Center for New York City Affairs

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New York City’s labor market turbulence, with a more sluggish rebound than most other large cities

Recent headlines on the record number of job openings nationally resonate locally, given reports of the difficulty in recruiting workers as New York City business restrictions are lifted and employers rush to re-open. At the same time, workers are quitting jobs at a record pace. It’s not too surprising, then, to see both of these trends most pronounced in the pandemic-battered hospitality sector, with most of the job churn occurring in the restaurant industry. Part of what’s going on is that following a year of social and economic upheaval, many workers are rethinking the work they do and how it fits into their lives. Undoubtedly, many former restaurant workers are considering other options, given the industry’s volatility and its low-pay reputation. Pre-pandemic, 48 percent of New York City’s restaurant workers had household incomes below 200 percent of the Federal poverty line, nearly 10 percentage points greater than the next-highest industry (social assistance).

Continuing pandemic-induced labor market turbulence points to not only a significant reallocation of workers among industries but also suggests a sluggish New York City recovery, with a lot of friction. The city likely mirrors national data for May that indicate that the number of permanent job losers is more than three-fourths greater than the number of unemployed on temporary layoff. We both have many workers who don’t have jobs to return to and others who don’t want to return to the jobs they had. At the same time, the pandemic economy has reshuffled consumer demand and accelerated technology changes, developments that change the mix of industry and occupational demand for skills and workers

Economist Betsey Stevenson called this “enormous reallocation of people and jobs” the labor market’s “primary challenge.” Stevenson cited a national Pew study that found that two-thirds of the unemployed are seriously considering changing their occupation or field of work. Similarly, our recent survey of Astoria residents indicated that 58 percent of those losing jobs during the pandemic did not expect to return to the same employer, and 21 percent expected to have to find work in a new occupation or industry.

As noted in our last Update, New York City’s job rebound during this February, March, and April was stronger than that in the nation for the same period. Nevertheless, as of April the city had regained only 41 percent of the jobs lost during the steep and sudden employment drop occurring in March and April of 2020. The United States overall had regained 68 percent of lost jobs by this April. New York City lags most other large U.S. cities in recouping last spring’s job falloff. Only San Francisco and Los Angeles have been more sluggish in gaining back lost jobs. Ten cities, most in the South or Southwest, have regained 70 percent or more of their pandemic job losses. 

One of the most troubling aspects of the city’s sluggish rebound is that more than 600,000 city residents have been unemployed for more than six months, a threshold level denoting long-term joblessness. Workers experiencing long-term unemployment generally suffer long-lasting wage erosion and negative household financial outcomes as well as adverse physical and mental health effects. Their children also experience adverse schooling outcomes. These negative effects are likely to disproportionately impact workers of color who have borne the brunt of pandemic job displacement and comprise an estimated three-quarters of the long-term unemployed.

It is certainly welcome to see the multiplying signs of the city’s reawakening from more than a year of restricted activity and isolation. However, these outward indications of re-opening should not be construed as the harbinger of an imminent economic “all-clear” signal. New York City still has a long way to go, and the indications of continued labor market turbulence far outweigh the likelihood of a quick return to the very high level of employment that prevailed in February 2020. The looming labor market reallocation is far greater than seen at any time in the city’s history since the end of World War II. Such a reallocation is unlikely to occur smoothly or easily, and at this point there is little indication that city policymakers, current or future, recognize the challenge.


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.