By Megan Cassella 08/21/2020 07:41 PM EDT
The coronavirus recession that began as a short-term shutdown devastating low-wage workers is now bearing down on white-collar America, where employers have been slower to rehire and job losses are more likely to be permanent.
Lower-paid workers are losing their jobs at about three times the rate of higher-wage employees. But the drop in overall employment that white-collar industries like real estate, information and professional and technology services have seen in five months is already on par with or worse than the hits they took during the Great Recession — underscoring how even highly paid workers with the ability to telework are vulnerable now.
As the economy begins to crawl back toward its pre-coronavirus normal, lower-paying industries are recovering at a faster clip than those at the higher end of the pay scale, where new job postings have been weak by comparison. Job postings for higher-wage occupations — those offering roughly $50,000 or more annually — remain 28 percent below last year’s trend, while lower-wage postings for jobs offering around $30,000 or less are down only 12 percent, according to the hiring platform Indeed.
The trend suggests that white-collar employers are increasingly unwilling to take expensive risks and hire more higher-wage employees at a time when the economy is precarious at best, economists say. That could spell trouble for the broader economy in the longer-term, in part because spending by high-income consumers supports low-wage jobs. Some economists fear how much more damage higher-paying industries could see in the coming months if economic growth stalls or dips downward again.
“This is not just a low-wage recession,” said Diane Swonk, chief economist at Grant Thornton, who compared job losses in industries paying at least $30 an hour between February and July to the share lost between December 2007 and June 2009.
Swonk found that employment in the information industry is down 11.4 percent now compared to 7.7 percent during the Great Recession, as one example, while employment in management services is down 4.7 percent now compared to 2.4 percent then.
For lower-wage workers who have lost their jobs, “their situation is clearly much more desperate,” she said. “But that doesn’t mean that the pain isn’t still broader-based than we’ve acknowledged.”
Layoffs in high-wage industries have been mostly overshadowed by those in low-wage occupations that have rolled in at unprecedented levels — more than 28 million Americans are receiving unemployment benefits, the Labor Department says — and comprise the bulk of the country’s job losses. More than 9 million workers in the bottom 40 percent of wage earners remained out of work at the end of June, compared to 3.3 million in the top 40 percent.
Lower-paid workers are also likely to have a harder time recovering from a period of joblessness, in part because they tend to have fewer savings and are less likely to own a home.
But judged by any other measure — including against previous recessions — the damage to higher-wage workers has been significant.
These industries saw smaller initial declines in employment, but in many cases their losses have since grown even as other sectors of the economy have begun to recover. Employment in finance and insurance was down just over 1 percent between February and late April but nearly 5 percent between February and late June, according to economists from the Federal Reserve and University of Chicago, who analyzed data from the payroll processor ADP.
Each of the 14 other industries analyzed — from food services and retail to construction and manufacturing — had seen larger overall losses but had improved between April and June, the study showed, with the exception of educational services.
Some high-wage sectors, the information industry among them, also continued to see layoffs in July even as the economy added workers, the Labor Department’s latest monthly data shows.
“Those are typically fairly recession-proof industries now that are continuing to lose jobs, even though every other industry is recovering to some degree,” said Julia Pollak, a labor economist with the job-posting platform ZipRecruiter. “That’s really cause for concern and pause.”
Data suggests that layoffs in white-collar industries are more likely to be permanent than those in frontline sectors such as restaurants or retail. The so-called core unemployment rate, which excludes all layoffs that are classified as temporary, has increased more for workers with more education, even as the unemployment rate has generally increased more rapidly for those with less education, according to an analysis of Labor Department data by Jed Kolko, Indeed’s chief economist.
The core unemployment rate has risen by 1.7 percentage points for workers with a bachelor’s degree or more, compared with 0.7 percentage points for those with a high school degree or less, Kolko found.
Nearly 7 million workers have also seen their pay cut since the pandemic began, according to the ADP analysis — most in high-wage industries.
Persistent white-collar layoffs and wage cuts would hold significant effects for the rest of the economy, particularly because spending among wealthier Americans helps support jobs in blue-collar service sector jobs at restaurants, for example, and hair salons or workout studios.
To be sure, if the economic recovery accelerates, higher-paying industries could ultimately emerge relatively unscathed, and continued spending among those workers would help repair damage the shutdowns caused to lower-paying service sectors. Wells Fargo economists acknowledged concerns that layoffs could spread throughout high-wage sectors, hindering any recovery, but said they expect those job losses to be limited.
Still, high-income spending remains down more than 8 percent compared to January levels, more than any other income bracket, according to the Opportunity Insights tracker. Economists warn that trend could continue even after businesses fully reopen if a share of white-collar workers remain unemployed.
“It’s in those kinds of high-wage cities like New York and San Francisco where low-wage workers have actually seen the steepest losses, and one reason is because of the decline in spending in higher-wage households,” Pollak said.
