The Initial Impact of COVID-19 on Labor Market Outcomes Across Groups and the Potential for Permanent Scarring

The economic damages of the COVID-19 pandemic are not being well captured by current labor market statistics that show both permanent damage to employment relationships and labor force attachment and the surge of workers who have experienced a temporary loss of work and income. The challenge is assessing the permanent damage that will persist well after the pandemic is behind us as a country. While the unemployment rate declined in May and June, permanent job loss accelerated over this period.  Reversing this trend and getting these folks back to work is the difficult task that lies ahead of us. Just as the Great Recession disrupted the labor market attachment of millions of workers, a similar phenomenon will likely occur as a result of this recession. In this essay, Betsey Stevenson of the University of Michigan explores the many ways the COVID-19 recession has affected the labor market. Stevenson shows that the labor market effects have not been evenly borne across workers of different genders, race, and educational attainment. The scarring effects of the recession will likely lead to high long-term unemployment and weakened labor market attachment for years to come.