The coronavirus pandemic has shot unemployment to record highs. The road to recovery may be difficult, and we’ll need civil society to guide us along this road.
It’s hard to know if we’ve felt the worst of it at this point in the U.S. For the pessimist, things can always get worse. For the optimist . . . I wouldn’t know. Of course, if you are one of the 33 million who have been laid off, hopefully things are already turning around as stay-at-home orders begin to lift this week in different parts of the country.
As of May 12th, there have been over 26 million unemployment applications and in March alone $3.89 billion was paid in unemployment. A survey from Nonprofit Quarterly found that 20% of respondents had been impacted by either reduction in hours, furlough, or lay off. If nonprofits employ about 10% of U.S. private sector employment, a guestimate of 2 million (since we know most unemployment has been in hospitality and retail) of those impacted by COVID-19 are nonprofit jobs. American Philanthropic started a survey of its own and found that the main reason for nonprofit layoffs is because of anticipated fundraising losses that will occur in the future. Another study from CCS Fundraising found that 25% of survey respondents furloughed or laid off staff. How long will nonprofits freeze hiring from anticipated fundraising losses?
The unemployment rate has jumped to the highest level since WWII and is well above the Great Recession with a seasonally adjusted employment rate of 14.7%—compared to 3.5% in February 2020. Will the health of our economy before COVID-19 mean a faster recovery? Or, will this unforeseen economic and health crisis be a beast beyond analysis? It is worth noting that most see COVID-19 as primarily an economic crisis, and health risk, second.
Yet, despite this unprecedented time and its harrowing figures, optimism remains high. 77% of laid-off workers believe that they will likely be hired by their former employers.
Economic analysts believe it could take years to return to 3.5% unemployment rate, in part, because there is still so little information available with what a post-pandemic economy will look like with no vaccine. The Labor Department reported that a single month (with 20.5 million people abruptly losing their jobs) wiped out a decade of employment gains. To put that in context, that is nearly double what we experienced during the entire financial crisis from 2008 to 2010.
A study out this month from the Becker Friedman Institute for Economics at the University of Chicago explains that for every 10 layoffs during COVID-19 there have been 3 new hires. The study estimates that 42% of recent layoffs will result in permanent job loss. Moreover, while this pandemic is causing the fastest reallocation of labor, will it be effective? The Wall Street Journal authors think not: “Unemployment benefit levels that exceed worker earnings, policies that subsidize employee retention, occupational licensing restrictions, and regulatory barriers to business formation will impede reallocation responses to the COVID-19 shock.”
We’re holding out for a V-shaped economic recovery and the extent to which that can be successful depends on creating more opportunities for labor reallocation to capitalize even more on those stimulus checks and forgivable loans. This is especially important to keep the economy improving as COVID-19 continues to spread with no vaccine and no herd immunity.
The best case is people going back to their former jobs as soon as possible. After that, loosening restrictions and licensure requirements for business and employment will help to absorb this unemployment shock.
In his seminal Democracy in America, Alexis de Tocqueville warned that, “if men are to remain civilized, or to become so, the art of associating together must grow and improve.” While the health of our economy depends on so many things beyond our influence, the health of democracy and mediating institutions depends in large part on individual citizens and the nonprofits they support, those voluntary associations that further the common good in many and diverse ways—while also providing the additional and humanizing good of gathering people around a shared vision and purpose.
Unemployment will go down, but it is here to stay for a while. Employers, entrepreneurs, and politicians have a part to play in aiding our economic recovery. And while each of us plays a role in that recovery, as well, our civic responsibility as the pandemic wanes will be to stay true to those principles that further human flourishing—in particular, the “art of associating.”
Invest in those peoples, associations, and missions who keep us human. Whatever the tea leaves tell us, we cannot perfectly predict or shape the circumstances that lie ahead, but we can preserve our humanity by strengthening those habits of thinking and being. We might hope that this extended time of social distancing helps more of us to see the importance of the associational life and the practices and institutions that promote association.
That—thicker civil society, a flourishing associational life—will help us, individually and corporately, survive the difficult days of economic recovery.