Key Takeaways:
- In just a few weeks, the coronavirus pandemic has ended the longest U.S. economic expansion on record and disrupted the global economy. It’s almost certain that employers and job seekers are already in the midst of the first U.S. recession in more than a decade.
- Past research on pandemics suggests we’re likely to see a U.S. recession that’s shorter-lived than the Great Recession, and with a much faster recovery — a so-called “V-shaped” recovery. Economies tend to snap back quickly once pandemics end.
- Economic models suggest we’re likely to experience a recession that’s roughly similar in magnitude to the Great Recession, with the economy shrinking on the order of 6 percent and unemployment rising into the low double-digits as coronavirus-impacted workers file for unemployment. The most recent Congressional Budget Office (CBO) estimates predict a 12 percent unemployment rate between April and June 2020.
- Recessions have an unequal impact on people and companies. Technology, healthcare, and e-commerce workers will be largely insulated and may experience a boom thanks to growing demand for remote work software (like video meetings and instant messaging apps), health services, and online shopping. Workers in restaurants, hotels, non-essential retail, and entertainment are already being dramatically impacted.
- The $2 trillion federal stimulus package agreed to by lawmakers will help support companies and workers in the coming months, but some parts of it are poorly targeted. The cause of today’s slowdown is the coronavirus, which means the best stimulus is to slow its spread. Unconditional cash payments to households can only do so much and could be funneled to workers most in need by further boosting unemployment benefits.
- For employees and job seekers: If facing unemployment fears, now is the time to upskill and get training to sharpen skills. When searching for the next role, research suggests workers can benefit by being geographically mobile and casting as wide a job-search net as possible.
- For employers: While job postings for some roles are already on the decline, many coronavirus-related jobs are already appearing. Even during a recession, we expect employers to maintain long-term investments in talent attraction and employer branding, as they’ll need to hire quickly again once the pandemic ends and the economy returns to normal times.
For the first time in a decade, job seekers and employers in America are facing an economic downturn. The coronavirus outbreak is having a swift and unprecedented impact on the economy. Thousands of businesses have shuttered instantaneously, causing a surge of nearly 10 million new unemployment claims and the first monthly job losses for the economy last month in more than 9 years. We are in uncharted waters.
What should companies and workers expect in the coming months and throughout the next year? And what can they do to help themselves, and the nation, recover from the coronavirus crisis? It’s difficult to predict. In this post, we’ll explain what economic research says about past pandemics and the economy, and outline what a 2020 recession may look like for employers and job seekers.
What’s the State of the Economy Today?
As of February, the economy was roaring ahead. The job market was among the strongest in a generation, with unemployment near a 50-year low and employers struggling to fill millions of open jobs. Then the novel coronavirus arrived and the U.S. hiring picture radically turned on its head. During the week ending March 23, there was a historically unprecedented surge in joblessness, with 3.3 million Americans filing for unemployment in a single week. The following week, another 6.6 million filed for unemployment. The economy ended a 113-months streak of positive job gains in March, losing a staggering 701,000 jobs in a single month.
It’s hard to overstate the magnitude of these shocks to the job market. 6.6 million workers filing for unemployment in a week is roughly 10 times more job losses in a single week than the worst week of the Great Recession (665,000 in March 2009), shattering all previous records in U.S. history. And the economy losing 701,000 jobs in a single month is on par with the scale of economic contraction we saw during the depths of the Great Recession a decade ago. For perspective, last year the American economy created 2.13 million net new jobs for the entire year. In one month, the economy shed a third of those jobs, and a number of workers equivalent to 3 years of U.S. hiring filed for unemployment, all due to coronavirus-related economic disruptions.
Secondly, we’re seeing declining volumes of online job postings as employers brace for coronavirus disruptions to their business. According to Glassdoor’s latest Job Market Report — a real-time view of hiring from our online jobs platform — job openings declined 8.8 percent week-over-week as of March 23. That ranks amongst the slowest 10 percent of weeks for online job postings since 2016.
Growth in U.S. job openings had been rebounding just before the coronavirus outbreak hit, which helped buffer against an immediate slowdown in hiring. But as government-mandated shelter in place orders put a complete stop to many economic transactions — and as more affected businesses shut down — this early downward trend in job openings, particularly in the BLS JOLTS survey, is very likely to continue as the economy slips into a recession.
Unfortunately, the coronavirus crisis has unfolded so quickly that most economic statistics are lagging far behind real-time events. Most labor market gauges won’t offer much guidance about the state of hiring for another several months. But given what we know today, here’s what we could possibly see in a variety of scenarios.
What to Expect in 3 to 6 Months?
All recessions are different. To understand what’s likely ahead for the economy in the next year, it’s important to think about how the dynamics of pandemics work, as the economy will only come back to full steam once the coronavirus is behind us.
Because the coronavirus pandemic is so disruptive to economic transactions — either because of illness or mandatory shelter in place policies — it’s likely the recession we’re on the cusp of won’t end until the pandemic is behind us.
How do pandemics end? Typically in one of two ways. Either a vaccine or effective treatment is developed, or enough people in the population get sick and recover with viral immunity that the virus stops spreading — what’s sometimes called “herd immunity.” For now, most health experts say a coronavirus vaccine is likely at least a year away, and there’s no effective treatment as of today. That means the coronavirus pandemic and the economic disruptions it is causing will likely not come to an end for several more months.
The Next 3 Months
The current challenge facing the U.S. healthcare system is a life-and-death balancing act. Without a vaccine, the only way to prevent coronavirus from spreading is to shut down large parts of the economy and impose shelter-in-place mandates. But once those are lifted, models predict the coronavirus will simply resume its spread through the population. The most realistic path for an end to the coronavirus pandemic is thus a strategy of slowing the spread of new cases through social distancing measures, and then slowly relaxing those measures — and letting the economy return to normal — as broad immunity grows in the U.S. population. During that time, we’ll likely remain in a recession.
According to one recent study, here’s the most probable path of coronavirus in America today. Based on computer simulations:
- The worst impact of coronavirus on the economy isn’t likely to happen for several months. The peak infection period in the U.S. will likely occur between 6 and 13 months from now, or in October 2020 through May 2021. At this point, even the latest U.S. Congressional Budget Office projections suggest the economy may remain depressed for a year or more — their latest projections are for a 9 percent U.S. unemployment rate even at the end of 2021.
- By the time the coronavirus pandemic is behind us, most of the author’s simulations suggest about 2/3 of the U.S. population will eventually contract coronavirus over the course of 18 months. That suggests a large fraction of the U.S. labor force will likely be quarantined or recovering for weeks or potentially more — an ongoing large disruption facing companies.
Over the next 3 months, we’ll likely see the first early signs of recession (some of which are already behind us) including depressed stock markets, rising unemployment claims, a downgrading of corporate debt, and early bankruptcies from smaller firms most affected by the outbreak. The sectors most likely to face an immediate downturn include those whose operations were involuntarily closed by state or federal officials, including restaurants, non-essential retailers, hotels, and entertainment venues. The impact on workers in these fields — many of which are among the lowest-paid roles in the economy — will likely be very severe in the coming year.
The Next 6 Months
Over the next 6 months, we should see escalating federal and state government efforts to counteract a recession. The economic harm from the coronavirus and shelter-in-place mandates will also spread throughout all sectors of the economy. As many small and mid-sized companies default on business loans due to falling sales, it’s likely that the financial industry will suffer significant losses over the coming year, potentially making it more difficult for businesses throughout the economy to get basic loans.
However, some sectors of the economy may stand to benefit from ongoing and dramatic coronavirus-driven disruption. The push toward remote work — at least for knowledge-workers whose jobs can be done without a physical presence — has led to a boom in online video conferencing services. Similarly, big social media platforms are seeing new surges in traffic as social distancing leads friends to connect online rather than in person. And while the health care system is near a breaking point today, the coronavirus pandemic represents a dramatic increase in health care demand, already one of the nation’s largest sectors in terms of existing job growth.
Will the Stimulus Deal Help?
With the U.S. facing a near-certain recession, in recent weeks Congress has raced to pass an economic stimulus bill. Lawmakers signed into law a $2 trillion economic relief package, which includes:
- Cash payments of $1,200 for most Americans;
- $260 billion in expansions for the unemployment insurance program;
- More than $370 billion in government loans for small businesses, along with another $500 billion in bailouts for larger companies in affected industries;
- Roughly $150 billion for public health;
- $340 billion in grants to state and local governments; and more.
Will these measures boost the economy and provide relief during the coronavirus pandemic? For the most part, yes. However, some of the provisions are poorly targeted. Unconditional cash payments to households, for example, may not be as well targeted as provisions boosting unemployment eligibility and benefits, which go directly to adverse-impacted workers.
The history of past pandemics shows that economies usually bounce back quickly once the outbreak is contained. This suggests that the most effective economic stimulus policy would be to spend heavily on containment measures, support unemployed workers, offer bridge loans to companies to prevent widespread bankruptcies, and allocate funds for rapid vaccine development. The sooner coronavirus is neutralized as a public health threat, the sooner the economy will begin the process of getting back to normal.
How Can Employers and Job Seekers Prepare?
It has been more than a decade since the last recession, and many young workers and almost half of U.S. companies today have never experienced a recession. What should they expect in the coming months?
Job seekers should prepare for rough waters in the coming year. Judging from soaring new claims for unemployment, there will be fewer open positions in industries most impacted by the coronavirus: Hotels, restaurants, travel and tourism, and non-essential retail.
For those facing unemployment, the two best strategies for a job search are: (1) Upskill now to get training to sharpen your skills for the job hunt, and (2) cast as wide a geographic net as possible when searching for your next role. The U.S. labor market is very large, and the ideal role during a recession may not be in your local city or even your home state. Use this time to think imaginatively about your career and where the best opportunities are across the country, whether they’re close to home or will require a distant move.
However, there’s one silver lining. Even in the worst recessions, most Americans in the labor force keep their jobs. For those employees, focus on job stability, ramp up financial savings whenever possible, and do your best to weather the storm. The best career strategy right now is to stay healthy and safe, and once the economy emerges from a recession you can hit the ground running again in terms of career advancement.
For employers, be prepared to handle the influx of applicants. As we explored in our recent Job & Hiring Trends for 2020 report, although pools of applicants will be larger during a recession, a surplus of job applicants creates new challenges. It’s beneficial to know how to separate quality talent from the ocean of applicants. To filter out the noise, HR teams will double-down on reliable hiring channels that deliver high-quality candidates — whether that’s referral networks that tap current high performers, informed candidates who’ve utilized sites like Glassdoor to research company culture and pay, or other proven sources.
Another major shift companies should expect in the coming months is moving to a radically more remote workforce than in the past. For obvious reasons, any role that can be done virtually in the coming months will be, and employers, for the time being, should expect default hiring arrangements to be remote. This will be a major source of disruption and change in long-established workplace norms, and it’s likely the U.S. economy will emerge from the coronavirus recession much more open to remote work than ever before.
Lastly, employers should not let their employer brand go sour. It’s important to know how to preserve employer brand image during a recession. It has been a decade since the last recession, and this is the first U.S. downturn in which there have been so many avenues on social media and online for employees to share information about employers. Building a strong employer brand can take years and, when the economy picks up again, companies who’ve maintained a positive employer brand will enjoy a clear strategic advantage. Even during a coronavirus recession, we expect to see most employers keep the long view and maintain investments in employer branding even as the economy slows.
Pandemics and the Economy: What Can History Tell Us?
While the coronavirus outbreak is unique, there are enough similarities with past pandemics to offer some guidance on how big a dent today’s crisis will put in the economy, and for how long.
A recent NBER working paper looked at how the economy fared during the 1918 influenza pandemic — a global pandemic that resulted in a large recession and the death of around 2 percent of the world’s population at that time, roughly 39 million people worldwide. That’s far larger than today’s coronavirus outbreak, and therefore provides a sense of an upper bound on economic impact.
By applying estimates from the 1918 flu pandemic to today’s global population, the authors suggest that U.S. recession is likely to accompany today’s coronavirus outbreak, with the nation’s gross domestic product (GDP) falling by about 6 percent. For context, the nation’s GDP per capita fell about 5.2 percent between 2007 and 2009, suggesting that a worst-case coronavirus recession may be about the same magnitude as the Great Recession.
One big difference between a coronavirus recession and the Great Recession is likely to be the speed of recovery once the crisis ends. During the Great Recession, the recovery was excruciatingly slow. This was partly because the crisis began with a housing collapse and, with transactions often taking months and sometimes years to unwind, the real estate market is extremely slow to adjust to changing market conditions. By contrast, research on the economic impact of other past pandemics shows the economy usually snaps back quickly once an epidemic is over — a welcome silver lining.
While history offers some clues about what’s in store for the economy, there obviously are many differences between the American economy today and that of 1918. Health care and treatment today are much more sophisticated and widely available. On the other hand, our economy has many more global supply chains and much more international travel, helping spread viruses far and wide in a much shorter period of time. And, of course, the underlying viruses fueling the 1918 epidemic and today’s are significantly different as well. So these estimates should be taken with a grain of salt.
What Can Mathematical Models Tell Us?
Aside from history, there’s another place economists can look to for guidance about what’s in store for the economy: Projections from quantitative models of virus transmission and how the macroeconomy will be affected.
In another recent NBER working paper, a team of researchers showed projections for the coronavirus crisis based on a combination of two models: A well-known model of how pandemics spread (known as a “susceptible, infected, recovered” or SIR model), and a standard macroeconomic model of the U.S. economy.
A pandemic almost always ushers in a recession, because it puts the brakes on both supply and demand. Supply is disrupted as sick or quarantined workers stay home (or are ordered to shelter in place), and demand for many products and services plummets for similar reasons — although demand doesn’t fall for every product, as those who’ve waiting in lines at grocery stores around the country this week can attest. That combination of falling supply and demand lowers the nation’s GDP and leads to layoffs — the definition of a recession.
The NBER researchers estimate coronavirus could ultimately infect just over half the U.S. population (about 52.8 percent) by the time the pandemic ends, peaking with about 5 percent of the population falling sick at the same time. If that came to pass, they estimate total consumption in the economy — which makes up about ⅔ of gross domestic product — would fall by about 9.1 percent. That’s a bit higher than estimates based on the history of past pandemics but still points to an impending U.S. recession that will likely be on the order of the Great Recession.
