Despite rebound, permanent job losses continue to rise

Despite rebounding from the initial hit COVID-19 delivered back in March, permanent layoffs and job losses are threatening the economic recovery.

Permanent job losses rose by 345,000 in September, bringing the total of those who have been let go for good to 3.8 million—the highest in 7 years. Although the U.S continues to add jobs and temporary layoffs have fallen to 4.6 million, those indicators have masked the true economic damage that the coronavirus has caused to the U.S. economy. At the current rate of recovery, the U.S would not return to pre-COVID levels of employment until the end of 2021. According to Federal Reserve Bank of Atlanta President Raphael Bostic, the data spells out a pretty clear picture.

“Widespread permanent job loss could become a material risk to the recovery,” Bostic said Monday speaking to the Securities Industry and Financial Markets Association. “The data on this is clear: Permanently laid-off workers find it far more difficult to rejoin the labor force. This would make recovery more difficult to sustain.”

Bostic also emphasized that job losses so far have hit women and minorities especially hard in services occupations. As permanent losses continue to mount, those groups will likely see increased inequality and suffer more than others in the long term.

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“An unnecessarily slow labor market rebound could just drive historic wedges deeper, continuing to exacerbate the geographic, racial, gender, and income disparities in our economy,” Bostic said. “The people who are often least equipped to weather a prolonged bout of unemployment are bearing the brunt of this health crisis and economic downturn.”

Although Bostic agrees with the Fed’s current interest rate policy of near-zero, he is acutely aware that the bank does have limits. Adjusting some of its lending facilities towards groups that have been more adversely affected by the pandemic is an option. But the details of those adjustments and when they would be enacted are unknown.

“Fiscal policymakers clearly have a significant role to play in ensuring that the economic disruptions don’t become deeply rooted, that the wedge does not continue to widen these disparities,” Bostic said.

With daily coronavirus cases at all-time highs and winter setting in across the country, it will be a balancing act to keep the virus in check and businesses open. Failure to do so could result in a continued rise in permanent job losses and an even slower economic recovery. With the right guidelines in place, however, there is still a chance for businesses to function safely and keep the economy thriving—even in a new normal.

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