We are now approximately 18 months removed from the onset of the COVID-19 pandemic. Businesses that were forced to close or severely limit capacity over the past year plus are coming back online, and for the first time, a sense of pre-pandemic normalcy is evident, with New Jersey’s statewide mask mandate lifted as more individuals get vaccinated for the virus each day.
From an economic standpoint, the recovery from what was a historic downturn induced by the black swan event appears to be underway.
To put into perspective just how unprecedented the economic downturn was, James Hughes, University Professor and Distinguished Professor, Dean Emeritus of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University, reminds us that in the two-month period between the end of February 2020 and April 2020, which he refers to as the “Great Coronavirus-Driven Contraction,” 97% (21.8 million jobs) of the US employment gains of the preceding 10 years were wiped out.
New Jersey itself lost approximately 750,000 jobs in that span, which wiped out nine years of job growth.
“It sent us back to the 20th century in terms of the total number of jobs in the state,” Hughes says.
The good news is the New Jersey economy has been slowly growing over the past year, with the latest figures (at press time) from the U.S. Bureau of Labor Statistics (BLS) showing five straight months of job growth in the state.
New Jersey has now recovered 403,000 jobs, according to BLS, or about 56% of the number lost in March and April 2020, due to the pandemic and measures taken in response to it. Despite the consistent, albeit slow growth, New Jersey’s unemployment rate still sits at 7.2%.
Hughes says, however, that perspective is important.
“February 2020 was a unique period. We had whittled down unemployment to well under 4%, and we didn’t have any inflation whatsoever,” Hughes explains. “It took us 10 years to get [to that point], so to use that as a benchmark [when looking through the lens of recovery] is pretty harsh.”
Another concern is the country’s rising inflation rate, which now sits at 5% at press time, which is the highest reading since August of 2008, according to BLS.
“That is the great unknown right now,” Hughes says. “The confidence of the Federal Reserve in saying [the rate increase] is temporary is increasingly being challenged. I don’t think we would be going back to 1981 or 1982 when the inflation rate was 12%, but to expect it to stay below 2% may be unrealistic.”
The biggest price increases were recorded for gasoline (56.2%), used cars and trucks (29.7%), utility gas service (13.5%), transportation services (11.2%), and apparel (5.6%).
According to Trading Economics, an online platform that provides historical data and economic forecasts, the rise in inflation can be attributed to a combination of factors, including rising consumer demand as the economy reopens, soaring commodity prices, supply constraints and higher wages as companies grapple with a labor shortage.
Speaking of the labor shortage, BLS data shows that the number of job openings in the US rose to a new record high of 9.3 million in May.
“There are a record number of job openings, but at the same time, the number of people quitting their jobs is also at an all-time high,” Hughes says.
According to a national employee survey from Eagle Hill Consulting, 27% of US employees plan to leave their employer as the pandemic subsides, with 29% of workers expecting to leave their job in the next year.
The numbers are even higher for Millennial workers, as 33% plan to leave post-pandemic, while 36% expect to leave within the next year.
“The talent turnover tsunami is here,” says Melissa Jezior, president and chief executive officer of Eagle Hill Consulting. “With vaccination rates climbing and workplaces re-opening, employees increasingly feel confident looking elsewhere for a job. And that is highly problematic for employers given the acute labor shortage.”
Hughes adds that a high quit rate is generally a positive measure, as it suggests worker confidence in the economy and is often indicative of a recovery, as opposed to during a downturn, where the unemployment rate rises due to layoffs, for example.
However, with so many businesses struggling to fill positions to meet the increasing demand for products and services, there is certainly concern.
In addition to higher quit rates among the workforce, a perfect cocktail of reasons are contributing to the labor shortage, including ongoing unemployment benefits, health-related fears of going back into work, lack of childcare access, and new working habits.
While the government can play a role in alleviating some of these issues, such as the eventual end of extended unemployment benefits and a full roll back of COVID-19-related childcare restrictions, businesses will need to be proactive in how they approach attracting workers.
For the companies that can afford to, offering higher salaries and more robust benefit packages can help, but with so many businesses already hurting from the pandemic, that’s not a solution for all.
Hughes says that a longer term structural solution that could arise is an acceleration of the adoption of automation.
“The longer labor remains a problem, the faster we will solve it with technology,” he says.
For now, it is certainly a job-seekers market.
“For somebody at the bottom of the employment ladder, it looks like there are some good opportunities out there,” Hughes adds.
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