Millions Of U.S. Jobs Are Never Coming Back From The Covid-19 Recession

It’s a nice, rosy notion, but one that would strike anyone most workers as wishful—maybe the job losses incurred because of the coronavirus shutdown were largely temporary, and will come roaring back as soon as the economy ‘reopens.’

The reality is a lot more harsh. As weekly jobless claims skyrocket past 30 million in just a matter of weeks, a new study from the Becker-Friedman Institute at the University of Chicago offers a sobering assessment of the extent of permanent damage to the job market.

“We find three new hires for every 10 layoffs caused by the shock and estimate that 42% of recent layoffs will result in permanent job loss,” write authors Jose Maria Barrero, Nick Bloom and Steven Davis.

That’s because the shock from the coronavirus epidemic may have permanent effects on certain industries, ranging from the obvious, like tourism and hospitality to the less immediately evident, like manufacturing and retail as warehouses and stores adjust to new social distancing norms.

“In other words, Covid-19 is also a major reallocation shock,” the authors say.

The report has deep implications for how extensively policymakers might react to a downturn that could prove more prolonged and protracted than officials, including those at the Federal Reserve, had been anticipating.

Minneapolis Fed President Neel Kashkari said during a videoconference on Tuesday that the Fed and Congress had reacted to the shock as if it were just going to last a couple of months.

As the slump now appears deeper, he said, the economy’s stewards will have to think hard about how to manage possible waves of bankruptcies and further job cuts.

"If this is in fact an 18-month journey that we're on, the way we think about economic policy responses changes significantly,” he said.