The coronavirus pandemic unleashed an earthquake in American labor markets—and its aftershocks are still with us. From March to May 2020, 20.3 million people abruptly lost their jobs; only half as many were hired over the following seven months. But businesses hired workers at turbocharged rates in 2021 and 2022. By May and June of this year, employment had fully recovered from the pandemic. Behind the headline numbers, however, COVID-19’s shocks continue to shake up the labor force.
A recent study that I did with my colleague Isaac Yoder shows that the people who lost their jobs during the pandemic’s steep decline are different in some respects from the people hired during the recovery. On balance, America’s workforce has become more male but also more racially and ethnically diverse.
Starting with gender, data from the Bureau of Labor Statistics shows that women lost jobs at a faster rate than men when the pandemic hit and were then hired at a slower rate than men as the economy recovered. From February 2020 to January 2021, the number of employed women fell 5.6 percent compared to a 5.2 percent decline for men; from January 2021 to May 2022, the number of men with jobs increased 7.2 percent compared to 5.1 percent for women. The result is a labor force today with more than 1 million additional men and 415,000 fewer women than in February 2020.
This unexpected divergence based on gender is puzzling economically. One possible explanation is what economists call “industry effects.” In particular, total employment in the leisure and hospitality industry was 1.2 million less in May 2022 than in February 2020. But since women and men shared those job losses nearly evenly, they cannot explain why the gender composition of employment changed so much. Another theory that doesn’t hold up is that women left their jobs in disproportionate numbers to stay at home with their children: The data shows that more men than women left the workforce for “family reasons, ill health or transportation problems.” (The monthly data is volatile, so we compared six-month averages.) Moreover, labor participation rates fell more sharply among men than among women over the pandemic period.
We’re left with the dispiriting conclusion that when negative and positive shocks hit American businesses, women are the first ones fired and the last ones hired.
The pandemic also increased the racial and ethnic diversity of the workforce. In the initial stages, Black and white employment contracted at roughly the same rates while Asian and Hispanic employment fell at higher rates. But as the economy recovered in 2021 and 2022, job growth was much faster for Blacks, Asians, and Hispanics than whites. As a result, the number of employed Asians, Blacks, and Hispanics increased by nearly 1.8 million, or 3.3 percent, from February 2020 to May 2022, while the number of whites working declined by more than 1.2 million, or almost 2 percent.
This unexpected shift is also notable. Again, we looked at leisure and hospitality businesses for clues about why white employment fell so sharply, since their workforce contracted so dramatically from February 2020 to May 2022. But the share of that industry’s employees who were white increased in 2021, while minorities’ share declined, so the leisure and hospitality industry cannot explain the changes in the race and ethnic makeup of the labor force.
The answer also does not lie in how noneconomic factors affected employment, such as demographic issues or regional differences in job growth and in the race and ethnic composition of employment. Consider age. We know that Asians, Blacks, and Hispanics are, on average, younger than white people. Each year, a larger share of Asians, Blacks, and Hispanics turn old enough to work while a larger share of whites become old enough to retire. We analyzed how much the pandemic economy alone—apart from other noneconomic forces such as age—drove job losses in 2020 and subsequent job gains in 2021 and early 2022.
We found that during the initial decline, noneconomic factors such as each group’s demographic profile kept employment relatively higher for Asians, Blacks, and Hispanics in 2020, but not for whites. Based just on what happened in the economy, the initial job losses among nonwhites would have been even higher—6 percent for Blacks (versus the actual 5.1 percent), 7.8 percent for Hispanics (versus 6.9 percent), and 9.7 percent for Asians (versus 8.3 percent). By contrast, white employment would have fallen 5.2 percent based only on the economy, instead of the actual 5.5 percent.
So when the pandemic’s adverse shocks hit the labor market, people of color, like women, were the first ones laid off.
Surprisingly, people of color did considerably better than whites during the job recovery. From January 2021 to May 2022, employment jumped 10.8 percent among Asians, 11.2 percent among Hispanics, and 9.7 percent among Blacks—compared to 3.5 percent among whites. Moreover, the same pattern holds when we consider only the economy’s impact. The result was that over the entire pandemic period, employment of minorities increased by 1,771,900 while white employment fell by 1,233,400.
The main reason for these surprising developments was supply and demand on steroids. Throughout 2021, historically strong growth drove traditionally strong hiring that continued this year even as growth slowed. As to the supply of people looking for jobs, the unemployment rates for Blacks, Hispanics, and Asians were considerably higher than for whites: From January 2021 to May 2022, unemployment averaged 8 percent for Blacks, 6.1 percent for Hispanics, and 4.4 percent for Asians, compared to 3.9 percent for whites.
These disparities rest in part on what happened with labor participation rates during the pandemic—they declined for whites and increased for Asians, Blacks, and Hispanics. By May 2022, the share of working-age people who had dropped out of the labor force reached 39.2 percent for whites, compared to 33.5 percent for Hispanics, 35.5 percent for Asians, and 37.2 percent for Blacks.
If this trend persists past the pandemic, and the rate at which Asians, Hispanics, and Blacks enter the labor force outpaces the rate of whites, diversity in American employment can only continue to increase.
