In early 2020, the world entered a massive global experiment with almost no planning and very little preparation. In both public and private industries, we minimized on-site activities to "essential employees" and then tried to determine how to keep businesses running. Some of the clear winners have been digital work platforms, e-commerce and cloud-based education; however, the pandemic has placed an unprecedented strain on the economy that will clearly impact the workforce.
From a 50-year low in January 2020, the U.S. unemployment rate jumped to 14.7 percent in April, a level not seen since The Great Depression. The labor force participation rate in the U.S. hit 60.2 percent in April, the lowest since January 1973. However, the 2.5 million jobs gained in May was by far the biggest one-month gain in 80 years. The U.S. unemployment rate recovered to 8.4 percent by the end of August, but this was still more than double that of February. As things stand today, it appears that job markets will return, but perhaps slower than we think.
Workforce indicators point to upcoming attrition in the labor market that is likely to result in a decrease in the labor force participation rate. In recent years, baby boomers have worked beyond the standard retirement age. People over 65 years old have had a very high labor participation rate at 20 percent for quite some time, but this number has dropped significantly, by 4 percentage points, in the past few months. Market volatility observed in the first quarter of 2020, which resulted in retirement account-value shakeups, has created the expectation that a surge in retirements will continue.
"It is totally the case that they are dropping out," said Torsten Slok, Deutsche Bank's chief economist.
Additionally, in reaction to shutdowns and slowdowns, we are also likely to see a rise in incentives for early retirement. However, in the long-term, this short-term solution will amplify the "skills gap" problem. Even with a slow recovery, the U.S. will likely continue to experience a high need for hiring as people choose to retire.
Other roles are experiencing involuntary decreases in positions. The coronavirus pandemic hit low-wage workers especially hard as industries like retail, restaurants and hospitality cut back their workforce. A 2020 Bureau of Labor Statistics survey found that 80 percent of furloughed workers thought it would be temporary, but it is beginning to look like this may not be the case for many.
Manufacturing has an opportunity to attract these workers to jobs that are less affected by this situation. As a result of COVID-19, there is an opportunity to shift worker interest toward jobs considered "essential," since those were not affected by layoffs. More than 40 percent of all workers between 18 and 64 years old -- 53 million people -- are low-wage workers in the U.S. making less than $10 per hour. These unskilled workers are especially vulnerable to economic shocks. They are likely to take a second look at manufacturing jobs deemed "essential" and see these jobs in a new light with higher regard for job stability. How do we leverage this "second look" and redirect these vulnerable workers to our manufacturing jobs? Career and technical education awareness efforts must be ready to focus on this.
For knowledge workers, remote work is expected to equal, if not surpass, fixed office locations by the year 2025. More than ever, managers are open to "work from home" plans. Research indicates that 56 percent of hiring managers say "working remotely has exceeded expectations." Benefits mentioned include no commute, fewer meetings, less distraction, increased productivity and greater autonomy.
For more information, contact Glenn E. Johnson at Glenn.Johnson@BASF.com.
