The December labor report and the overall decrease of 140,000 jobs was, by most accounts, a pause in the progress made during the past six months. The composition of the report released on Friday was almost all determined by the loss of 498,000 employees in the leisure and hospitality sector, with a majority of sectors experiencing modest to strong gains.
The data was defined by a pandemic that is surging as deaths increase and the rollout of the vaccine has yet to gain momentum. Yet there are some concerning long-term issues that cannot be ignored and will demand attention by policymakers in the post-pandemic economy.
For instance, though the labor force participation rate remained steady despite the spread of the virus, the deceleration in the growth of the labor force picked up again. It took a decade for the labor force to resume growing by 2% per year after the Great Recession. But it took only a few months of the trade war to end that progress.
Since the summer, the labor force has been shrinking by up to 3% on a year-over-year basis. Should the pandemic drag on, there is the potential of more and more of the labor force becoming discouraged, ending efforts to look for work.
And should changes in the economy become permanent – for instance, the decline in the demand for indoor dining or brick-and-mortar shopping – there will be a flood of service workers who will age out or be left behind whatever economic recovery occurs.
The resistance to a fiscal stimulus after the Great Recession not only dampened the rate of the recovery, but also arguably encouraged the deindustrialization of the economy from 2009 to 2020 in favor of more competitive offshore production.
Finally, the longer the existing labor force is out of work, the more likely the loss of skills that would damage the competitiveness of the labor force.
For more information on how the coronavirus is affecting midsize businesses, please visit the RSM Coronavirus Resource Center.
