Fed Chair Jerome Powell mentioned "lasting damage to the economy" as a worry three separate times during his prepared remarks on Wednesday, and called it a reason to continue providing support through fiscal and monetary policy.
The state of play: But experts say the damage already has been done, even as we're still in the midst of figuring out just how much. The labor market is changing and many who have lost their jobs are unlikely to get them back.
- Specifically, economists worry that many who leave the labor force — especially mothers, older workers, minorities, and many who were outside the labor force and had only recently gotten jobs — will return to the sidelines for good.
Case in point, economist Betsey Stevenson sees a long-simmering child care crisis that could have a significant impact on the number of parents, especially mothers, working over the next 20–30 years.
- “We are letting the whole child care system erode in such a way that it’s not going to be there for us when we are fully ready to go back," she told Politico.
- "You’re seeing child care centers that can’t stay in business. They can’t figure out how to reopen. They can’t keep their employees on staff. They’re letting people go."
Additionally, Black workers are significantly underrepresented in "remote-compatible jobs," and were also especially prone to the “last hired, first fired” trend that has meant Black unemployment rebounds more slowly than white unemployment following recessions, the Dallas Fed noted in a recent blog.
- "The benefit that [Black people] received from the tight labor market in recent years may dissipate as the economy falters."
By the numbers: The U.S. labor force participation rate saw its largest decline ever from February to March and has not recovered much of that ground, even as the unemployment rate has declined.
Between the lines: The Hamilton Project's Wendy Edelberg and Jay Shambaugh warn "widespread bankruptcies could fundamentally change the business landscape," leading to a substantial imbalance between companies and workers.
- "The COVID-19 recession is going to have scarring effects both on the business landscape and labor markets, and policy makers need to be preparing for those effects now," Edelberg told Axios earlier this month.
The big picture: Americans who have lost their jobs are losing hope. In April, 78% of those in households with a job loss assumed it was temporary.
- As of July, 47% think that lost job is definitely or probably not coming back, according to the latest poll from AP.