There are three sets of implications that this increase in Covid has for hiring in the US. We will begin to see the effects of the Delta variant as soon as this week’s jobs report, in slower employment and workforce growth, as well as weaker office reopening.
While we are unlikely to return to the restrictive shutdowns we saw last year, the fear of becoming infected is likely to affect willingness to participate in face-to-face activities, including a wide range of work and consumption categories. It is now clear that Covid-19 will stay with us for the foreseeable future and that spending on face-to-face services in December 2021 will be weaker than expected before the Delta variant appeared. As a result, the demand for workers to provide these services will be weaker and the recovery in employment in December 2021 will be far from complete.
The increased risk of infection is likely to have a significant impact on two particular groups: the elderly and families with children under the age of 12 (and therefore not eligible for the vaccine). These groups spend disproportionately more on consumer categories, such as vacations, restaurants, daycare, and children’s services. These industries are likely to recover more slowly than expected. In addition, given the continued global expansion of the pandemic, international tourism will not return to normal soon.
The labor supply will remain tight
We expected Covid’s continued decline to reduce or eliminate barriers to returning to work, such as fear of infection or the threat of continuous remote learning. But Delta’s persistence will keep people out of the job market. Some older workers who expected the risk of infection to disappear before returning to work can now retire.
In this week’s work report and in the following ones, we are likely to see the recovery in labor participation losing strength. At the same time, we expect more unemployed workers to find work as high unemployment benefits expire.
Remote work will make recovery difficult
Delta’s rise will slow the return to the office. The delay will lengthen and increase economic damage to city centers, where many office buildings are located and where workers spend money on food, shopping and other categories of consumption. In addition, the more workers and employers settle into a remote work environment, the more difficult it will be to return completely to the office. The proportion of remote workers in the new post-pandemic normalcy may be even higher than expected.
At some point, despite the presence of Covid-19, the labor market and the US economy will return to normal. But unfortunately, with the rise in Delta, it is unlikely to happen in 2021. This week’s and post-2021 jobs report will show lower labor and employment growth than initially expected.