New research from the Society for Human Resource Management (SHRM) and Oxford Economics shows that the U.S. workforce has lost $1.3 trillion in annualized income due to the coronavirus pandemic. Job losses aren't the only cause of lost income. Pay cuts are responsible for 20 percent ($260 billion) of the $1.3 trillion. This amounts to a reduction in earnings of roughly $8,900 per worker on average (excluding the self-employed).Data was collected by SHRM and Oxford Economics, a global advisory firm based in Oxford, U.K., between April 27-May 1. The COVID-19 Business Index will recur every two weeks through June."It's literally impossible to overstate the magnitude of $1.3 trillion," said SHRM President and CEO, Johnny C. Taylor, Jr., SHRM-SCP. "We're talking about lives and livelihoods. That's why, hard as it is to look at, leaders need to see this data. This is our reality—and it underscores the urgency with which we must move to safely reopen and return to work."
"This has been the greatest economic shock since the Great Depression," said Sudarshan Sampath, director of research at PayScale, a compensation software and data insights firm in Seattle. "I wouldn't be surprised if the loss of annualized income is higher in future surveys."
Most of the job losses so far have been among women, setting this recession apart from the Great Recession, said Julia Pollak, a labor economist at online employment marketplace ZipRecruiter. "There are two reasons for the disproportionate impact on female employment. The first is the industry composition of job losses. Far more men lost jobs during the Great Recession than women because the job losses were so concentrated in construction and manufacturing. This time, the crisis has caused large job losses in hospitals, schools, nail salons, clothing stores, child day care services, dentists' offices and other establishments where women are vastly overrepresented in employment."
The second reason has to do with caregiving responsibilities, she said. "Women disproportionately shoulder the burden of child care and elder care during school closures and nursing home disasters. The female labor force fell by 4.5 percent in April whereas the male labor force fell by 3.5 percent."
The estimate of $1 trillion in lost income due to job cuts is based on survey responses showing 13 percent of hourly workers and 14 percent of salaried workers had either been laid off or furloughed as of April 24, representing about 19 million workers nationally.
Nearly 3 million more Americans filed for unemployment insurance during the week ending May 9, bringing the total number of first-time jobless claims filed amid the pandemic to more than 36 million. The official unemployment rate from mid-April is 14.7 percent.
But experts believe it's
closer to 25 percent for a variety of reasons, including that many workers are currently not willing or able to look for new jobs.
"There are people who have been unable to access unemployment benefits and are not counted as unemployed," Sampath said. "Unemployment also does not count people who are discouraged to look for work."
The unemployment rate would be much higher if workers counted as absent for "other reasons" were instead counted as temporarily unemployed, said Josh Wright, chief economist at Wrightside Advisors, an economic research and consulting firm based in New York City. "Add in the historic increase in underemployment, which rose from 8.7 percent in March to 22.8 percent in April, and you get a more accurate picture of the current situation."
Reduced Hours, Pay
The nearly 125 million wage earners still employed as of late April also are feeling the pain. Across all industries, remaining hourly workers saw their hours—and consequently their pay— reduced 9 percent, while 5 percent of salaried workers saw their pay decreased or deferred by an average of 14 percent. Not surprisingly, workers in the hotel and restaurant industry have been the most affected.
Retail wages have fallen even more—by 9 percent since last year, Sampath said. He explained that some restaurant workers are still working at least part time to support curbside service or takeout, but brick-and-mortar retail is almost completely shut down.
Hourly and salaried workers have seen nearly the same income loss, at $629 billion and $640 billion, respectively, according to the SHRM/Oxford Economics research.
"This is surprising," Sampath said, because the "vast majority of employees who are able to work from home and are still working—in occupations such as technology, professional and business services—earn the most money."
Slow Recovery for Metro Areas
The combination of high unemployment and reduced income for those still working will have long-term consequences for cities across the country, and recovery will take a long time.
Oxford Economics expects that even by as late as the end of 2022, only 20 percent of large metropolitan areas and 11 percent of smaller ones will have recovered the employment levels from the beginning of this year.
"The future economic recovery is tough to predict, especially since it's almost entirely dependent on today's public health response," said AnnElizabeth Konkel, an economist at the Indeed Hiring Lab. "We see on Indeed that the economic devastation of the coronavirus is widespread. As of May 8, job postings in all major metropolitan areas are growing slower than in 2019."
The metros expected to recover fastest, such as Austin, Raleigh and San Jose, tend to have a large share of employment in professional business services and technology. On the other hand, traditional manufacturing hubs such as Cleveland and Detroit might not recover to pre-Covid-19 employment levels for many years to come. Nearly 4 in 10 smaller communities are not expected to recover to pre-Covid-19 employment levels even by the end of 2024.
"It's tough to forecast how the pandemic will transform major industries and their associated metropolitan hubs," Konkel said. "As of May 8, job postings in software development and production and manufacturing are both growing slower than in 2019 and have slowed by approximately the same rate as the rest of the economy on average."
Certain industries are better positioned to help propel recovery in metropolitan areas. For example, financial and professional services can maintain operations indefinitely through remote work arrangements.
"Work-from-home ability will likely play a role in the recovery," Konkel said. "On Indeed, we see that some of the fastest growing search terms are 'online' and 'wfh' [work from home]. This indicates that job seekers are shifting toward more job options that allow for continued distancing during this public health crisis."