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In what ought to be taken as the latest indicator the country should be opened sooner rather than later despite the ongoing coronavirus pandemic, a new study has found that more than four-in-10 jobs lost due to mandatory business closures won’t come back.
A paper being circulated by the National Bureau of Economic Research predicts that 42 percent of Americans who experienced layoffs in recent weeks will see their jobs disappear permanently.
“Our survey evidence aligns well with anecdotal evidence of large pandemic-induced demand increases at some firms, with contemporaneous evidence on gross business formation, and with a sharp pandemic-induced rise in equity return dispersion across firms,” says a summary of the paper, authored by Jose Maria Barrero, Nicholas Bloom, and Steven J. Davis.
While it was always expected that some businesses that were already operating on narrow profit margins wouldn’t be able to survive the weeks-long pandemic-related closures, it’s difficult to imagine that nearly half of the people who were laid off won’t be able to quickly return to work.
But then, according to the Washington Examiner, the NBER’s paper does not comport with U.S. Labor Department findings last month:
The vast majority of the massive layoffs in response to the pandemic have been on a temporary basis: In April, 18 million of the 20.6 million people who lost work said that their job losses were “temporary,” according to the Bureau of Labor Statistics.
Still, ”If the pandemic and partial economic shutdown linger for many months, or if pandemics with serious health consequences and high mortality rates become a recurring phenomenon, there will be profound, long-term consequences for the reallocation of jobs, workers and capital across firms and locations,” the study said.
Late last week, the government reported that the national unemployment rate had soared to 14.7 percent, or its highest level since the Great Depression when the level climbed to 24.9 percent.
“This is the biggest and most acute shock that we’ve seen in post-war history,” Michelle Meyer, the head of U.S. economics at Bank of America, told NBC News.
That’s up from around 3.5 percent last fall.
So, what can be done to mitigate job losses?
The study listed several policy actions that would be detrimental to the employment recovery process, which is just now barely getting underway as some states have begun reopening. For one, which seems odd, researchers claim that efforts to preserve jobs that were there before the pandemic may actually result in a lot of harm to taxpayers and a misallocation of resources — perhaps because those jobs were on the brink anyway.
But then again, the study found that policy initiatives aimed at improving employment opportunities could be more rapidly implemented due to a much higher need at the moment.
“If we are correct that many of the lost jobs are gone for good, there are important implications for policy,” the study said.
President Donald Trump has remained optimistic about the return of jobs, and that optimism seems to be warranted given that outside of the loss of some small businesses, most other jobs are likely there for the waiting. Last week, he said he believed that the job losses were mostly going to be temporary.
“Those jobs will all be back, and they’ll be back very soon,” Trump told Fox News. “And next year, we’re going to have a phenomenal year.”
The administration’s top economic adviser, Larry Kudlow, has also said he believes most job losses will be temporary.
“Because this is a temporary virus cycle,” he said on Fox Business. “This goes on now, my opinion, a few more weeks or a month.
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