COVID-19 cases are declining and millions are getting vaccines, but the pandemic’s economic hangover may persist for years.
That’s among the implications of a recent report by the U.S. Bureau of Labor Statistics, which downgraded many 10-year job growth projections because the pandemic could permanently alter the behavior of consumers and employers.
Remote working was cited as “the primary force of economic change,” and a quarter of all full-time employees were still working from home last month, according to BLS data. In some fields, including computers, legal services and business operations, well over half the employees were teleworking.
Surveys suggest many Americans want to continue remote work after the pandemic, the researchers wrote, adding: “Telework has also been shown to increase employee happiness and not to hinder productivity.”
The shift to remote work has direct and spillover effects, including reducing the need for office space and nonresidential construction, wrote three BLS economists.
Spending on commuting, business travel and restaurants is expected to decline from pre-pandemic levels in the report’s “moderate-impact” scenario. Under its “strong-impact” scenario, there would be a stronger effect on restaurants and travel, along with the desire by some to avoid large crowds and close proximity to others. That would hurt industries with large gatherings and reduce demand for some customer service jobs, the report said.
The alternate scenarios also show surging demand for some industries and occupations, especially in technology and science. From 2019 to 2029, the number of epidemiologists is projected to grow 31% — up from a pre-pandemic projection of 4.6%.
But most job sectors will face a headwind, especially under the strong-impact scenario. They’re expected to grow, just not as fast as before COVID-19.
“The purpose of these projections is to estimate potential long-term structural changes in the U.S. labor market that are caused by changes in consumer and firm behavior as a result of the pandemic,” the authors wrote. “The intent is not to produce precise estimates of employment change.”
In September, the BLS published projections on job growth from 2019 to 2029 and did not include effects from the pandemic. Last month, the BLS released a new report that updated job growth estimates under the moderate-impact and strong-impact scenarios.
Projections that deviate the most from baseline numbers show the industries facing the greatest uncertainty from the pandemic, the report said. For example, the number of restaurant hosts and hostesses was initially projected to grow 8.2% over a decade. After the pandemic, the projection turned negative — to a decline of 10.8% or 18%, depending on a moderate or strong impact.
In contrast, little change was projected in the hiring of CEOs.
The report “reminds us that big shocks can have long-term aftereffects and they can go on for a while, even a decade,” said Mark Muro, policy director of the Metropolitan Policy Program at Brookings Institution, a Washington think tank. “We’re all understandably pivoting to the recovery and craving the recovery. But this has been a massive economic shock. This shows softening in very big areas of the economy — tourism, food, hotels and travel. And that’s a problem.”
Food services and accommodations, which include restaurants, bars and hotels, would be hit hardest with a 10% decline in employment compared with the baseline estimate, according to the BLS report. Arts and entertainment, retail trade and construction are next on the list.
The BLS projects a bigger increase in hiring for residential construction. But nonresidential construction jobs would decline in both scenarios — after being forecast to grow prior to the pandemic.
In the strong-impact scenario, construction is expected to still add 90,500 jobs from 2019 to 2029. But that compares with over 300,000 hires expected in the baseline scenario.
Retail trade already was expected to lose 2.4% of jobs over the next decade. But in the worst case, the industry would lose 7.2% of employment, about 1.1 million jobs, the report said.
BLS researchers did not break down the effects of the pandemic by region, but Muro and a colleague applied the BLS data to states and hundreds of metro areas.
“The first takeaway is that for all places, the pandemic is shaping up to depress employment growth from 1% to 4% over the next 10 years,” they wrote in the report published last week.
There’s also “a sharp north-south divide,” with Sunbelt regions seeing worse projections because they’re more reliant on leisure, tourism and dining. Northern areas, especially “superstar” tech centers and university towns, have a deeper concentration in science and information technology, which are projected to grow faster because of the pandemic.
San Jose, Washington and Boston face much weaker headwinds, for example, than Naples, Fla., Las Vegas and Atlantic City, N.J., the Brookings report said.
Dallas-Fort Worth and Texas rank around the middle of the pack with 10-year job growth projected to slow by 1.75% and 1.78% respectively. Austin and Houston projections are similar, and San Antonio’s is slightly higher, according to Brookings.
Dallas has a significant workforce in food and drink and hospitality and tourism. That will pose challenges for the region, especially for many lower-paid workers.
“But an increasing share of the Dallas economy is in technology and professional services, which are slated to grow quite rapidly,” Muro said. “And if there’s more investment in technology and research, that could really benefit the region and the state.”
Many questions remain about the future of business travel, which is crucial to two major hometown employers, American and Southwest airlines.
“It certainly feels like travel patterns of all kinds may change, but these activities don’t disappear,” Muro said. “We just don’t know how much consumer behavior is going to return.”
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