Fears of “K-shaped” recession realized in 2020: Lowest paid North Carolinians experiencing prolonged unemployment while most well-paid workers have recovered

RALEIGH (Jan. 26, 2021) — Early in the COVID-19 pandemic, economists started talking about the potential for a “K-shaped” recovery, with highly-paid workers bouncing back rapidly while many of the worst-paid workers experience long periods of unemployment. Data through the end of 2020 now show those fears to have been well-founded. One-third of the jobs lost at the outset of COVID-19 have not been recovered, and low-income workers are far more likely to have experienced prolonged periods of unemployment.

“The COVID-19 recession is one of the most unequal in our history, where people who were already having a hard time making ends meet before the pandemic are experiencing the worst financial pain,” said Patrick McHugh, Research Manager with the North Carolina Budget & Tax Center. “Last year ended with over 300,000 North Carolinians actively trying to find work — mostly people who had been laid off from low-wages jobs that left them with little financial cushion.”

Economic challenges facing North Carolina include: 

    • Recovery has slowed dramatically in recent months: After recovering over 230,000 jobs in May and June, North Carolina added fewer than 50,000 jobs in the past two months. All told, one-third of the jobs lost since the start of the recession have not been recovered, and North Carolina still needs to add more than 200,000 jobs to get back to where we were before COVID-19.

    • Recession is over for most highly paid North Carolinians while still devastating low-income workers: While not captured in the headline unemployment figures, job losses have fallen the hardest on North Carolinians with the least financial cushion. Data through mid October show high paying jobs with annual wages over $60,000 have fully recovered and only a modest decline in middle-wage jobs. While the recession is effectively over for many people in good-paying jobs, 1 in 5 North Carolinians who were paid under $27,000 before the recession are still out of work. As of December 2020, Leisure and hospitality, an industry where many workers are paid extremely low wages, accounts for nearly half of the total employment losses during COVID-19.
    • Job losses are heavily concentrated in some industries, particularly among worst-paid workers: The COVID-19 recession has devastated workers in some industries while others have almost fully recovered. The largest persistent job losses since February have occurred in industries like Accommodation and Food Service (-96,600), Government (-30,400), Manufacturing (-30,300), Health Care and Social Assistance (21,600), Arts, Entertainment and Recreation (20,900), and Education Services (10,200).

For charts showing the most recent labor data and COVID-19 job data, visit the Budget & Tax Center’s Labor Market page at www.ncjustice.org/labormarket.

For more context on the economic choices facing North Carolina, check out the Budget & Tax Center’s Prosperity Watch report.

The nonpartisan Budget & Tax Center is a project of the NC Justice Center, which works to eliminate poverty in North Carolina by ensuring every household in the state has access to the resources, services and fair treatment it needs to achieve economic security. 

FOR MORE INFORMATION, CONTACT Patrick McHugh, Budget & Tax Center Research Manager, at patrick.mchugh@ncjustice.org or 919-856-2183; or Mel Umbarger, Budget & Tax Center Senior Communications Specialist, at mel@ncjustice.org.