COVID-19 has reshaped our economy for the long haul. Here’s how to help workers adapt.

The March jobs report was a pleasant surprise: The economy added 916,000 jobs, and unemployment fell to 6%. Some of the strongest gains were felt in construction, as well as leisure and hospitality — the jobs hardest hit by COVID-19.

With multiple, massive rounds of federal stimulus and a gusher of monetary easing by the Federal Reserve, it appears we’re on a path to recovering the jobs lost last year.

Although those numbers are promising, long-term unemployment (those out of work for 27 weeks or more) remains stubbornly high. Before the pandemic, roughly 1 million Americans were considered long-term unemployed. That number quadrupled over the past year and sits at 4.2 million, accounting for more than 43% of unemployed Americans.

At the same time, shorter-term unemployment spells have either been flat or on a slow but consistent decline.

It’s important to look at exactly who the long-term unemployed are and who continues to be disproportionately impacted by job loss. During the Great Recession, middle-wage occupations — primarily in construction and manufacturing — bore the brunt of job reductions while low- and high-wage occupations were minimally impacted.

During the COVID-19 crisis, the majority of job losses has fallen on lower-income workers in the services sector.

This is the largest sector of the economy, accounting for 80% of the workforce, and these jobs make up the majority of low-wage employment.

Last April, the first full month after the lockdowns, low-wage employment fell nearly 34% compared with April 2019. Middle-wage employment fell 14%. High-wage employment actually increased marginally. Throughout 2020, lower-income workers continued to absorb most of the job losses.

Before the pandemic, roughly 1 million Americans were considered long-term unemployed. That number more than quadrupled over the past year, and currently sits at 4.2 million, accounting for roughly 43% of all unemployed Americans.

In December, low-wage employment was down 12.5% compared with December 2019, still more than double the losses felt in middle-wage occupations (5.3%). High-wage occupations remained up by a slim margin.

Lower-wage workers hit hard

The types of jobs hit hardest within low-wage occupations include waiters and waitresses, cashiers, chefs and cooks, retail salespersons, as well as maids and housekeeping cleaners.

Strikingly, seven of the top 10 low-wage job categories that have experienced the greatest losses during this recession were among those who experienced the most job gains during the Great Recession.

Within middle-wage occupations, the jobs lost include taxi drivers and chauffeurs, secretaries and administrative assistants, accountants and auditors, sales workers and truck drivers, laborers and material movers, as well as teachers.

It gets more complicated when we dive deeper into the demographic and socioeconomic makeup of those who are still jobless. Young workers in the early stages of their careers have taken a big early career hit during the pandemic compared with the rest of the workforce. Those ages 16-19 have an unemployment rate of 14.1%, and those ages 20-24 have an unemployment rate of 10.4%, far surpassing the unemployment rates of all other age groups ahead of them.

Young workers are often overrepresented in leisure and hospital jobs. With these jobs disappearing over the past year, it has been more difficult for younger workers to gain the early work experience crucial to launching their careers.

Older employees leave workforce

On the other end of the age spectrum, workers 55 and older have the lowest overall unemployment rate of all age groups, but the labor force participation rate of workers over 65 dropped more than 11% in the past year, far more than any other age group.

As New York Times reporter Kevin Roose posits in his new book, “Futureproof: 9 Rules for Humans in the Age Of Automation,” these workers are vulnerable to expanded use of algorithm-driven technology, and they’re being displaced by automation at extremely high rates compared with their early- and mid-career colleagues.

Roose quotes one millennial business executive calling these systems “boomer removers” for the way they replace middle managers with machines.

Unsurprisingly, women, noncollege-educated workers as well as Black and Hispanic workers make up the bulk of the COVID-19 unemployed. Women account for 56% of workforce exits during the pandemic despite making up just 48% of the overall workforce — the result of lost child care arrangements and the need to supervise schooling at home.

Black and Hispanic workers, as well as other minority groups, experienced larger employment gaps than their white counterparts before COVID-19, and these gaps were exacerbated by the damage done to the services sector.

If projections of a slow services recovery come true, women and minorities could be scrambling for work in 2021 and beyond.

One of the trickiest aspects of our unemployment picture is that the two most challenging types of unemployment — cyclical (business cycle) and structural (technology-driven) — are merging.

Their combined forces are reshaping the services sector and the broader economy as we know it. Retail closures and a sharp reduction in travel have reduced service sector demand, perhaps for an extended period.

Meanwhile, employers are taking this opportunity to substantially increase their investments in automation. McKinsey & Co. recently projected that accelerated investments in automation during and after the pandemic will displace tens of millions of low-wage American workers over the next decade in retail, food service and hospitality, forcing most to find new work in different occupational categories.

Without training opportunities that help workers develop new skills for in-demand occupations, middle- and low-wage workers might face some of the most challenging labor market conditions in recent memory.

What’s most needed in such an environment is flexibility in employment and workforce development financing and services. Congress should look to personal reemployment accounts that provide workers with resources to meet a range of employment-related needs, including retraining, transportation, child care and relocation.

The federal government also can provide states with incentives to upgrade websites and other sources of information on local job markets so workers are better able to find open positions and improve their skills.

Enhancements to the nation’s American Job Centers — with a heavy emphasis on digital access to benefits and case management — would also help those in greatest need find help to land a job.

Federal stimulus and monetary policy prevented an economic collapse during COVID-19, and all the economic indicators are “green” headed into the rest of 2021 and beyond.

To meet the needs of the economy, as well as workers — including those who have been sidelined for prolonged periods — we need to be flexible and imaginative in creating resources that meet this unique moment in our history.

The alternative is a long, slow, frustrating slog for millions of Americans who find themselves struggling to match their skills to an economy that has been significantly reshaped by COVID-19.

Brent Orrell is a resident fellow at the American Enterprise Institute. Matthew Leger is a research analyst with AEI.

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