Long-term job­less could turn re­ces­sion into more painful, ex­tended down­turn

Daily Sabah (Turkey) - - Money -

THIS spring, Magdalena Valiente was ex­pect­ing her best year as a Florida-based con­cert pro­moter. Now, she won­ders if the ca­reer she built over three decades is over.

Back in March, Valiente had been plan­ning five tours for Latin Grammy win­ners Fonseca and An­drés Cepeda and more than 20 for Mi­ami Latin pop band Baci­los. Earn­ing well into six fig­ures dur­ing good years, Valiente was hop­ing to help her youngest son, a high school ju­nior, pay his way through col­lege.

But with live events can­celed, things have turned bleak. She is re­ly­ing on un­em­ploy­ment ben­e­fits and Med­i­caid and has ap­plied for food stamps. She has lost hope that the cri­sis will end soon.

“I worked up from the very bot­tom when I started in this business in my twen­ties,” said Valiente, a sin­gle mother in Fort Laud­erdale, Florida. “There weren’t many other women, and it was hard. It’s not easy to let it go.”

Mil­lions of Amer­i­cans in the industries hit hard­est by the vi­ral pan­demic face a sim­i­lar plight. Their un­em­ploy­ment has stretched from weeks into months, and it’s be­come painfully un­clear when, if ever, their jobs will come back. In the en­ter­tain­ment field where Valiente worked and in other sec­tors that ab­sorbed heavy job losses – from restau­rants and ho­tels to en­ergy, higher education and ad­ver­tis­ing – em­ploy­ment re­mains far be­low pre-pan­demic lev­els.

These trends have raised the specter of a pe­riod of wide­spread long-term un­em­ploy­ment that could turn the vi­ral re­ces­sion into a more painful, ex­tended down­turn. Peo­ple who have been job­less for six months or longer – one def­i­ni­tion of long-term un­em­ploy­ment – typ­i­cally suf­fer an ero­sion of skills and pro­fes­sional net­works that makes it harder to find a new job. Many will need train­ing or education to find work with a new com­pany or in a new oc­cu­pa­tion, which can de­lay their reen­try into the job mar­ket.

On Fri­day, the gov­ern­ment re­ported that em­ploy­ers added 661,000 jobs in Septem­ber, nor­mally a healthy gain. Yet it marked the third straight monthly slow­down in hir­ing. The na­tion has re­gained barely half the 22 mil­lion jobs that were lost to the pan­demic and the wide­spread business shut­downs it caused in March and April.

In a wor­ri­some trend, a ris­ing pro­por­tion of job losses ap­pear to be per­ma­nently gone. When the virus erupted in March and par­a­lyzed the econ­omy, nearly 90% of lay­offs were con­sid­ered tem­po­rary, and a quick re­bound seemed pos­si­ble. No longer. In Septem­ber, the num­ber of Amer­i­cans clas­si­fied as per­ma­nently laid off rose 12% to 3.8 mil­lion. And the num­ber of long-term un­em­ployed rose by 781,000 – the largest in­crease on record – to 2.4 mil­lion.

We have a real chance of there be­ing mas­sive long-term un­em­ploy­ment,” said Till Von Wachter, an eco­nom­ics pro­fes­sor at UCLA.

The na­tion now has 7% fewer jobs than in Fe­bru­ary. Yet the dam­age is far deeper in some sec­tors. The per­form­ing arts and spec­ta­tor sports cat­e­gory, which in­cludes Valiente’s in­dus­try, has lost 47% of its jobs. It hasn’t added any new jobs since the coro­n­avirus struck.

Ho­tels are down 35%, restau­rants and bars 19%, trans­porta­tion 18%. Ad­ver­tis­ing, one of the first ex­penses that com­pa­nies cut in a down­turn, is down 9%.

Higher education has lost 9% of its jobs. Many classes have been de­layed or moved on­line, re­duc­ing the need for jan­i­tors, cafe­te­ria work­ers and other ad­min­is­tra­tors. Nor­mally dur­ing re­ces­sions, the education sec­tor adds jobs to ac­com­mo­date peo­ple re­turn­ing to school to seek mar­ketable skills or education. Not this time.

Ash­ley Brosh­ious took years to de­velop skills that now seem much less in de­mand. A man­ager and som­me­lier at a Charleston restau­rant, Brosh­ious is one of just six cer­ti­fied ad­vanced som­me­liers in South Carolina. Still, she was laid off in March. And when the restau­rant owner re­opened one of his two es­tab­lish­ments, she wasn’t re­hired.

Now, Brosh­ious re­ceives about $326 a week in un­em­ploy­ment ben­e­fits. That’s not nearly enough to pay the $2,400 monthly rent on her home, as well as stu­dent loans, car in­sur­ance and credit card debt from a trip to Hawaii she took while still work­ing.

“When you spend your en­tire life build­ing this ca­reer,” Brosh­ious said, “it’s hard to start over.”

Some economists note hope­fully that this re­cov­ery has pro­gressed faster than many an­a­lysts ex­pected and may keep do­ing so. Matthew No­towidigdo, an econ­o­mist at the Univer­sity of Chicago’s Booth School, and three col­leagues pre­dicted in a re­search pa­per that the rapid re­call of tem­po­rary work­ers will lower un­em­ploy­ment to 4.6% a year from now. That would sug­gest a much faster re­cov­ery than the pre­vi­ous re­ces­sion.

Three-quar­ters of the tem­po­rar­ily laid off aren’t both­er­ing to look for work, No­towidigdo said, based on an analysis of gov­ern­ment data, ap­par­ently be­cause they’re con­fi­dent of be­ing re­called. And while the num­ber of job open­ings has de­clined by about 17% com­pared with a year ear­lier, ac­cord­ing to Glass­door, it re­mains far higher than dur­ing the Great Re­ces­sion.

In July, the most re­cent month for which gov­ern­ment data is avail­able, there were 2.5 un­em­ployed work­ers, on av­er­age, for each job open­ing. That’s much bet­ter than the six un­em­ployed per job open­ing dur­ing the depths of the Great Re­ces­sion. “There are still a lot of peo­ple find­ing jobs fairly rapidly,” No­towidigdo said.

Still, more than one-third of work­ers who have been laid off or fur­loughed now re­gard their job loss as per­ma­nent, ac­cord­ing to a sur­vey by Morn­ing Con­sult. That’s up from just 15% in April.

Some economists, like Sophia Koropeckyj of Moody’s An­a­lyt­ics, see ris­ing cause for con­cern. Koropeckyj es­ti­mates that 5 mil­lion peo­ple will strug­gle to find work even af­ter the virus has been con­trolled. Jobs likely won’t re­turn to pre-pan­demic lev­els un­til late in 2023, she said in a re­search note.

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