Meredith Daniels, a licensed vocational nurse at a hospital in North Texas, is dealing cautiously but confidently with the coronavirus pandemic. While at-risk patients are being screened and isolated, the hospital has canceled elective surgeries and is reassigning pre-op and surgical nurses to pandemic patients as needed.
“Every day we have new updates. We’re definitely on high alert,” says Daniels.
It’s a different story in a different industry in Los Angeles, where wine-bar owner, Zach Negin, is anything but confident after the mayor ordered bars to shutter and restaurants to stop serving diners on-site. The restrictions due to COVID-19 “might put us out of business,” Negin told the Los Angeles Times. “It will put lots of people out of business.”
The perspectives of Daniels and Negin underscore the contrasting fortunes of U.S. business segments in the face of the coronavirus outbreak. In what might be called “A Tale of Two Industries,” an analysis by ThinkWhy found that the nation’s Healthcare and Social Assistance segment, a subsector of Education and Health Services, is likely to fare best in the pandemic, while the Leisure and Hospitality segment is apt to take the biggest hit.
ThinkWhy arrived at this conclusion based on a forecast of the outbreak’s probable impact on job growth and job gain in U.S. industries through the end of 2021.
That forecast assumed three alternative scenarios:
- The base-case scenario mirrors ThinkWhy’s pre-pandemic forecast. It assumes a mild drop-off in job growth and job gain in March, but minimal effects from the outbreak overall. This will lead, as earlier projected, to a natural downturn in the economy by late 2021, following labor-market tightness caused by 11 straight years of growth.
- In the mid-impact scenario, the effect of COVID-19 on the labor market is also projected to be relatively mild, but for a much longer period than in the base-case scenario. Mid-impact expects the worst impacts on job growth and job gain to be felt through Q3 2020, before a rebound begins.
In the worst-case scenario, the magnitude of the outbreak is expected to be more severe through late summer of 2020, impacting job growth, but with a rebound beginning in Q4 2020 and picking up steam starting in early 2021.
Vitality in Healthcare and Social Assistance
If any U.S. industry stands to see positive impact from the current crisis, it’s the Healthcare and Social Assistance subsector. After all, the industry is on the front lines of the war against COVID-19. Workers in this sector, like Daniels in North Texas, are caring for those stricken by the virus, even as they tend to their regular patients. Others, in the research field, are searching overtime for cures for the disease. Hospital visits are expected to swell, as will the use of telemedicine services.
ThinkWhy projects that Healthcare and Social Assistance will most closely reflect the base-case scenario for job growth and job gain. Even in the best of times, the demand for labor in this subsector tends to be strong, with annualized job gain averaging about 448,000 over the last three years.
Demand for labor should increase to 484,000 jobs, with a peak increase during the first half of 2020 at 527,000 jobs. Because wages in this sector are already high, wage growth should average 2.6 percent in 2020, up slightly from the three-year average of 2.3 percent.
ThinkWhy’s three scenarios for the U.S. Healthcare and Social Assistance subsector.
If job gain, however, does begin to decline in this sector – as shown in the mid-impact and worst-case scenarios – it would mean that larger disruptions to economic activity because of COVID-19 couldn’t be avoided, even in this robust industry. The situation could be further exacerbated by travel restrictions affecting foreign-born healthcare workers, the large-scale hiring of private-sector healthcare workers by the government, and the possible closure of nursing schools that grant certifications. The good news for workers in these scenarios is that if an increasing shortage of supply for this subsector occurs, wage growth would pick up at a rate that’s higher than the historical average.
A Gloomy Outlook for Leisure and Hospitality
The outlook is far gloomier for the Leisure and Hospitality industry, which before COVID-19 had strong job and wage growth. The coronavirus quickly changed all that. Over the last few weeks, restaurants and bars in multiple states, like Negin’s in L.A., have closed their doors, and so have retailers like Neiman Marcus, Macy’s and Nordstrom.
Since most consumer products are sourced from abroad, supply chain disruptions have played havoc with the brick-and-mortar stores. Travel has been restricted, causing airlines to pare back their schedules and hotels to lose billions of dollars in revenue. Sports leagues have suspended their play, and big public gatherings, like the South by Southwest (SXSW) technology and media conference, have been canceled.
As a result, ThinkWhy predicts the Leisure and Hospitality sector will most closely reflect the worst-case scenario for job gain and job growth. In fact, the industry may go through a downturn lasting two consecutive quarters, the definition of an economic recession.
ThinkWhy’s three scenarios for the U.S. Leisure and Hospitality sector.
What’s more, job losses in this sector will be substantial because hobbled businesses will be unable to keep and pay all their blue-collar employees, as evidenced by the drastic climb in unemployment across the country. Those losses will deliver a “double-whammy” to the economy at large, since jobs in this sector support consumer spending, which in turn props up the production of goods and services. While consumer spending supports an estimated 70 percent of GDP, some predict that spending by consumers could take a 30 to 35 percent hit this year.
The expected economic stimulus to consumers and businesses in this industry may lessen the pain during Q2 2020. But in a worst-case scenario, stability in this industry will return only late in Q4 2020, pushing deeper job losses in Q3 2020.
“If I knew that in two weeks, we’d be open and back to business as usual, yeah, no problem – we can afford to pay our employees,” Negin told the L.A. Times. “But I don’t know that we’ll be open in two weeks or six weeks.”
The uncertainty that accompanies the COVID-19 pandemic spans industries. However, the extreme ways it is affecting the economy are easily visible when seen through the lens of these two industries.
Healthcare and Social Assistance, even with the possibility of a worsening labor shortage, has been able to remain stable during this uncertain time. Leisure and Hospitality, on the other hand, has experienced an immediate downturn caused by the precautions necessary to control the spread of the virus.
Though the economic consequences of the pandemic are felt across industries, the results can dramatically differ.
It is still early. ThinkWhy monitors and forecasts as we calculate industry and metropolitan statistical areas (MSAs) for impact. Stay current with us. We are here to support businesses and provide insights into changes – downturn and recovery phases.