July 2020, Volume 26, Number 3
Residents of most US states were ordered to stay home in mid-March 2020. The unemployment rate surged from 3.5 percent in February 2020 to 14.7 percent in April 2020, fell to 13.2 percent in May 2020, and was 11.1 percent in June 2020.
The unemployment rates of minority and immigrant workers are higher: 10.1 percent for whites in June 2020, 15.4 percent for Blacks, 14.5 percent for Hispanics, and 13.8 percent for Asians. Hispanics are overrepresented among those who work in service jobs that were affected by state at home orders, including as restaurant cooks and hotel maids.
After 128 months, the longest US economic expansion came to an end in February 2020, as the US slipped into recession in March 2020. The US is headed for a record $2 trillion deficit in FY20.
By June 2020, over 40 million jobless workers applied for unemployment insurance (UI) benefits. UI systems are operated by states, which set benefit levels for jobless workers and job-search requirements to continue to receive weekly payments. Since the 2008-09 recession, many states have tightened requirements to receive UI benefits or limited their duration to less than the usual 26 weeks. The share of unemployed workers receiving UI benefits fell from about 35 percent in 2007 to 27 percent in 2019.
The average replacement rate, the share of previous earnings replaced by UI benefits, is about 40 percent across states, so that a worker who earned $1,000 a week receives $400 in UI benefits when jobless. The federal government added $600 a week in pandemic UI benefits through July 31, 2020, equivalent to $15 an hour, so that many jobless workers received as much or more in benefits, $1,000 a week or $15 an hour for a 40-hour week, than they were earning.
Half of US workers earned less than $1,000 a week in the first quarter of 2020. The $600 a week payment was aimed at replacing, through the UI system, 100 percent of the earnings of workers who earned $15 an hour.
Some employers complained that laid off workers did not want to return to work in summer 2020 because UI benefits exceeded their earnings. The median wage of restaurant workers in 2019 was $11.65 an hour or $466 a week, which was less than UI benefits. Some laid-off workers cited fears of contracting the virus as the reason they did not return to work. In some states, employers reported workers who refused to return to state UI authorities, which cut off their UI benefits.
How many of the jobs lost during the lockdown will disappear? Fears of contracting the virus through personal interaction and requirements for social distancing may reduce the need for service workers in many industries. By some estimates, up to half of the service workers who were laid off during the shutdowns may be replaced by automation or outsourcing and not recalled.
Social-distancing directives that increase the cost of hand labor are combining with ever more flexible and cheaper robots to speed automation in warehouses and stores. Robotic cleaners and self-check out in stores are expected to spread rapidly.
Foreign-born. The unemployment rate of foreign-born workers was 3.1 percent in 2019, lower than the 3.8 percent rate of US-born workers. The 28 million foreign-born workers in 2019 were 17 percent of the 164 million strong US labor force. Half of the foreign-born workers were Hispanic, and a quarter were Asians.
As in previous years, foreign-born men had higher labor force participation rates than US-born men, 78 percent compared to 67 percent, while foreign-born women had lower participation rates, 55 percent compared to 58 percent. Foreign-born workers earned an average $800 a week in 2019, compared with $940 a week for US-born workers.
The foreign-born workforce is more male, younger and less educated. Over 20 percent of foreign-born workers did not complete high school in 2019, compared to four percent of US-born workers. About 39 percent of the foreign born, and 42 percent of the US born, had at least a bachelor?s degree.
CARES. In March-April 2020, Congress approved $3.7 trillion in coronavirus aid. The CARES Act provided payments of $1,200 per adult and $500 per child, but only to families in which all members have valid Social Security Numbers, prompting suits on behalf of US citizen children with unauthorized parents and US citizen spouses with an unauthorized partner.
As Congress considered another aid package for state and local governments in May-June 2020, there was controversy over the first aid packages. Some Democrats decried the large publicly traded corporations that received benefits, while some Republicans worried that the extra $600 a week of UI benefits would reduce incentives to work.
Republicans oppose federal aid to states with large public employee pension deficits, and they want to protect essential businesses that remain open from lawsuits filed by workers who get sick. Business groups want limits on liability for allowing the virus to spread, for informing co-workers if a worker get sick, and for manufacturing new items such as personal protective equipment.
Under the proposed Republican liability shield, employers who follow federal and state safety guidelines would be shielded from worker suits. Some states enacted laws shielding health-care facilities that follow guidelines from worker lawsuits.
How should the economy be reopened? President Trump asserted that the ?cure cannot be worse than the problem itself? and pushed for re-opening quickly, while many health experts warned that Covid infections could surge with a pre-mature opening. Trump emphasized that a lengthy shutdown could increase deaths from non-Covid related diseases, pointing to the opioid crisis that followed in the wake of China?s entry into the World Trade Organization and the subsequent loss of US manufacturing jobs.
The coronavirus had many economic effects, including driving the price of oil below zero in April 2020, meaning that sellers would pay buyers to take their oil. The deflationary effects of falling demand and commodity prices rippled across many industries that were producing more goods than people were buying.
H-1B. DOL certifies almost all employer requests for H-1B visas, but USCIS adjudicates employer petitions for particular foreigners to fill jobs that normally require a college degree. USCIS denial rates for these employer petitions are rising, from six percent in FY15 to over 20 percent in FY19, in part because some USCIS adjudicators believe that employers cannot require college degrees for particular jobs. The foreigners for whom employers are seeking H-1B visas often have Master?s or higher degrees; critics say that the H-1B program allows employers to cheaply hire highly qualified workers.
Universities. Some four million people are employed by the 4,000 two-year and four-year US public and private colleges and universities, educating about 20 million students and generating $650 billion in revenue in 2016-17. Due to the coronavirus, the enrollment of foreign students is expected to drop by 25 percent in 2020-21, and many US students may elect to stay home.
There were 1.1 million foreign students in the US in 2018-19, including 60 percent from four countries: 370,000 from China; 202,000 from India; 52,000 from South Korea; and 37,000 from Saudi Arabia. The switch to remote instruction and tighter immigration controls may reduce college enrollment by 10 percent 2020-21.
In July 2020, the Immigration and Customs Enforcement agency, which operates the Student and Exchange Visitor Program for non-immigrant students on F-1 and M-1 visas, announced that foreign students must take some classes in person in order to retain their student status in the US. Several universities sued, asserting that ICE was attempting to force them to have in-person classes; foreign students already in the US sought in-person classes to retain their F-visas.
About three-fourths of US colleges and universities plan at least some in-person instruction in 2020-21 in order to keep students enrolled. However, 40 percent of professors are 55 or older. Many are reluctant to teach in person because their age puts them in the high-risk group for complications from Covid-19.