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Labor economy at greater risk in Texas than U.S. during COVID-19 crisis

Anil Kumar

Lack of worker mobility and social distancing are taking a heavy toll on workers holding jobs that cannot be performed from home in the wake of stay-at-home orders issued by states and localities to slow the spread of the coronavirus (COVID-19).

While multiple factors determine the number of at-risk jobs in various business activity sectors, the ability to work from home is a key indicator. The coronavirus crisis could more adversely affect the Texas economy than the U.S. economy due to the state’s relatively large share of at-risk jobs, a review of data suggests.

Ability to work from home across major industries

The Bureau of Labor Statistics’ American Time Use Survey (ATUS) provides data on jobs that can be performed from home. The survey asked workers: “As part of your (main) job, can you work at home?”

The ATUS data suggest that an average of about 29 percent of American workers were in jobs in which they could work from home in 2017 and 2018, and there is considerable heterogeneity across supersectors (Chart 1).

Chart 1: Industires Vary Widely in Share of Workers Able to Work from Home

Downloadable chart | Chart data

Another study, using occupation-level data on remote work capability, finds that about 39 percent of full-time workers hold remote-compatible jobs.

ATUS data provide different results because ATUS responses are self-reported by workers and include all wage and salary workers—not just those who are full time. While more than half of workers in financial activities, information, and professional and business services reported they had jobs that could be performed from home, a vast majority in other industries lacked that ability.

The leisure and hospitality supersector ranked at the bottom, with just over 8 percent of workers able to work remotely, followed by about 16 percent in trade, transportation and utilities. Not surprisingly, less than a quarter of the workforce in construction, other services (including automotive repair and beauty salons), and mining (including oil and gas) reported holding jobs that allow them to work from home.

Many individuals in these industries also lack paid leave benefits, presenting additional challenges to their ability to deal with stay-at-home orders. While about two-thirds of American workers overall reported receiving paid leave benefits from employers, just about one-third are eligible in leisure and hospitality, which encompasses hotels restaurants, arts, entertainment and recreation.

Sectors most limited in work from home

Those unable to work remotely are especially at risk of losing their jobs due to the near-national shutdown. By this measure, the bottom-ranked supersectors—leisure and hospitality; trade, transportation and utilities; construction; and other services—are likely hard hit. Due to the precipitous decline in oil prices, energy sector workers (included in mining) also face significant dislocation.

These five at-risk supersectors account for 42 percent of the Texas workforce and about 39 percent of the U.S. workforce, suggesting that an extended lockdown could be more economically damaging to Texas than to the rest of the country.

Many workers in these at-risk supersectors faced significant financial hardship even before the lockdown began, and their financial woes will only deepen due to the crisis. For example, analysis of data from the American Community Survey (ACS) indicates that nearly 1 in 5 workers in leisure and hospitality reported income below the federal poverty line in 2017 (Chart 2).

Chart 2: Texas Exceeds U.S. in Share of Workers in Poverty in Many Sectors

Downloadable chart | Chart data

Poverty rates are significantly lower on average in supersectors with a relative ease of working remotely—just 5 percent among workers in financial activities. For those workers possessing the fewest monetary resources—the most vulnerable and disproportionately affected—the crisis could further deepen the economic divide across sectors.

Texas workers more at risk than U.S. counterparts

In Texas, workers will face even greater challenges because poverty rates in many sectors—including some of the sectors most at risk—are generally higher than in the U.S. overall (though mining/energy is a notable exception). A widespread lack of health care coverage can further amplify the financial woes of workers in at-risk industries.

ACS data show that 37 percent of workers in Texas’ leisure and hospitality businesses are uninsured, compared with 22 percent for the nation (Chart 3). The share of uninsured is 46 percent for construction workers in Texas, relative to 28 percent for the nation.

Chart 3: Greater Share of Texas Workers Lack Health Insurance Coverage

Downloadable chart | Chart data

A larger prevalence of undocumented workers in Texas drives some of the gap, though a portion of it reflects Texas’ refusal to adopt Medicaid expansions under the Affordable Care Act, which took effect in 2010.

Policy actions to mitigate financial distress

The recently approved federal Families First Coronavirus Response Act stipulates that all workers at firms with fewer than 500 employees and those in government are entitled to 12 weeks of job-protected leave under the Family and Medical Leave Act and up to two weeks (80 hours for full-time workers) of paid sick leave. The law also provides for reimbursement of the cost of coronavirus testing and related services for uninsured individuals.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, also signed into law in recent weeks, provides further relief, with cash benefits of $1,200 for individual taxpayers earning up to $75,000 per year and $2,400 for married couples earning up to $150,000 per year, with an additional $500 for each dependent child under age 17. The cash benefits decline with rising incomes and eventually phase out.

The CARES Act also extends regular unemployment insurance benefits from the typical 26 weeks to 39 weeks and provides additional unemployment benefits of $600 per week for up to four months to workers who lose work due to coronavirus-related illness, quarantine or disruption. The regular and additional benefits would replace more than 100 percent of an average worker’s pay.

The precrisis average weekly benefit amount in Texas was $419 in 2019, for a replacement rate of 42.5 percent of a $985 average weekly wage—higher than the average U.S. benefit amount of $371 and the national 38.5 percent replacement rate, according to U.S. Department of Labor data. (Notably, some of the difference may reflect varying unemployment insurance eligibility rules across states.)

Under the CARES Act, the average weekly benefit amount for coronavirus-affected workers in Texas would be approximately $1,019 per week for up to four months until July 31, replacing more than 100 percent of weekly wages for many workers making the average wage or below. The act also allows benefits for contractors and the self-employed who normally would not qualify. Undocumented workers remain ineligible.

A closer look at what Texas may face

Not all industries within at-risk supersectors are equally at risk. For example, construction is considered essential in many local jurisdictions and exempt from the stay-at-home orders. While professional and business services occupations rank high in the ability to work from home, parts of the employment services supersector—which includes job placement agencies, temporary help services and travel arrangements—have been hit hard. Non-essential retail, such as furniture, clothing and sporting goods stores, is also facing near-total disruption.

Other research suggests that industries most at risk can be narrowed down to leisure and hospitality, transportation, employment services, travel arrangements and energy/mining. Adding non-essential retail to the list, most-at-risk businesses account for about a 19.8 percent share of Texas employment, higher than the 17.9 percent share in the U.S. (Chart 4).

Chart 4: Texas Has Greater Share of Jobs in Industries Most at Risk During Pandemic

Downloadable chart | Chart data

Using numbers from the most-at-risk industries, we can get a sense of just how much the Texas unemployment rate could spike by the time the crisis bottoms out.

In February, before coronavirus disruptions began, Texas had a labor force of 14.2 million and an unemployment rate of 3.5 percent. Roughly 492,500 workers were unemployed. In the worst-case scenario, if all 2.6 million workers in the most-at-risk industries join the ranks of the unemployed, and the labor force remains unchanged from February, the unemployment rate could jump 18.3 percentage points to 21.8 percent.

In a more optimistic scenario, if just 1.3 million (50 percent) of these most-at-risk workers become unemployed, the unemployment rate could still increase 9.2 percentage points to 12.7 percent.

Depending upon which scenario plays out, jobless rate could end up anywhere between 12.7 and 21.8 percent at the depths of the crisis.

An important caveat is that such back-of-the-envelope calculations are only as good as the assumptions on which they are based. Peak unemployment could be higher if industries other than those most at risk contribute to additional unemployment. The jobless rate could be lower if workers losing jobs in industries most at risk simply leave the labor force or become self-employed.

About the Author

Anil Kumar

Kumar is an economic policy advisor and senior economist in the Research Department at the Federal Reserve Bank of Dallas.

The views expressed are those of the authors and should not be attributed to the Federal Reserve Bank of Dallas or the Federal Reserve System.

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