The recovery of the economy is at the front of everyone’s mind. Third-quarter unemployment numbers for North Carolina so far show reasons to be positive, but also to worry.
One report from Beaconomics says the second quarter was bad, but this is a short-term shock. They do not expect this recession to be as bad as the Great Recession. The main reason? This shock lacks the long-term qualities of the Great Recession. There is much less “true job loss” than before (4% compared to 8% at the height of the Great Recession). According to those Beaconomics experts, this difference means job losses should be a temporary rather than permanent change in the economy.
Plus, they say one-third of the loss in consumer spending came in healthcare. Healthcare is non-cyclical, and most spending losses came from delayed procedures. This is spending delayed, rather than spending lost. However, third-quarter unemployment numbers could still worry us.
Speed of Recovery: V or U?
Beaconomics also says the economy is less distorted than it was during the 2008 recovery. This note suggests that the recovery could be quick, not slow. They call this a “V-shaped” recovery, instead of a “U-shaped” recovery.
As of the end of the third quarter, the North Carolina unemployment rate has increased 2.7% since last year. Still, in just the last month, the total number of unemployed dropped by 100,105 people. North Carolina’s August unemployment rate is also 1.9% below the national average. Reports show signs of progress but also that the state has a long way to go.
Other experts like economist Dr. Michael Walden caution that the recovery may not be as fast as we hope. He says, “I expect third quarter GDP numbers will be very impressive,” but he does expect that recovery to slow down. He believes there will be no full recovery of the labor market until 2022, even 2023.
We have seen an economic slowdown in recent weeks, coinciding with an increase in new COVID-19 cases in August. “As the virus goes, the economy goes,” says Walden. He also says both death and hospitalization rates are rising more slowly. Meaning? We know how to deal with the virus better. The clustering experiences of NC colleges and their need to backtrack were difficult but important lessons.
NC Has to Balance Two Separate Recoveries
He says “The big change…was the removal of some of the shutdown orders for bussinesses…as a result, we are seeing more economic activity.” He agrees we will have a strong third quarter rebound.
The problem is, there are two different recoveries going on: the recovery telecommuting jobs, and the recovery of necessarily face-to-face jobs.
Remote jobs – professional occupations, financial services and technology – have had much better recovery. Hospitality, leisure and other non-remote sectors have had a slower recovery. Also, there is also a pay gap between these sectors. Pay was better for those now working from home even before the virus.
Last month’s unemployment numbers reflect this difference in the two recoveries. Industries like trade, professional services, education, and health saw upticks in employment. Meanwhile, leisure and hospitality lost 1,300 jobs while construction lost 1,800.
Unfortunately, many people cannot work from home. Walden says the “hospitality and leisure sector…got slammed … About half of the jobs lost in North Carolina [were] in the sector.” These sectors recovered somewhat but are still down approximately 25% since February. He says, “If you’re in a job with a lot of face-to-face contact, it’s going to be a long time before people are willing to do that”.
Job Churning: A Possible Setback
Walden calls our current circumstance a “mandated recession.” He adds that it will lead to a large amount of “job churning.” Hotels, for example, are automating. Some of them use automated check-ins, while others use cleaning robots. Walden notes that North Carolina has one of the largest food processing plants in the world. Other plants are already replacing workers with robots. This “churning” of existing jobs could lead to permanent or “true” job loss, and, in time, that loss could force people to leave their career for new work.
Expect Changes to Training and Education
There is a lot of job change, and Walden says we need to create community college training programs to help workers adapt. A lot of these trends – like robots – were already happening, but the virus has accelerated the process. Walden says, “One of the most important things the public sector can do is education and retraining.”
In the private sector, Walden suggests that remote working may be here to stay. He cites a study that shows around 40% of workers have remote jobs right now. This trend could mean less demand for office buildings, campuses and shopping centers. This also applies to medicine as doctors diagnose and treat through web apps. He says, “There’s going to be a tremendous amount of innovation in tele-education, telemedicine, and tele-working.”
Change in these sectors could lead to a reconfiguration of the real estate market. There will be downsides, but if people can work anywhere, they can choose to live anywhere. To name one a personal perk of that change, people might be able to spend less time commuting and more time with their loved ones.
Walden also expects that “we will likely see much more federal resources dedicated to… preventing future pandemics.” Likely a cabinet-level agency, he says. This possible addition (added atop the CDC) could be another way to add federal jobs if the new agency holds sites in North Carolina.
Time will tell which side of the “V shape” vs. “U shape” argument is correct.
One thing both sides agree on is that we are facing changes, whether they’re short term or long term. Change can be hard, but it also presents an opportunity for growth. Now is a great time to invest in learning a new skill or take advantage of new opportunities.