Academic Literature

Labor market Structural Damage in in US – fraction of the unemployed whose previous jobs have been permanently eliminated has increased from 10 percent to about 40 percent

In this analysis, we find evidence of structural damage in the monthly employment data. Early in the pandemic, most workers who lost jobs were laid off temporarily, as businesses expected to reopen and recall their workers. However, as time has passed, an increasing share of unemployed workers have no expectation of being recalled: the fraction of the unemployed on temporary layoff has declined from about 80 percent in April to about 40 percent in September, while the fraction of the unemployed whose previous jobs have been permanently eliminated has increased from 10 percent to about 40 percent.

The shift in the composition of the unemployed from temporarily to permanently laid off has likely occurred for several reasons. First, for some workers who were initially temporarily unemployed, their employers decided to permanently downsize or close in response to weak activity. Second, as the recession has persisted, firms that did not initially lay off workers have likely started to restructure or close in response to what they perceive will be a prolonged period of reduced demand or even structural changes to the economy (for instance more telework or less business travel). We expect that those firms permanently laid off workers without offering any expectation of recall. Finally, in the face of poor labor market prospects or challenges brought on by the pandemic – particularly for the caregivers of young children – some workers on layoff have decided to (or felt compelled to) drop out of the labor force altogether.

Chosen excerpts by Job Market Monitor. Read the whole story @ Tracking the mounting challenges among those who have lost their jobs

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