Western States1 See Steady Employment Recovery from the COVID-19 Pandemic
The coronavirus pandemic has been an unprecedented disruption of our economy and labor markets. The magnitude of job losses in March and April of 2020 resulting from the national business lockdown had not been seen since the end of World War II. Early hopes of a short shutdown and a quick return to prepandemic employment levels faded as the crisis dragged on and the stress on the economy deepened.
The impact of the pandemic was geographically widespread with every state experiencing significant employment declines except Wyoming. But the economy is now on the mend and the western states have seen over 3.2 million jobs return to the market between April 2020 and April 2021.
U.S. Employment
Between mid-March and the end of April 2020, more than 22 million jobs were lost, and more than 33 million people applied for unemployment benefits. During that same period, the unemployment rate shot up from 3.5% to 14.8% — the highest unemployment rate in any post World War II recession.2
When the economy began to reopen, nearly 11 million jobs were quickly filled in the May through August 2020 period, but a resurgence of the virus in the fall slowed the pace of growth as states reinstituted stricter lockdown policies. Between May 2020 and May 2021, approximately 14.5 million positions were filled, bringing total U.S. employment to 151.62 million, approximately seven million less than in February 2020. Assuming job creation progresses at about the same average monthly rate as it did in 2018–2019, it will take more than three years to recoup the remaining seven million job loss. 3
And while significant job losses occurred in all the labor sectors, the leisure and hospitality and other services4 sectors had the greatest job losses in every state except North Dakota and Wyoming5. Nationally, between February 2020 and April 2020, leisure and hospitality job losses totaled 48.3% and other services job losses equaled 22%.
Western States’ Employment
February 2020 to April 2020
In February 2020, the seven western states reviewed in this article accounted for 31.8 million jobs and had an average unemployment rate of 3.7%. Just two months later, in April 2020, over 4.7 million jobs were lost to the pandemic6, driving the average unemployment rate up to 15.8% with Nevada topping the rate at 29.5% driven by total job losses of 31.45%. Of the 2.96 million jobs California lost between February and April, 2020, 2.34 million, or 79%, were lost just in April, over one million more than all the jobs lost in California during the 2½ year long Great Recession.
Similar to the rest of the country, the greatest number of job losses in the western states occurred in the leisure and hospitality (L&H) and other services (OS) sectors. These two sectors were most directly impacted by the lockdown rules prohibiting direct contact between employees and customers or clients and enforcing distance and capacity limitations. In the 60 days between February 2020 and April 2020 over 1.6 million L&H jobs—or 48.6% of the entire L&H workforce—were lost. Another 285,100 jobs, or 28.6% of the workforce in the OS sector were eliminated.
California lost 985,500 L&H jobs for the highest number of jobs lost in the western states. Approximately 61% of those California job losses, or 595,900, occurred between San Francisco, Los Angeles and San Diego. Oregon and Nevada lost the highest percentage of L&H jobs at 51.3% and 51.2%, respectively. The loss of more than 182,000 L&H jobs in Nevada was especially challenging to the Nevada economy, overwhelmingly dependent on tourism and gaming. Unsurprisingly, Las Vegas had more than 82% of the L&H job losses in Nevada with 150,300 positions eliminated. No state in the region lost less than 40% of their L&H jobs.
The OS employment sector in the western states was the second most adversely affected labor sector during the 60 days between February 2020 and April 2020. In that short time, the sector lost over 285,000 jobs, dropping from 997,900 to 712,800, a 28.6% loss. This was more than the national average of 22.0% for that same period. California and Nevada suffered the greatest losses at 33.4% and 33.1% respectively. Together, these two states lost 212,300 OS sector jobs, nearly 75% of all the losses. California again had the most OS jobs in the western states at 593,300 and lost the most at 395,300. Of that 395,300, 198,100 came from Los Angeles, San Francisco and San Diego. All but 4,000 of the 43,300 OS jobs in Nevada in February 2020 were in Las Vegas and Reno. Combined, these two cities lost 13,000 OS sector jobs by the end of April.
While the pandemic restrictions all but shut down the L&H and OS sectors, other labor sectors were better able to continue their activities within those restrictions. The least affected sector in the western states in the February–April time frame was the financial activities sector. From the beginning of the lockdowns, nearly all financial activities sector employees were able to work remotely from home, greatly limiting the necessity for layoffs and terminations. And the need for personal, consumer and corporate financial activity to continue uninterrupted during the lockdowns provided the business volume to keep those employees working. Consequently only 75,100 financial activities employees lost their positions in the seven western states, with 48,600, or approximately 65%, of those job losses occurring in California. After the financial activities sector, the education and health services and trade, transportation and utilities sectors saw the lowest employment cutbacks. Combined, those two sectors lost just under 1.2 million positions at the beginning of the pandemic. For perspective, in every one of the seven western states, the combined job losses of the financial activities, education and health services and trade, transportation and utility sectors were less than the losses in just the L&H sector.
May 2020 to August 2020
After six weeks of the national lockdown re-opening efforts to varying degrees began in the states in May. This ignited a hiring frenzy in the country with 10.9 million jobs being created between May and August with over 7.6 million of those jobs being filled in May and June. Optimism for a strong V-shaped recovery was growing.
Rapid job growth was also underway in the western states. Between May and August, the region recovered just over 36% of the jobs lost in March and April on the strength of 1,725,105 new hires. While posting the lowest percent change, (4.7%) California led the way with 740,914 new positions followed by Nevada with 247,305 and Arizona with 232,524. The solid expansion during those four months drove the average unemployment rate in these states down from 15.8% in April to 8.7% in August.
Interestingly, even though the major industries included in the L&H sector, such as lodging, tourism, theme parks and food services, continued to be subject to the strictest pandemic lockdown rules, over 500,000 jobs were added in the western states between May and August, restoring 31.6% of the L&H jobs lost in the previous two months. The OS sector recovered 25% of the jobs lost in the prior two months with the addition of 72,100 new positions in the same period.
Trade, transportation, and utilities had solid growth during the summer months of 2020, adding 437,400 new positions, over half of which were added in California. Education and health services also saw strong growth, expanding by 241,600 jobs in the same period. Together, these two sectors erased 58% of their total losses in March and April of 2020. The financial activities sector experienced more moderate growth, adding 12,800 new positions in the May–August months. Not surprising, California added the most jobs in that period, with 393,600 new posts, 56.9% of the total 691,800 jobs added.
September 2020 to April 2021
As mentioned above, the resurgence of the COVID-19 virus in the fall of 2020 prompted the reinstatement of many of the pandemic restrictions that had been relaxed during the summer. Not surprising, the rate of job expansion slowed from the 6.4% job growth seen in the summer months to 5.3%, September through April 2021.
California led all seven western states with 1,012,760 new jobs, fully 66% of the total 1,524,112 jobs created. Only Nevada and Washington added more than 100,000 jobs in that eight-month period, 132,109 and 118,935 respectively. By the end of April, a total of 3,249,217 jobs had been recovered, over 1.5 million jobs short of the pre-pandemic employment level.
L&H and OS sectors job growth moderated in the eight months between August 2020 and April 2021 as only 291,500 L&H jobs and 54,800 OS jobs were added constituting only 22.7% of all the new positions added in that time frame. By April 2021, there were over 808,000 L&H jobs and more than 158,000 OS jobs less than in February, 2020.
Growth in the financial activities, trade, transportation and utilities and education and health services sectors also slowed between August 2020 and April 2021 in tandem with the overall economic slowdown. Combined growth in all three sectors was less than half that seen in the May to August 2020 period, coming in with 301,200 new positions in the eight months between September 2020 and April 2021. Trade, transportation, and utilities was the top sector during this time with 182,500 new jobs and besting the number of pre-pandemic positions in Arizona, Nevada, Idaho, and Utah.
Looking Ahead
The labor market warrants close scrutiny through the rest of this year and into 2022. While current projections call for continued improvement, there are many factors that can profoundly impact its course. The unique position of coming out of the once-in-a-century global pandemic that we now face creates an unusually high degree of uncertainty about future projections. Concerns about the future course of the coronavirus and its variants, inflation, interest rates, and the overall performance of the economy all bring a high degree of uncertainty to how the labor market will perform going forward. Unanswered questions about tax, monetary, and fiscal policy of the new administration amplify that concern.
As we move into the second half of the year, we can be cautiously optimistic that moderate improvement of the labor markets in the western states will continue. In May, the average unemployment rate across the seven states dropped 20 basis points from April’s rate to 5.6% on the strength of 143,500 added jobs. But we must be diligent and anticipate challenges along the way that may impede or even reverse the progress we have seen so far.
Contact
GARY BARAGONA
Director of Research
415.229.8925
gary.baragona@kidder.com
Written by John Fioramonti
Senior Business Writer
Kidder Mathews Research
Sources
1As referenced in this article “Western States” include Arizona, California, Idaho, Nevada, Oregon, Utah and Washington
2December 2020, “Monthly Labor Review,” BLS
3BLS
4The “Other Services” sector includes activities such as repair and maintenance, and personal services such as barber and beauty shops.
5BLS
6“All jobs” calculation according to the BLS