The American economy is incredibly dynamic – even in a soul-crushing pandemic. Lost in the disheartening news about the depressing number of firms going bust and workers losing their jobs is the other side of the ledger: new and existing firms are adding millions of new jobs. I estimate about three for every ten jobs lost through furloughs or lay-offs – or almost nine million new jobs in all – were created during the dark first six weeks of the pandemic.
This process of simultaneous job creation and destruction is a vital, if underappreciated, feature of our economy, and will be an important force in our recovery from the pandemic recession. Still, the overall labor market picture is grim and unlikely to be fully reversed soon.
Over 21 million Americans lost their jobs in March and April, the first two months this nascent recession, equal to 14.5% of all jobs, according to the Bureau of Labor Statistics (BLS); less than half of these jobs have been recovered in the three months since at the economy began to reopen (May through July). The astonishing 20.8 million jobs lost in April alone was ten times the previous record monthly job loss. In only six weeks we lost virtually all the jobs created in the last decade (22.8 million) – almost times as many jobs as were lost in the entire Global Financial Crisis (GFC), which itself was the high-water mark for economic downturns since the Great Depression 90 years ago.
And yet, despite all this depressing news, there is cause for some optimism. For one thing, the vast majority of workers who lost their jobs were only temporarily “furloughed” or “completed temporary jobs” rather than permanently “laid-off”, which theoretically should simplify and expedite rehiring as government-mandated shutdowns are relaxed.
While there is considerable doubt about how much and how quickly ailing firms will be able to rehire their former employees, other firms are actually thriving, even surging. Most obviously, e-commerce is booming at the expense of physical retailers, while groceries are flourishing as restaurants languish.To cite some noteworthy announcements: Walmart plans to hire 50,000 more workers, on top of the 150,000 they just hired to deal with increased demand, while Amazon is adding another 75,000 new workers to the 100,000 previously announced. That’s 375,000 new jobs from just two firms.
Add to that 100,000+ new hires at grocers like Safeway. Kroger, and Albertsons; drug chains like CVS (50,000 new jobs), Walgreens, and RiteAid; and home improvement stores like Lowe’s (30,000) and Home Depot. The food delivery startups (DoorDash, Uber Eats) are also adding workers, as are pizza chains and dollar stores. Even the fledgling legal cannabis industry is seeing a hiring boom. All this despite the net loss of almost two million retail jobs overall over the past two months, equal to 14% of all retail jobs.
But job creation is hardly limited to just the retail sector. Jobs are growing across many sectors for firms that make products or provide services that help us either deal with the health crisis or otherwise adjust to the “new normal.” Of the former, it’s all hands-on deck, and many new hands, for pharmaceutical companies seeking COVID-19 vaccines or treatments and manufacturers of masks and hand sanitizers. Cleaning services are seeing a surge in demand, as are delivery services. Thus, the economy continues to create many new jobs, as well as new firms, even as many more are destroyed or at least waylaid.
A Very Dynamic Economy
This process of simultaneous job creation and destruction is not unique to this pandemic. Only the scale is unprecedented. When we hear that 200,000 jobs are added in a monthly jobs report – the average over the past decade of economic expansion – we implicitly focus on only these net new jobs created. But the reality is much more dynamic, with a vastly greater number of jobs begun and ended each month, as shown in the following graph, which goes back to 1999 when the government started tracking the flow of gross job gains and losses.
Which brings us to the current recession. The media reports of hiring at retail and delivery firms illustrates that the economy is still adding many jobs, even as we’re hemorrhaging jobs overall. So when we read that the country lost over 22 million jobs during March and April, we now understand that’s net jobs lost. But how may gross jobs were lost and, more importantly, how many were created?
Some 30.8 million people filed new claims for unemployment benefits in March and April. With 22.2 million net jobs lost over those two months, that implies the economy added about 8.7 million new jobs over the same period. In other words, the economy gained almost three new jobs for every ten it lost (8.7M versus 30.8M). This finding almost precisely matches the findings from a Federal Reserve Bank of Atlanta study by Dave Altig, John Robertson, and other Atlanta Fed economists and researchers, which concluded that “COVID-19 caused 3 New Hires for Every 10 Layoffs.” And it’s broadly consistent with another Fed report that found that 4% of U.S. adults surveyed they started a new job in March compared to 13% that lost their job during the month (again, a 3 to 10 ratio).
Conclusions and Implications
With all the ugly economic headlines in the first two months of the pandemic, it is perhaps comforting to learn that upwards of nine million jobs were created over this period, even as three times as many positions were lost. Likely more than a million of these new jobs were created in either new firms or the new branches of existing firms. Capitalist economies are endlessly adaptable, as firms and workers continuously seek new to identify and capture changing market opportunities, even during harsh economic conditions.
This dynamism gives hope that our economy will continue to evolve and create new opportunities for enterprising workers and investors as we collectively confront the many challenges of containing and ultimately conquering COVID-19.
Still, the cold, hard reality is that some 13 million fewer Americans hold jobs now than just prior to the pandemic. Many more gig and part-time workers are working fewer hours for less income.
And given the continued rise in coronavirus cases across the country, and ominous warnings from epidemiologists and public health professionals of a potential major infections wave in the fall, it seems inevitable that some of the recent progress we’ve made in restarting the economy and rehiring workers will be reversed – particularly with the expiration of the various federal business and household income support programs.
Restoring our pre-pandemic prosperity – imperfect as it was – will be a long, tough haul.
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Posted: by Andrew J. Nelson
