Many of the coronavirus pandemic layoffs will become permanent job losses, according to a new study with alarming implications for the future of the economy.
Forty-two percent of workers experiencing recent layoffs will suffer permanent job losses, according to a paper circulated by the National Bureau of Economic Research.
The finding is especially grim news because officials are hoping that most of the workers sent home during the pandemic will return quickly to their old jobs. The vast majority of the massive layoffs in response to the pandemic have been on a temporary basis: In April, 18 million of the 20.6 million people who lost work said that their job losses were “temporary,” according to the Bureau of Labor Statistics.
“If the pandemic and partial economic shutdown linger for many months, or if pandemics with serious health consequences and high mortality rates become a recurring phenomenon, there will be profound, long-term consequences for the reallocation of jobs, workers and capital across firms and locations,” the study said.
The study cited a number of policy actions that may be harmful to the recovery process. It said efforts to preserve the jobs and employment relationships available before the virus outbreak could result in huge costs to taxpayers and the misallocation of resources. On the other hand, there could be benefits of policy reforms that expedite a speedy reallocation of jobs, workers, and capital to new, productive uses during the pandemic.
“If we are correct that many of the lost jobs are gone for good, there are important implications for policy,” the study said.
Last week, President Trump vowed that the job losses will be temporary, promising a “phenomenal year” in 2021 following a hopeful recovery from the public health crisis.
Top White House economic adviser Larry Kudlow also said it’s a positive sign that most job losses were perceived as temporary. Kudlow said he believed the layoffs will only be suffered for a few more weeks to a month.
States have been working individually to reopen in phases at their own pace. The majority of states have begun partial openings, but those facing higher rates of COVID-19 have remained strict on not lifting their lockdowns too early to prevent a potential uptick.
The United States has more than 1.3 million cases of the coronavirus, with over 80,000 deaths and 210,000 recoveries.
