Time for Economists to Put Down Their Hammers and Put on Their Glasses (and Listening Caps)

Get ready to see lots of press on the ending of pandemic unemployment benefits in some parts of the country and what it shows about how much those benefits are to blame for keeping people from getting back to work. See, for example, this Wall Street Journal story which offers this analysis:

The number of workers paid benefits through regular state programs fell 13.8% by the week ended June 12 from mid-May—when many governors announced changes—in states saying that benefits would end in June, according to an analysis by Jefferies LLC economists. That compares with a 10% decline in states ending benefits in July, and a 5.7% decrease in states ending benefits in September.

Eric Morath and Joe Barrett, “Americans Are Leaving Unemployment Rolls More Quickly in States Cutting Off Benefits,” Wall Street Journal, 6/27/21

But the dollar value of benefits paid and the number of people claiming unemployment benefits of course will decline in places that are ending benefits. This is mostly a direct effect on government and household budget constraints, rather than the (indirect) effects of the policy change on the marginal incentives people have to go back to work–the economist’s theory being that what matters is (simply) the generosity of unemployment benefits one can receive by remaining unemployed relative to the level of wages they can earn by going to work for their “highest bidder.”

The current mismatch between the demand for leisure/hospitality workers and the available and willing supply of workers to these businesses is far more complicated than the marginal incentives story economists like to tell. In my first piece for Avison Young, I focus on the apparent surge in consumer demand for restaurants vs. the apparent lack of workers looking for work across certain localities, based on Google search data. Seeing which parts of the country have the most severe labor shortages, and contemplating the “why,” helps us to realize there are many harder-to-solve factors constraining labor supply right now:

(i) the ongoing suspension of “seasonal” work visas for foreign visitors;

(ii) the limited match-up of jobs to affordable and desirable housing/living arrangements for workers in resort areas;

(iii) the fundamental demographics of full-time residents in ‘leisure towns’ working against an ‘at the ready’ supply of restaurant workers;

(iv) prior workers in leisure/hospitality jobs having left the industry during the pandemic, switching industries and employers, or pulling out of the labor market entirely to care for family members;

(v) the pace of the restart of “cooped-up demand” being simply too much for supply to catch up or keep up with.

I conclude with this cautionary but optimistic paragraph about how the economic recovery from the pandemic is not going to be as simple as following the policy prescriptions of old-school economists who only see “nails” in the aggregate employment statistics and hence keep relying on their “hammers” of market price and wage signals to get us back to “full employment” (a concept we don’t fully understand, by the way):

With the 4th of July holiday just around the corner, our “summer of freedom” (as President Biden has called it) will be in full swing. We will continue to see increases in leisure/hospitality consumer spending and businesses struggling to hire enough workers to fully meet their demand. Many businesses will respond by making those leisure/hospitality jobs more desirable (higher wages, more benefits, greater flexibility). We shouldn’t interpret the current excess demand for restaurants and other leisure/hospitality spending as a sign of an undesirable “overheating” of the entire economy, but rather as demonstration of the inevitable difficulty of quickly rebuilding and restarting a supply side of our economy that has not only been shut down for so long but has gotten smaller. (Remember, we’ve lost a lot of immigrant workers and working women—which were two of the fastest-growing segments of our U.S. workforce pre-pandemic.) The economic “recovery pains” we’re currently experiencing signal that the post-pandemic economy will likely be quite a bit different. To bring back the full potential of our economy will require giving more people more reason to participate—creating a truly more inclusive (and therefore more resilient) economy. And that’s a good thing.

Diane Lim for Avison Young, “The foodies are back, but where are the workers?” 6/24/2021

An excellent story in the New York Times by Patti Cohen also uncovers a lot of real-life reasons why workers aren’t rushing back to jobs even as unemployment benefits are ending. How did Patti learn these real-life reasons? She talked with people, one at a time:

Among job seekers interviewed at job fairs and employment agencies in the St. Louis area the week after the benefit cutoff, higher pay and better conditions were cited as their primary motivations. Of 40 people interviewed, only one — a longtime manager who had recently been laid off — had been receiving unemployment benefits. (The maximum weekly benefit in Missouri is $320.)

Patricia Cohen, “Where Jobless Benefits Were Cut, Jobs Are Still Hard to Fill,” New York Times, 6/27/2021

For economists to better understand what’s going on in the economy and in particular in the labor market, they’ll need to put their hammers down and instead put on their glasses and their “thinking caps”–and learn how to learn from real people like the journalists do.

From the Last BLS Report of (bleh) #2020

Here are some charts (and one table) I updated today in my employment status by race and gender analysis I’ve been doing since the summer. Crossposted in this (poorly numbered) Twitter thread here. All based on monthly (through November) unadjusted data published by the Bureau of Labor Statistics accessible here.

Absolute change in unemployment rates among women by race — comparing the Great Recession with the Pandemic Recession. The largest increases in unemployment have been among women of color–Hispanic and Asian women at the start of the Pandemic Recession, but through November (all groups of) women of color still had experienced larger increases in unemployment than White women.
Unemployment rate for all in the labor force (age 16+), all men (blue), and all women (red), during the Pandemic Recession (Feb-Nov 2020). Note that female unemployment surged past men’s at the peak of the recession in April, but since October, the overall male unemployment rate has exceeded the female rate.
Female unemployment rates by race since January 2019. Before the pandemic, Asian women (blue line) typically enjoyed the best labor market outcomes and experienced the lowest unemployment rates, but in this Pandemic Recession their unemployment has increased the most and they have looked much more like other women of color (Hispanic/Latina and Black women) than like White women. In November, Asian female unemployment was still two full percentage points above White female unemployment.
Male (blue) and female (red) employment-to-population ratios during the Pandemic Recession (Feb 2020 – Nov 2020). Hard to see any interesting differences by gender when everyone is lumped together/averaged out! (Note that men have always had higher E/pop and the male and female levels appear to have moved together during this recession.)
Differences by race (men and women combined) in employment-to-population ratios are clearer. Note that Hispanics started out with highest E/Pop and dropped the most in the spring but have also recovered the most since the spring.
Looking at women by race, we see clear differences in the levels and trends of E/pop. Note that Asian women (in blue) for much of 2019 had the second-highest E/pop (closest to Black women, in green), but looked more like Hispanic women (in red) this recession and as of November had the lowest E/pop among all women by race.
Summary table of unemployment rate levels and changes for all race-gender categories, comparing the Great Recession with the Pandemic Recession.

Top line story is that yes, this Pandemic Recession has been one that’s disproportionately burdened women and especially women of color, but as the months are approaching a year, we’re seeing that even White men will not come out unscathed. With today’s report on the November employment situation–the rise in long-term unemployed, the slowing of the recovery in labor force participation and the employment-to-population ratio as people sit themselves on the sidelines (hunker down at home) and literally “wait” for the public health crisis to end–we can see that the labor market impacts we’ve suffered so far are going to take awhile to recover from.

For economic policy to be most helpful to the labor market recovery, it will have to address all the conditions that are holding back work both at the workplace (the demand side, where certain places and types of work are still not safe to return to) and the home (the supply side, where many parents are now full-time caregivers given school closures). This is truly not a typical economic recession–it is not just dubbed the “Pandemic Recession” but is literally driven by the pandemic. So first and foremost, we need to get the public health crisis under control. (And that means listen to Dr. Fauci’s advice about wearing our masks and avoiding social gatherings as we wait for our vaccine.)

Update on Pandemic Recession vs. Great Recession Unemployment by Race and Gender (incl. Asian Women)

10/22/20: Belated UPDATE through September data to charts below, originally shared on Twitter here. (I’ll make future updates here as well in order to keep in one place where some might look thanks to the new Center for American Progress report by Mike Madowitz and Diana Boesch published today.)

Today the BLS released their monthly “Employment Situation” report –and the report’s underlying data (which you can access here), including numbers on Asian women separated from Asian men which are not included in the report. Here’s a small, mostly quantitative update to my original post (with Mina Kim) from last month. First, the bottom-line/main-story bar chart:

… and below, the updated table with detailed unemployment stats by race and gender:

One thing I decided to adjust in the bar chart and add as note to the table is that April 2020 was when the unemployment rate peaked for the workforce overall as well as for most of the race-gender categories–except that the peak for Asians (both men and women) and for Black women (and Black overall but not Black men) happened in May. So the bar chart compares the absolute change in unemployment rate during the (aftermath of the) Great Recession compared with the change from this February to either April or May–whichever was the worst point for each race-gender category.

Some findings worth highlighting (or repeating):

  • Asian women fared the best in the Great Recession in that their absolute change in unemployment rate from the start of the recession to peak unemployment was the smallest of all race-gender categories;
  • From the start of the Pandemic Recession (Feb. 2020) to either peak unemployment in April or May, or to the latest data for September, White men have fared the best (their September unemployment rate is just 2.8 percentage points higher than in February);
  • Hispanic women fared the worst in the Pandemic Recession through this spring (April)–but up through September, Asian women have seen the largest increase in unemployment (+6.7 percentage points);
  • While Asian unemployment peaked in May at 16.6% for women and 13.2% for men, both had failed to recover as much as for other race-gender categories through August. Unemployment rates in August were 11.5% for Asian women and 10.0% for Asian men, still higher than they ever got even in the depths of the Great Recession. By September, Asian male unemployment (at 8.0%) was lower than at its peak in the Great Recession, yet Asian female unemployment (at 9.7%) was still higher than at any time in the last recession–and in fact, higher than ever measured in the BLS data.

As I hinted at in my first post on this subject, there are many different possible explanations for why this Pandemic Recession has been so hard on women (it’s the “She-cession”) and Asian women in particular. The intersection of Asian and female provides a uniquely-focused lens into what’s so different about this recession and how it’s affecting all workers through the roles and demands that Asian women just happen to disproportionately represent. To be continued!

More Pictures on the Pandemic “She-cession” by Race

Here are a bunch of charts that illustrate why the Pandemic Recession is also sometimes referred to as the “She-cession.” These are based on BLS monthly data through August (released last Friday, Sept. 4). I’m also re-posting the bar charts I put up on Twitter and here last Friday, so the latest figures are in one place. (See original post on “Seeing Asian Women…” here and the table with all the unemployment data through August by race-gender categories here.)

First, compare male minus female unemployment during the Great Recession to during the Pandemic Recession (thus far):

During the Great Recession (Dec. 2007-2009/10 recovery period), male unemployment relative to female unemployment grew dramatically–and in general/overall male unemployment stayed higher than female even years after.
During the Pandemic Recession (since Feb. 2020), female unemployment increased dramatically and surpassed male unemployment in all racial categories, and only among Black workers did male unemployment again exceed female unemployment this summer.

The differences in unemployment across racial categories have been stark. It’s not just a recession with disproportionate impact on women, but one with disproportionate impact on people of color. Zooming in a bit more recently, here’s what the unemployment rates by race since January 2019 look like:

Unemployment rates by race categories, men and women combined. Note that Asian unemployment started the very lowest in February 2020 and is the second highest in August 2020.

Going back to looking at the employment outcomes among women by race over the past year and a half (since January 2019), here are charts showing the unemployment rates, the employment-to-population ratios, and the labor force participation rates:

Female unemployment rates, by race, January 2019 through August 2020. Note that like for race categories overall, Asian females had the lowest unemployment rate in February 2020, but in August 2020 have the second highest–as Hispanic female unemployment has shown the best recovery since its peak in April.

Female employment-to-population ratios by race, January 2019 through August 2020. Hispanic women had the lowest e/pop at worst part of the Pandemic Recession and have traded places with Asian women a couple times since. Black women had had the highest e/pop going into the pandemic but in August, white women had surpassed black women.
Female labor force participation rates by race. Asian female participation was relatively low pre-pandemic, but is second highest this summer–showing that many Asian women consider themselves still “in the labor force” even if currently unemployed.

And below is the headline bar chart I previously posted comparing absolute changes in unemployment rates for women by race in the Great Recession vs. during this Pandemic Recession (through August):

The Pandemic Recession is a “She-cession” and has had disproportionate impact on women of color, particularly on Asian women–who face a still higher unemployment rate in August (at 11.5%) than at their worst point in the Great Recession (8.4%).

And looking at Asians alone (both men and women), the “double whammy” of being both Asian and female in this Pandemic Recession is underscored:

Asians (especially the women) had very low increases in unemployment during the Great Recession relative to other race categories. This time is totally different.