Center for New York City Affairs

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It’s a longer road to recovery for the labor market—Covid’s impact has been lop-sided, reshuffling employment demands and causing historic long-term joblessness

A strong national jobs report on the first Friday in August and a robust 6.5 percent real second quarter Gross Domestic Product (GDP) report recently led several commentators to herald an impending complete recovery from the Covid-19 economic compression. It’s true that June and July saw the best national job growth since last August and the second quarter inflation-adjusted value of all goods and services (the GDP) surpassed the pre-pandemic peak reached in the last quarter of 2019. Similarly, total wages and salaries paid in the U.S. economy in the second quarter of this year well exceeded the pre-pandemic peak.  

But, when it comes to the labor market, the focus is still on damage control. The latest data make clear that for the average worker, we are a long way from a full recovery. And given the earlier and steeper impact that Covid has had in New York City relative to the rest of the nation, a local labor market recovery is some distance down the road and not just around the corner. As of June, New York City’s total employment level was 488,000 jobs (or 10.4 percent) below the February 2020 pre-pandemic level. That’s more than 3.5 times greater than the 2.9 percent remaining national job decline from pre-pandemic levels. 

We need to keep in mind three defining characteristics of the current Covid-impacted job market: 

  • New York City’s job loss has been extremely lop-sided. Face-to-face service industries (generally low-paying jobs disproportionately held by persons of color) had suffered five times greater job losses as of June than had been experienced in higher-paying remote-working industries like finance, tech, and information. (In absolute numbers, it’s even more lopsided. Face-to-face employment showed a -400,000 jobs deficit vs. a -54,000 deficit in the remote-working industries.) 

  • Covid’s broad economic impact has changed consumer demand and business practices in ways that permanently reshuffle employment demands.  Going forward this will likely mean fewer jobs in leisure and hospitality and brick and mortar retail, more jobs in warehouses and delivery, and changed skill requirements (some higher, some lower) resulting from accelerated use of technology across many industries. 

  • The scale and duration of Covid’s economic impact creates historically high levels of long-term unemployment (defined as more than six months without work). This is a condition that usually entails adverse effects on personal health and family well-being, and great difficulty in reconnecting with work that pays at least as well as pre-displacement jobs did. For the U.S., 42 percent of jobless workers were long-term unemployed as of the second quarter of this year; for New York City, the share was 61 percent (encompassing about 275,000 New Yorkers).   

NYC unemployment rates much greater than pre-pandemic 

A recent analysis by the Center for New York City Affairs of Current Population Survey data from the U.S. Census Bureau shows the extent to which unemployment rates have risen in New York City since the fourth quarter of 2019, the last full quarter before the pandemic. The analysis confirms that unemployment rates are much higher for Blacks and Latinx workers than for White workers, and that the pandemic’s lopsided effects have hit hardest at young adults and less-educated workers.  

Overall, New York City’s unemployment rate averaged 11 percent during the second quarter of 2021. Unemployment was 9.4 percent for Whites, 12 percent for Blacks, 12.4 percent for Latinx, and 10.7 percent for Asian and “other” workers. Unemployment for young adults ages 18-24 was a stratospheric 26.4 percent in the second quarter and was 13.7 percent for workers with a high school education or less. Workers with a four-year college degree experienced 7.5 percent unemployment, and those with a post-graduate degree had six percent unemployment in the second quarter of this year.  

Source: Center for New York City Affairs analysis of Current Population Survey, benchmarked to seasonally-adjusted New York City Labor Force Data from the NYS Department of Labor.

Another commonly used measure is the under-employment rate which factors in involuntary part-time workers and discouraged workers who have stopped looking for work. It is a broader measure than the traditional unemployment rate and is typically several points higher. For the second quarter of 2021, New York City’s overall under-employment rate was 16.4 percent vs. the 11 percent regular unemployment rate. Under-employment was 13.4 percent for White workers, 17.6 percent for Blacks, 19.5 percent for Latinx, and 16.6 percent for Asian and other workers. The bar graph above also shows the under-employment rate for young adults and for those with a high school education or less. (The under-employment rate is sometimes denoted as the Bureau of Labor Statistics “U-6” measure and the regular unemployment rate as the BLS U-3 measure.) In comparison, the U.S. headline unemployment rate was 5.9 percent in the second quarter and the under-employment rate was 10.1 percent. 

Economic uncertainty with the Covid-19 case rate rising again 

Through June, New York City had enjoyed fairly steady job gains, averaging about nine-tenths of a percent monthly since January of this year. That’s about a tenth of a percent better than the U.S. However, the economic outlook has since been tempered by the resurgence in Covid-19 case rates since the second week in July due to the spread of the Delta variant in a context where many people have still not been vaccinated. Beginning August 16, New York City will require proof of vaccination for indoor dining, gyms, and entertainment performances. In light of the case resurgence, many large businesses recently have announced delays in their return-to-office plans. Initial unemployment claims in New York State had been on a downward trajectory since late January, but leveled off in July (although at a rate two-to-three times the pre-pandemic level from two years earlier.)  

As has been the case since the onset of the pandemic, the course of the virus itself has a profound influence on the course of Covid-19 economic effects. At this point, the uptick in the New York City case rate over the past month resembles the upward trend that began in mid-October of 2020. On the bright side, hospitalization and mortality rates are much lower this time around.  


Editor’s note: This is part of a regular biweekly Covid-19 Economic Update prepared by economist James Parrott of the Center for New York City Affairs with the support of the Consortium for Worker Education and the 21st Century ILGWU Heritage Fund.