Retirements, layoffs, labor force flight may leave scars on U.S economy


Judith Ramirez received a letter this month that she’d been dreading: The Honolulu hotel that furloughed her from a housekeeping job in March, during the lockdown triggered by the coronavirus pandemic, made her layoff permanent.

FILE PHOTO: People line up outside Kentucky Career Center prior to its opening to find assistance with their unemployment claims in Frankfort, Kentucky, U.S. June 18, 2020. REUTERS/Bryan Woolston

Ramirez, 40, was originally told she might be called back after business picked up. But infections increased in Hawaii over the summer and quarantine restrictions for visitors were extended, a blow to the state’s tourism-dependent hotels.

Six months into the pandemic, evidence of longer-term damage to the U.S. labor market is emerging, according to separate analyses of detailed monthly jobs data by labor economists and Reuters.

Retirements are drifting up, women aren’t re-engaging with the job market quickly, and “temporary” furloughs like Ramirez’s are becoming permanent - trends that could weigh on the U.S. economic recovery in the short term as well as the country’s prospects in the long term.

Economic growth depends on how many people work. If more retire, or are kept from the job market because of childcare or health and safety issues, growth is slower.

“In the first few months of the recession we were much more focused on how many jobs could come back, how many jobs could be preserved,” said Kathryn Anne Edwards, a labor economist at RAND Corp. “Now the question is really how much damage has this done.”


The U.S. economic drag is falling heavily on two groups, women here and older workers, who fueled here a rise in labor force participation prior to the pandemic. That supported stronger-than-expected economic growth in 2018 and 2019 and showed how a historically low unemployment rate drew people back into jobs.

Those workers may now be getting stranded. Women and workers aged 65 and older make up a disproportionate share of the 3.7 million people no longer working or actively seeking a job since the pandemic hit, Labor Department data show.

People 65 and older made up less than 7% of the workforce in February, but 17% of those who have left the labor market through August. Women previously accounted for 47% of the workforce, but makeup 54% of the departed.

Initial evidence of longer-term trouble is starting to show in the monthly Current Population Survey (CPS) that forms the basis of regular government employment reports.

After a spike in women leaving the labor force in the early months of the pandemic, particularly to tend to family responsibilities, there’s been slower movement back into jobs compared to the months before the pandemic, according to an analysis of CPS data by Nick Bunker, economic research director for North America at the Indeed Hiring Lab.

The percentage of women and men who moved from employed to out of the labor force jumped as the pandemic layoffs hit in April. The number of women, however, who cited child care or family responsibilities as the reason, increased 178%, while the number of men citing it less than doubled, Bunker’s analysis showed.

The percentage of those women moving in the other direction month to month - from caring for family into a job - meanwhile has dropped, to a low of 5% in April from 6.6% in 2019, though it rose to 5.8% in July. It is lower for men too.

The data “suggests ... that being out of the labor force for family reasons is a ‘stickier’ state” than prior to the pandemic, Bunker said.

The Center for Retirement Research at Boston College found CPS data shows a rising share of workers 65 and older are calling it quits, a development many economists expected given the risk COVID-19 poses to older people.

Nearly a fifth of that age group working as of July 2019 were retired as of July of this year, compared to 17% for the prior year, the center’s research concluded. The percentage of these workers who consider themselves “retired” instead of merely out of work also rose steadily in recent months, from 14.2% in April to 19.5% in June.

“It is something we expected might happen - that people who were close to retirement might transition earlier,” said Anqi Chen, the center’s assistant director for savings research.


The situation is rekindling debates from a decade ago about how unemployment can lead to long-term economic “scarring,” but the specifics are different.

The 2007-2009 recession fell disproportionately on the male-dominated construction and manufacturing industries. The pandemic has caused more job losses in services concentrated among women and brought the added complication of school closings and concerns about the safety of daycare centers and nursing homes.

The road back to employment may be getting harder, as suggested in the analysis of CPS data by Rand’s Edwards. Of 7.6 million people “temporarily” laid off as of June, the number who had found jobs by July - 2.4 million - was eclipsed by the 2.8 million who either left the labor force altogether or said they were no longer expecting to get their jobs back. That’s the first time in the pandemic that was the case.

Ramirez, the laid-off housekeeper, said she has been looking for a job, but not many places are hiring with travel sharply down from pre-pandemic levels and many retail stores closed. Some businesses say they have a list of furloughed employees waiting to be called back. “There’s no hiring here,” she said. “People don’t know we are struggling.”

Seven U.S. states have reported record one-day increases in COVID-19 cases so far this month even as the average daily number of new infections is falling nationally.

Nationwide, about 35,000 new infections are reported on average each day, down from a peak in July of about 70,000 a day, according to a Reuters analysis of state and county data.

Still, hotspots continue to emerge, the data shows:

* Arkansas, Illinois, North Dakota, South Carolina, West Virginia, Wisconsin, and Wyoming reported record one-day increases in cases in September. Kansas, which only reports three times a week, also had a record increase in deaths covering a three-day period.

* Seven states had a record one-day increase in deaths this month: Arkansas, Idaho, Kentucky, Missouri, Montana, South Dakota, and Wyoming. Kansas also had a record increase in deaths over a two-day period.

* The number of coronavirus patients hospitalized overall has fallen to an average of 33,000 a day over the two weeks that ended on Sunday, down from an average of 40,000 a day the previous two weeks. During the last two weeks, four states have reported their highest daily number of hospitalized COVID-19 patients since the pandemic started: Hawaii, Montana, South Dakota, and West Virginia.

* Coronavirus cases over the past two weeks are rising in 16 out of 50 states, including the former epicenters of New York and New Jersey, compared with 10 states the previous two weeks.

* Coronavirus deaths over the past two weeks are rising in eight states, compared with 12 states the previous two weeks.

Citigroup Inc. will resume job cuts starting this week, joining rivals such as Wells Fargo & Co. in ending an earlier pledge to pause staff reductions during the coronavirus pandemic.

The cuts will affect less than 1% of the global workforce, the bank said Monday in a statement. With recent hiring, overall headcount probably won’t show any drops, Citigroup said.

The reductions will come as Citigroup is facing a likely revenue drop and another increase to loan-loss reserves this quarter as the pandemic drags on, as well as years of expenses to improve risk controls. The Office of the Comptroller of the Currency and the Federal Reserve are weighing public reprimands of the firm because of continued deficiencies in its infrastructure and control functions, people familiar with the matter said earlier on Monday.

“The decision to eliminate even a single colleague role is very difficult, especially during these challenging times,” Citigroup said in the statement. “We will do our best to support each person, including offering the ability to apply for open roles in other parts of the firm and providing severance packages.”

The bank said it has hired more than 26,000 people this year, and over one-third of those jobs were in the U.S. The lender had roughly 204,000 employees at the end of the second quarter.

Banks have resumed job cuts in recent weeks after pledging, en masse, to pause such actions earlier this year. Many firms are pushing to cut costs as the pandemic has dragged on, threatening lenders with higher credit costs and crimping revenue growth.

Chief Financial Officer Mark Mason said Monday that the bank is hoping to keep expenses flat to slightly up this quarter as persistently low-interest rates and a slowdown in consumer spending have weighed on the bank’s results.

While revenue from fixed-income and equities trading is likely to climb by a percentage in the low double digits in the third quarter, firmwide revenue will probably still fall, Mason said. The lender will also likely have to set aside more in reserves to cover potential losses in the third quarter.

Citigroup dropped 5.6% to $48.15 in regular New York trading, the worst performance in the 66-company S&P 500 Financials Index.

Regulatory Scrutiny

The bank has been investing more in improving its infrastructure and control functions after spending roughly $1 billion on such efforts this year. It is in discussions with the Fed and OCC over-improving those functions, the people said.

“While we never comment on our discussions with regulators, we are completely committed to improving our risk and control environment,” Citigroup said in a separate statement on Monday. “We recognize that we are not yet where we need to be and that has to change. We have thus redoubled our efforts and have made improving our risk and control environment a strategic priority.”

Still, the looming regulatory hurdle accelerated the timing of Chief Executive Officer Michael Corbat’s announcement that he would step down next year. Corbat wanted fresh leadership installed ahead of announcing what could be a years-long remediation process to satisfy regulators, according to the people.

The bank will offset investments in better governance with plans to reduce its real estate footprint and by moving some employees to less-expensive cities and offices.

“I cannot emphasize enough, there is no greater priority for the entire management team than getting to what we would characterize as a best-in-class risk and control environment,” Mason said.

Income inequality has given the rich a greater share of the economic spoils than middle- and low-income earners. That's resulted in a very real impact on the incomes of middle- and low-income households, with the typical full-time American worker now earning $42,000 less than they would have if inequality hadn't surged over the last four decades.

That's according to a new analysis from researchers at Rand, the global policy think tank. Its researchers wanted to look at the dollars-and-cents impact on U.S. households from yawning income inequality, which has lifted the fortunes of the rich to that of Gilded Age levels

Prior to the mid-1970s, Americans' incomes, no matter their level, generally rose in step with overall economic growth. But that changed in the late 1970s, with the rich capturing the lion's share of economic growth, while middle-class and lower-income workers eked out gains far below par.

In 2018, the typical full-time worker earned about $50,000 — but if that same worker had kept up with the economy's expansion, they would have earned $92,000 annually, the Rand analysis found. 

Only the top 5% of Americans have enjoyed earnings that approached or exceeded the nation's economic growth. Meanwhile, the top 1% has come out far ahead, gaining a far greater share of economic growth than they did prior to the 1970s. 

The typical person in the top 1% earned $1.4 million in 2018, but would have earned $630,000 –– less than half that amount –– were it not for benefitting from widening inequality, the analysis found. 

"I hope that this provides a sense of the scale of the problem that rising inequality has been for the vast majority of Americans," said Carter Price, one of the Rand researchers who co-authored the analysis with Kathryn Edwards. 

The Rand report doesn't specify the causes of growing inequality, however economists such as Emmanuel Saez and Gabriel Zucman of the University of California at Berkeley have posited that the inequality can be partly blamed on tax policies that favor the rich. Their 2019 book "The Triumph of Injustice" found that the 400 richest U.S. families now pay a lower overall tax rate than the middle class, the first time that's happened in 100 years. 

Widening income inequality has also been set against the backdrop of declining labor union membership and a wage premium for college-educated workers, with people who lack college diplomas suffering from weaker wage growth.

Between 1975 to 2018, the bottom 90% of earners lost out on $47 trillion in taxable income, the Rand analysis found.

The Gini in the bottle

To track inequality, economists rely on a measure called the Gini coefficient, a statistic developed over a century ago. It scales inequality from zero to 1, with zero representing complete equality and 1 representing total inequality (one person receives all the wealth, and everyone else gets nothing.) The U.S. had a Gini coefficient of 0.39 in 2017, worse than any other country in the G-7, according to the Organisation for Economic Co-operation and Development (OECD). For instance, Germany's Gini coefficient is 0.29 and Canada's is 0.31. 

But it can be difficult to grasp the real-world impact of an abstract number, which is what prompted Rand researchers to examine taxable incomes after decades of growing inequality. 

"This measure should be more easily interpretable than a Gini coefficient — is a Gini of 0.4 good or bad?" Price noted.

The Rand analysis helps explain the financial stress that many American families are experiencing, said David Rolf, the founder and president emeritus of labor union SEIU 775 and the founder and chairman of the Fair Work Center, which funded the Rand research. For instance, even before the coronavirus outbreak created the current recession, 4 in 10 Americans said they couldn't handle a $400 emergency expense

"As someone who spent his life representing low-wage workers, even I was shocked at the size of the problem, and just how far up the income scale the problem goes," Rolf said, noting that even families earning $90,000 or $100,000 per year can find themselves in precarious financial straits. 

He added, "They are still not nearly capturing their share of national income vis-a-vis income growth and inflation over the last four decades."

For instance, full-time workers at the 90th percentile of the income distribution earned $133,000 in 2018, or the type of six-figure income that many Americans aspire to. But they are still losing out, with Rand finding that they would have earned $168,000 if they had earned an equal share of economic growth. 

The losers: Men and rural workers

The analysis also examined income by demographic groups, such as gender, race, the urban-rural divide and education. 

White men who work full-time grabbed the smallest share of economic growth of any other demographic, the researchers found. The median income for these workers stood at $57,000 in 2018, but they would have earned $109,000 if they had kept pace. According to Rand's calculations, their incomes grew by about one-tenth of the nation's economic growth from the mid-1970s until 2018.

That share of economic growth trails the amount captured by White women, Black men and women and Asian men and women, the study noted.

Rural workers have also lost out in the last four decades. The typical full-time rural worker earned $43,000 in 2018, but should have booked $78,000 if they'd kept up with national economic growth. Their share of growth stood about six percentage points lower than urban workers. 

The findings are "absolutely shocking and, if I may say so, a little terrifying," said Nick Hanauer, founder of public-policy incubator Civic Ventures and co-founder and partner of the Seattle-based venture capital firm Second Avenue Partners. "They explain to me almost completely why our politics are so polarized."

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