initially anticipated and the ranks of long-term unemployed have swelled. About 40 percent of the currently unemployed — 3.2 million — have been out of work for six months or longer.

Years of research, especially after the Great Recession, show these people have a much harder time getting back to work. Hiring managers are skeptical that their skills are still fresh, and these workers’ prior jobs and employers are often gone, forcing job seekers to rely on sending out resumes online without any personal connections.

“One of the most well-known facts in labor economics is people unemployed for a short time get jobs really quickly. People unemployed a long time have a harder time getting a job,” said Peter Ganong, assistant professor of economics at the University of Chicago’s Harris School of Public Policy.

[E]conomists point out that overall jobs are actually rebounding at a remarkable pace. Over 75 percent of the jobs lost during the pandemic are back, a much faster recovery than almost anyone anticipated a year ago. Private forecasters anticipate all the jobs lost could be back by mid to late 2022 — a rebound of about two years compared to the six-plus years it took for the labor market to recover from the Great Recession.

But, as Federal Reserve Chair Jerome H. Powell put it recently, it’s been a “vigorous but uneven recovery.” Job losses remain steepest for Black and Hispanic women, as well as Americans without college degrees.

The uneven recovery is evident in how different states are faring. In some areas of the country, the labor market is booming. All the slack has vanished in Idaho and Utah, where employment recovered months ago and the unemployment rates were nearing their all-time lows at 2.6 percent and 3 percent respectively. But other states are still reeling: Hawaii is still missing 12 percent of its jobs, New York is still missing 9 percent, and Nevada and Alaska are more than 7 percent behind, as tourism-dependent economies struggle amid fast-spreading covid-19 variants.

Here in Arizona: Arizona has recovered nearly all jobs lost during pandemic: “The latest figures from the Office of Economic Opportunity, which reflect the employment situation in July, show the state has recovered 94% of the 331,500 jobs shed since April 2020. And the situation is even brighter among private sector employers, with the state at 98% of the number of people working before the pandemic.”

[A]s the recovery proceeds, the holes in the labor force have shifted. Half of all jobs are still missing in high-contact industries such as buffets and movie theaters, but other industries that were hit harder in the early days of the crisis, such as RV dealers, carwashes, breweries and appliance stores, have staged a full comeback, buoyed by record consumer spending on goods.

Some lucky industries, such as delivery services, mortgage lenders, and breakfast-cereal manufacturers seemed to have sailed through the entire crisis without shedding jobs. They now have 10 or even 20 percent more employees than they did in February of 2020.

The White House and many business leaders hope a combination of rising vaccination rates, reduced unemployment benefits and more time will lead more unemployed Americans to find new careers — and to be excited about them. [Hope is not a plan.]

“The key to this great reallocation will be ensuring some workers aren’t left behind.”