A post-pandemic economic landscape emerges, one where blue-collar jobs cool but face a brighter future, and white-collar layoffs grab headlines but may not signal a broader decline.
For millions of low-wage workers in the United States, the COVID-19 pandemic offered a glimmer of hope. As businesses reopened and the economy clamored for labor, their skills, often concentrated in in-person service industries, became highly sought-after. Wages surged, defying decades of stagnant growth and widening income inequality.
But was this a turning point, or a temporary blip? Three years on, the picture is becoming clearer. Here's what you need to know:
The Boom and the Nuance
Early signs were promising. Studies hailed a reversal of the long-standing trend of wage disparity. Low-wage earners, particularly those without college degrees, saw wages rise disproportionately thanks to a historically tight labor market. Even as white-collar professions faced corporate downsizing, blue-collar jobs thrived.
However, the situation is more nuanced. Some of the initial boom may have been temporary. Hiring and wage growth are slowing across many blue-collar sectors, particularly leisure and hospitality, which experienced the deepest cuts during the pandemic shutdown followed by the fastest rebound. As the industry approaches pre-pandemic employment levels, hiring has naturally cooled.
A Soft Landing, Not a Crash
Despite the slowdown, economists predict a softer landing rather than a recession. Economic growth, job creation, and consumer spending are expected to moderate from 2023's highs, but a complete downturn seems unlikely.
"We're returning to a state of equilibrium," says Brad Hershbein, a senior economist at the Upjohn Institute for Employment Research. He acknowledges a slowdown across various sectors, especially the overheated tech industry, while highlighting similar trends in some blue-collar fields like leisure and hospitality.
Winners and Losers in the Job Market
While the leisure and hospitality sector experiences a hiring slowdown, other blue-collar industries might benefit. The Federal Reserve's potential interest rate cuts could provide a boost to interest-sensitive industries with a strong blue-collar presence, such as manufacturing and construction, according to Kory Kantenga, a senior economist at LinkedIn. Construction, in particular, witnessed record highs last year fueled by a building boom and federal infrastructure investments.
White-Collar Jitters: Are Layoffs a Sign of Things to Come?
The narrative of large-scale layoffs seems to dominate tech, finance, and consulting – sectors known for their concentration of "white-collar" jobs. Companies are streamlining operations, cutting costs, and downsizing after aggressive hiring sprees during the pandemic's early days. Tech giants like Google's parent company Alphabet, Amazon, and Microsoft are just some of the high-profile names making headlines with job cuts.
However, the data paints a more nuanced picture. Labor Department data reveals a declining trend in monthly layoffs within the information industry, which encompasses software and data processing companies. Kantenga from LinkedIn corroborates this, suggesting a decline in employee churn within the sector. "The initial adjustment seems to be leveling off," he says. "Companies are recalibrating their workforce needs."
Long-Term Outlook: A Brighter Future for Low-Wage Earners?
A study co-authored by Arin Dube of the University of Massachusetts-Amherst, first published in 2023 and updated recently, offers promising insights. The research found that between 2019 and 2023, wages adjusted for inflation rose the most for the bottom 20% of earners. Interestingly, the only group to experience a decline was the top 20%. Notably, a significant portion of these gains stemmed from low-wage workers transitioning to higher-paying, better-quality jobs.
Dube remains optimistic about the long-term prospects for low-wage workers. He cites two key factors: demographic shifts with the retirement of baby boomers, and the potential for artificial intelligence (AI) to complement, rather than replace, skilled labor. However, he acknowledges the early days of AI necessitate caution and a focus on potential uncertainties.
A Note of Caution: Recessionary Risks
Nela Richardson, chief economist at ADP, warns that a full-blown recession, rather than a soft landing, could disproportionately impact lower-income workers. These individuals are less likely to receive severance pay in the event of a layoff, further amplifying their vulnerability in a downturn.
The Bottom Line
The post-pandemic economic landscape is a complex one. While the initial boom for low-wage workers might be subsiding, a complete reversal seems unlikely. Long-term trends like the aging workforce and the potential impact of AI on job displacement offer reasons for optimism. However, the threat of a recession remains a cause
