Employment and Health Effects from COVID-19 Containment Measures

By Veronica Carrion
ABA Economic Research Associate

Five months have passed since the coronavirus pandemic shut down the United States. More than five million Americans have contracted the virus, and more than 160,000 have died from it. Business closures across the country left more than 20 million Americans without jobs. Despite progress in the last three months’ job reports and the quick action of Paycheck Protection Program lenders, the unemployment rate sits at 10.2%.

States have grappled with tough decisions balancing the needs of public health and the economy. While all states have begun at least some phase of reopening, they have taken different approaches and moved at different speeds. As new data has emerged, it appears that states that were faster to reopen saw increased coronavirus spread with uneven economic benefits.

Early openers versus stringent states

States on the Pacific coast and in the Northeast responded quickly in March, shutting down businesses and implementing stay-at-home orders as the first coronavirus hotspots emerged in New York and Washington. Southern states were slower to respond, and shutdowns did not last as long, with reopenings beginning as early as April.

New York, New Jersey, Washington, and New Mexico implemented some of the most stringent policies to control the spread of the virus. Measures taken included a 100 percent transition to remote work for office workers, closure of nonessential businesses, mandatory face coverings while in public, bans on social gatherings of all sizes, and fines for violating social distancing rules. The most cautious states started reopening in June after reaching certain health metrics. Retail and food establishments are still restricted to curbside pickup, entertainment venues remain closed and mask requirements are still strictly enforced.

By contrast, Texas, Georgia, Florida, and South Carolina imposed more modest restrictions. By late April, Georgia allowed gyms, personal care salons, restaurant dining, and movie theaters to reopen. Texas, Florida and South Carolina began their phase-one reopenings in early May. Less populous states varied in their responses. Rather than issue stay-at-home orders, Arkansas, Iowa, Nebraska, North Dakota and South Dakota instead opted for mandates enforcing social distancing, following Centers for Disease Control and Prevention hygiene practices, and closing personal care salons.

Effects on employment

Nationally, continuing claims dropped slightly to 19.5 million in late July, down from May’s peak reading of 24.9 million. With the limited resumption of economic activity, unemployment rates were lower in 42 states, higher in five and stable in three states and D.C.

Many states that opened early or implemented more lenient restrictions—such as Texas, Georgia, South Carolina, and Florida—hoped to get people back to work more quickly and limit damage to their local economies. This was of particular concern in states with large hospitality and tourism sectors, which were hit hard by social distancing policies. Florida, for instance, saw a brief surge in continuing claims, before they began to reopen. While reopening appeared to temporarily reduce unemployment, the rate edged back up as COVID-19 cases began to rise. Florida’s mandatory stay-at-home order expired in May. As cases began to surge the state took action to reverse reopenings by prohibiting bars from selling alcohol.

Compared to the country in aggregate, densely populated lenient states saw no faster decline in unemployment as a result of reopening early. Despite reopening in May, South Carolina’s unemployment rate has edged down at the same slow pace as cautious states. Georgia has been one of the hardest-hit states in the country, with insured unemployment peaking at 20 percent in April. While the state has regained 47 percent of jobs lost from February to April, a surge in new cases appears to be slowing down its economic recovery.

Meanwhile, rural states have largely held unemployment below 10 percent and are out-performing more populous states. Idaho’s unemployment rate peaked in late April at 10 percent but steadily declined to 3.4 percent by the end of July. Idaho—which does not rely as heavily on the leisure and hospitality industries that were particularly affected by the pandemic—now has the lowest insured unemployment rate across the nation, according to the Department of Labor’s weekly claims report. Like Idaho, North Dakota, South Dakota, and Indiana have seen their unemployment rates steadily decrease since April. The labor forces of these states are largely concentrated in trade, transportation, and utilities; education and health services; and government work.

Among states with more restrictive social distancing measures, the insured unemployment rate has held fairly steady as many businesses remain closed. One outlier, Washington state, saw a spike in continuing claims in early May that retreated in June. This may be explained by the unusually high number of fraudulent claims filed in the state, which amounted to $550 million to $650 million worth of fraud.

The decision to open early or remain closed did not appear to materially impact the unemployment rate of different states, especially in regions with large leisure and hospitality workforces. Businesses continue to struggle. Google mobility data shows that consumers are still avoiding open retail and food establishments, and polls suggest that 51 percent of voters feel the country as a whole is moving too fast to reopen and many agree that continuing social distancing is worth the economic cost.

Effects on public health

The effects of closures and re-openings on the spread of COVID-19 are much clearer. Despite the short- and medium-term economic consequences, cautious states focused on flattening the curve and limiting the spread to prepare for safer, longer-lasting reopenings. Stringent states have either limited the spread throughout the pandemic or seen their initially high case numbers fall.

By contrast, less restrictive states began to see their case numbers rise in June as stay-at-home orders were lifted. As a result, many governors have paused reopening plans or re-closed segments of their states. Forty-eight states saw an increase in coronavirus cases over the last few weeks. Rural states with meatpacking and correctional facilities saw high per-capita infection rates. The U.S. hit a record single-day spike of 60,000 cases in mid-July—with Arizona, Florida, California and Texas accounting for nearly half of all new cases.

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Despite the recent promising jobs reports and initial optimism as states reopened, unemployment remains elevated, daily COVID-19 cases are rising in several states (including North Dakota, South Dakota, Iowa, and Illinois) and 24 states have paused or reversed their reopening plans amidst rising case numbers. While some less restrictive states saw temporary reductions in unemployment as they reopened, the resulting spikes in coronavirus have raised questions about the longevity of those improvements.

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