Twenty-year-old William Lovely used to work at Jason’s Deli in Virginia Beach, delivering catering orders to surrounding businesses. Now, thanks to the coronavirus, he’s struggling to pay his bills.
Laid off in March, he’s gone from regular hours and pay to gigging for UberEats or Instacart, earning up to $100 on some days but often coming home with almost nothing. While the restaurant is trying to slowly reopen, Lovely reckons the best he can hope for is a part-time position, requiring him to keep his second job if he’s going to meet his expenses.
“My job stopped, but the bills don’t,” he said.
Lovely’s experience goes to the heart of the dilemma facing the world economy as it gradually emerges from the virus-enforced lockdown and unprecedented recession: How many of the millions of lost jobs are gone for good?
The hope is the waves of stimulus doled out by governments and central banks should eventually buoy economies and spark a revival in hiring. Furloughed or redundant workers would then return to their employers.
The risk though is that the pandemic is inflicting a “reallocation shock” in which firms and even entire sectors suffer lasting damage. Lost jobs don’t come back and unemployment stays elevated. That would force workers to retrain or relocate, both of which are hard, and governments to do more than just try to spend their way out of trouble.
It was a theme hit upon last week by Federal Reserve Chairman Jerome Powell as U.S. central bankers forecast leaving interest rates near zero until 2022 in part because of a surge in unemployment to the highest level since the Great Depression.
There will be “well into the millions of people who don’t get to go back to their old job,” said Powell, who will testify to Congress on the economic outlook this week. “In fact, there may not be a job in that industry for them for some time.”
Unfortunately, new research by Bloomberg Economics reckons 30% of U.S. job losses from February to May are the result of a reallocation shock. The analysis — based on the relationship between hiring, firing, openings and unemployment — suggests the labor market will initially recover swiftly, but then level off with millions still unemployed.
Jobs in the hospitality industry — like Lovely’s — are among the most at risk, alongside retail, leisure, education and health. In many cases, the pandemic will increase the challenge for bricks and mortar companies facing off against e-commerce platforms such as Amazon.com. Inc, accelerating the pre-crisis trend.