Back in April 2020, the unemployment rate peaked at 14.7% nationally as a result of COVID-19. The unpredictably that this pandemic has brought has shaken the labor market in ways not previously seen. Although, the unemployment rate has improved and dropped back down to 7.9% in the U.S., there have been additional factors that continue to affect employers and job seekers. When looking beyond unemployment rate, you’ll see things such as labor force participation rate, stimulus efforts and overall industry performance that have altered what unemployment levels really mean.
Similar to the unemployment rate, COVID-19 drastically impacted the labor force participation rate, reaching a low of 60.2% in April. This resulted in around 5 million people simply dropping out of the workforce since February, when the rate was at 63.4%. While we continue to see improvements, with the rate at 61.4% as of September, the existence of the virus still is limiting a return to normalcy.
Individuals have dropped out for a variety of reasons. Early on, you could look to stimulus efforts, discussed further in the next section, and fear of the virus as the major causes. When this first spread, you had many parents staying at home due to childcare issues and workers unable to access the public transportation they relied on. Now, as our understanding of COVID-19 grows, it is worker safety and reopening plans that hold more weight.
When this first started, stimulus efforts were crucial in making sure the economy stayed afloat during these uncertain times. We had enhanced unemployment benefits for those who lost their jobs and the Paycheck Protection Program (PPP) for companies to stay in business.
From April through the end of July, unemployed Americans saw an additional $600/week on top of their state-provided unemployment benefits. While many continued to take on available opportunities, others earning more than 100% of their previous wage had a short-term monetary incentive to stay out of the workforce.
The Paycheck Protection Program (PPP) was introduced to help small businesses cover their expenses while revenues dropped. While the initial payments from the PPP were loans with a 1% interest rate, a forgiveness plan was put in place to encourage companies to avoid layoffs. While some organizations cut labor costs and took on the loan, others now had an incentive to keep their employees around.
Additional stimulus efforts haven’t been implemented and talks have stalled. However, both parties have confirmed that they plan to introduce new stimulus bills after the election.
Certain industries have been negatively affected much more than others while some have even seen business improve as a result of the pandemic. The airline, restaurant and leisure industries have been hit the hardest by COVID-19 due to the nature of their businesses in addition to their place as a luxury instead of a necessity. On the opposite end of the spectrum, insurance companies, grocery stores and online retailers such as Amazon have seen record revenues in recent months.
Therefore, you’ll see that there can be vast differences in the number of job seekers and job openings available based on the work you do and the skills you have. For example, those who worked in entry-level restaurant roles may want to consider a career change into a field such as manufacturing, where the job (and pay) is more stable in the current labor market.
Measuring the economy and labor market goes beyond looking at the most current unemployment rate. There are many factors, including the ones mentioned in this blog, that play a role in diagnosing its condition. Despite the struggles that many of us have gone through due of this pandemic, whether you’re a business owner or employee, the improving economic conditions should give us a bit of optimism as we make our way into 2021.