As economists and analysts increasingly anticipate nationwide unemployment rivaling the worst levels of the Great Depression of the 1930s, Gabriela Best, associate professor of economics at Cal State Fullerton’s Mihaylo College of Business and Economics, points to predictions that joblessness will stay high through the end of 2021.
“But we are going to see a W-shaped recovery, where some unemployment will decrease as businesses reopen through the end of 2020 and a slower decrease in unemployment until 2021 when the businesses that closed permanently are replaced by other businesses,” she says.
How the Unemployment Rate Works
Economists speak of several types of unemployment: cyclical (related to the business cycle mainly through changes in demand), structural (resulting from changes in labor market characteristics, and industrial reorganization) and frictional (as people move from one job to another).
“The largest share of the current unemployment changes that we see today are due to cyclical unemployment,” says Best.
However, she cautions it is difficult to determine the level of structural joblessness while so many businesses are closed.
“Structural unemployment is caused by labor market situations, such as unemployment benefits and minimum wage, but it is also caused by supply-side factors such as changes in productive capacity,” she says. “In the current situation, with so many businesses closed, we don’t know what the capacity situation is in the economy. For example, we know that many businesses will not reopen, and that will impact structural unemployment as well. The impact on structural unemployment will depend on how many businesses are able to reopen, and on the state of the economy when they are allowed to reopen.”
Finding Your Way Through Double-Digit Unemployment
The entire labor market is hurting, but certain sectors, such as entertainment, tourism and restaurants, have been especially devastated by the COVID-19 crisis. On the other hand, sectors considered essential, such as the grocery business, have fared much better.
As 92% of the jobs lost during the coronavirus pandemic are low wage jobs, the crisis underscores the need for a higher education and staying competitive in careers to weather hard times.
“Students can work on their degrees during this recession and build their human capital by staying in school,” she says, “and focus on jobs allowing work from home, such as finance and accounting jobs, where remote work is possible.”
For More on Gabriela Best
Best, who has research interests in macroeconomics and monetary policy, previously completed a dissertation internship with the research division of the Federal Reserve Bank of St. Louis. Discover her insights on earlier U.S. economic conditions in our 2016 article.
During the present crisis, Best has provided economic commentary for the Southern California Hispanic community through appearances on Spanish-language television network Univision.