The labor market mess awaiting Joe Biden

President-elect Joe Biden will inherit one of the weakest labor markets in U.S. history, with record-high unemployment, widening inequality and deteriorating economic conditions.

Yet many of the solutions he’s offering — massive infrastructure, clean energy and technology investments — will need the approval of a largely hostile Congress. That could undercut one of the central goals of his presidency: to come to the rescue of the nation’s ailing workforce, rocked by widespread layoffs during the pandemic shutdowns.

A potential crisis will greet him before he even enters the Oval Office: An estimated 12 million people will lose their jobless benefits at the end of the year without another aid package from Congress. There are also early signs that the labor market is backsliding, as the number of people seeking unemployment aid has started to rise again after weeks of declines. 

Last week, workers filed another 778,000 new applications for jobless benefits, an increase of 30,000 from the previous week, the Labor Department reported Wednesday. More than 20 million people are currently receiving unemployment benefits. 

“Biden’s going to be very constrained in what kinds of economic policies he’s going to be able to legislate,” said Mark Zandi, chief economist at Moody’s Analytics. “Unfortunately, I don’t think he’s going to have the ability to implement the proposals he’s put forward to get us back to full employment more quickly.”

After meeting with business and labor leaders on Nov. 16, Biden said an infusion of relief money and a national strategy to address the coronavirus would get the economy revving again after a “dark winter.” He vowed to create millions of new union jobs through vast spending programs.

“These are the kinds of investments that are going to strengthen our economy and our competitiveness, create millions of jobs, union jobs and doing so, or respect the dignity of work, and empower the voice of workers,” Biden said.

An analysis conducted by Moody’s earlier this year found that if Democrats were able to fully adopt their economic agenda, 18.6 million jobs could be created during Biden’s first term as president, and the economy could return to full employment by the second half of 2022.

Biden has also called for raising the federal minimum wage to $15 an hour from the current $7.25, a change that economists say could shrink gaps in equality in the labor market and boost workers in low-wage jobs — the sector of the economy hit the hardest by the pandemic.

But whipping the votes needed to pass those proposals would be tough going in a divided Congress. Even if Democrats win both of the runoff elections in January for U.S. Senate seats in Georgia — a steep climb — the chamber would be tied 50-50, requiring Vice President Kamala Harris to break the deadlock. And some red state Democrats may not be willing to go along with Biden’s most ambitious spending plans.

House Democrats’ efforts to pass a measure to raise the minimum wage to $15 stirred headwinds within the caucus last year. And that bill was never taken up by Senate Majority Leader Mitch McConnell after it eventually passed the House.

Biden’s promises to require all contractors to adhere to collective bargaining agreements on federal projects as part of an infrastructure package would also be a nonstarter for conservatives and would be strongly opposed by the business lobby.

“Biden is going to go into office with an economy that is worse than he and his advisers thought he would have when they wrote up those grandiose policy proposals,” said Claudia Sahm, who was a senior economist at the Council of Economic Advisers during the Obama administration. “And with a divided Congress they will be very limited in what they’re able to do,” she said. “That agenda is dead on arrival. A 50/50 Senate would not be enough to put through major massive spending.”

And more dark clouds are gathering over the economy.

Cities and states across the country are weighing new business restrictions, threatening to send the labor market into a deeper spiral even before Biden takes office. 

California Gov. Gavin Newsom last week ordered widespread closures of indoor dining and gyms following a rapid surge in cases in the state. New York City shuttered the nation’s largest public school system after coronavirus infections climbed to a level not seen since the spring.

Getting the economy through the winter without a widely available vaccine and then “healing scars from the recession” are going to be “monumental challenges by any administration,” said former U.S. Treasury economist Ernie Tedeschi.

“What worries me the most is that we’re losing momentum at a time when the U.S. economy is about to enter a very sort of dangerous phase, economically, and in terms of public health,” Tedeschi added.

Even when the economy makes it out of the winter months and flu season, millions of workers who have been unemployed for long periods of time will face new challenges getting hired for a pool of jobs that is expected to stay shallow for some time.

“The labor market is a mess,” Zandi said. “One-fifth of the workforce is either unemployed, underemployed or is getting paid less than they did before the pandemic,” he added. “That’s a very troubled job market.”

Nearly a third of the estimated 20 million jobless Americans were defined as “long-term” unemployed in October, meaning they were out of a job for more than six months, which can create major consequences for job-seekers, economists say.

“As joblessness spells drag on, workers’ skills erode, they become discouraged, and they’re more likely to face discrimination by potential employers,” Andrew Stettner and Elizabeth Pancotti wrote in new research released by the progressive Century Foundation. “Not only are the long-term unemployed more likely to face subsequent periods of unemployment, they face the risk ofdropping out of the labor force indefinitely.”

Congress pumped trillions of dollars into the economy earlier this year in several March relief packages, providing businesses with forgivable loans and expanding unemployment benefits to help Americans weather shutdown orders throughout the country.

Despite the infusion, the economy has only gained back about half of the 22 million jobs lost to the pandemic in March and April. The unemployment rate has been slowly declining since hitting 14.7 percent in April, but it was still sat at 6.9 percent in October, “which is close to the average peak unemployment rate in recessions since World War II,” Zandi said.

Those who have been hurt the most by the pandemic-induced job losses are minorities and the poorest workers, according to economists, leaving deep scars in the labor market that a Biden administration will have to address.

“People who can least afford the job losses are the ones who’ve experienced them,” said Chad Stone, chief economist at the Center on Budget and Policy Priorities. “Half of the job losses have been in industries that disproportionately employ … in the low wage sector. And those are disproportionately Black workers, Hispanic workers [and] women, who get paid low wages.”

“This is going to be a much trickier thing to solve,” AFL-CIO chief economist Bill Spriggs said. “My fear is … that the scarring will have left us with the Black unemployment rate that is still hovering near double digits. Young people will still be in a horrible job market.”

This blog originally appeared at Politico on November 25, 2020. Reprinted with permission.

About the Author: Rebecca Rainey is an employment and immigration reporter with POLITICO Pro and the author of the Morning Shift newsletter.

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