Many Americans have seen their household incomes become one of COVID-19’s many casualties, as the U.S. unemployment rate has skyrocketed and millions of workers who still have jobs face cuts to their hours or pay rates.
New data from the U.S. Bureau of Labor Statistics indicate that while the official jobless rate was 13.3 percent as of May, nearly half the U.S. adult population (47 percent) actually lack a job. Unlike the official unemployment rate, the broader figure — known as the employment-to-population ratio — counts adults who are not working and no longer actively seeking employment.
“To get the employment-to-population ratio back to where it was at its peak in 2000, we need to create 30 million jobs,” Torsten Slok, Deutsche Bank’s chief economist, told CNBC.
However, the Economic Policy Institute estimates that 11.9 million American workers — or 7.2 percent of the total U.S. workforce — are out of work with no hope of being called back to their prior jobs. Another 5.7 million workers, or 3.5 percent of the workforce, are out of work and believe they might get called back but likely will not. In other words, more than 10 percent of the U.S. workforce is unemployed and not expecting to get its old job back.
Even among Americans still gainfully employed, the news isn’t entirely good. According to data provided to The Washington Post by economists who worked on a labor-market analysis for the University of Chicago’s Becker Friedman Institute, at least 4 million Americans who are still employed have faced wage cuts since the pandemic began.
The economists found that Americans have been twice as likely to face pay cuts during the COVID-19 downturn than they were during the Great Recession a decade ago. The experts added that pay cuts are spreading most quickly among white-collar workers — a sign that the downturn might be both deeper and longer than even the staggering unemployment data suggest.
But the economists found that pay cuts are still most prevalent among hourly workers who have seen their checks thin out as their hours diminished over the course of pandemic-related shutdowns. The Post reported that 6 million workers have been pushed to part-time work even though they’d prefer full-time jobs.
“I have Fridays off, but I would rather have the money,” Denise Iezzi, an accounting assistant, told the Post. Her paycheck at a New Jersey air-conditioning business has fallen from $720 a week to $576 a week since her employer cut her hours in March.
The paper said that while slashing worker pay to avoid layoffs has historically been unusual, many firms have been cutting compensation in recent months by between 5 percent and 50 percent. The University of Chicago economists told the paper they’ve seen a 10 percent median wage cut.
But how much workers appreciate cuts instead of layoffs remains debatable. When PYMNTS polled consumers early in the pandemic about how the downturn was impacting their economic lives, a solid majority (59.2 percent) reported already living paycheck to paycheck.
Of that population, 36.3 percent said they were at least able to cover all of their monthly expenses, but 22.9 percent had difficulty getting their paychecks to stretch enough to cover all bills. Hit such consumers with cuts to their hours or pay rates and they’ll have even less money to make ends meet. Of course, they’ll fare even worse if their paychecks stop entirely due to layoffs.
What happens next depends on how fast the U.S. economy turns around. The Post noted that June University of Michigan Surveys of Consumers indicated that 56 percent expect the U.S. economy to be better a year from now, but that many expect that high unemployment to persist into next year. Those figures match up with PYMNTS consumer surveys, which found consumers expect the pandemic and its economic effects to stretch into 2021.
All in all, the situation remains uncertain for both those without work and those with less work than they’d like. Workers and employers are both wondering what comes next — with the recovery’s fate hinging on what the future holds for them.
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