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The Pandemic Job Shuffle

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eye on the news

The Pandemic Job Shuffle

Nearly two years of data reveal the downside of lockdowns. January 20, 2022
Covid-19
Economy, finance, and budgets
Politics and law

Policymaking involves tradeoffs. As the Covid-19 pandemic started in the U.S. in early 2020, governments chose to impose lockdowns and other restrictions in an effort to limit the spread of disease. Most knew that “flattening the curve” would also flatten the economy. But while initial government reactions to the pandemic were relatively uniform, government measures have varied substantially since the spring of 2020. Some states, wary of the economic and social costs of restrictive measures, largely moved away from lockdowns; others heedlessly maintained them. New data show the different approaches had important consequences.

Job losses in March and April 2020 exceeded 22 million nationwide. The unemployment rate jumped from 3.5 percent in February 2020 to 14.7 percent in April 2020. Then, as government restrictions on businesses and individuals eased, unemployment began a rapid and steady decline, reaching 6.4 percent at the end of the Trump presidency and 3.9 percent a year later.

Payrolls have recovered somewhat, but nationwide there are still 3.6 million, or 2.3 percent, fewer jobs than at the pre-pandemic peak. The recovery has been uneven. Only four states—Utah, Idaho, Arizona, and Texas—have recovered all their jobs lost to the pandemic, with payrolls rising 3.9, 1.9, 0.2, and 0.2 percent respectively since February 2020. All four are Republican-led and imposed lenient Covid restrictions.

Other states have not done as well. Jobs in New York, Michigan, and California —three states governed by Democrats and notorious for rigid and prolonged lockdowns—are still down 8, 4.7, and 4.7 percent, respectively, compared to February 2020.

These states not only lost jobs and failed to recover them; they lost people as well. Census data show that between April 1, 2020, and July 1, 2021, blue states saw large numbers of residents move out and red states large numbers move in from around the country. California and New York lost 2 percent and 1 percent of their residents, respectively. Idaho, Arizona, Utah, and Texas enjoyed population growth ranging from 0.7 percent to 3 percent. While these same domestic migration patterns existed before the pandemic, the surge in migration during the pandemic was likely due at least in part to people voting with their feet in response to onerous lockdowns.

Despite the media’s insinuation that Republican governors’ lenient policies were akin to murder, red states did not suffer a disproportionate increase in the Covid cases that lockdowns were proposed to prevent. Cases per 100,000 population were within a few percentage points of one another in Utah (23,057), Arizona (22,282), New York (21,806), Michigan (19,866), Texas (19,280), and Idaho (19,074), despite widely divergent public health approaches. Even California’s case rate (17,992), while lower, is within 6 percent to 7 percent of Idaho and Texas.

Some Republican-led states that avoided extended lockdowns still experienced job losses, including Alabama, Alaska, and Kentucky. But in general, high-growth, dynamic red states have resumed their pre-Covid growth—while the likes of California and New York are stuck in reverse.

Democratic policymakers failed to appreciate that while short-term restrictions could limit case counts, long-term lockdowns were of little benefit and created tremendous economic and social costs. That message finally seems to have gotten through: even the governors who were previously most enthusiastic about lockdowns are now trying to keep their businesses and schools open.

The latest data reveal that the private sector accounts for three-quarters of the persisting job losses. The leisure and hospitality sector accounts for almost half the private shortfall. This explains why Florida, a state with lenient Covid restrictions but a large tourism industry, has recovered most but not all of its pandemic job losses. As conditions continue to normalize and people gain confidence that it is safe to patronize reopened hotels, restaurants, and entertainment venues, private-sector job losses should dissipate.

Meantime, decreased federal, state, and local government employment accounts for about a quarter of the persisting job losses, with 927,000 fewer government jobs than in February 2020. The largest category of government job gain in 2021 was in local education. A persistent decrease in government employment is perhaps a silver lining of the pandemic’s misguided public-health policies.

Photo by PATRICK T. FALLON/AFP via Getty Images

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