The battle against the economic fallout related to the COVID-19 outbreak has broadened from monetary policy to fiscal policy. Several proposals are circulating and, of course, the macroeconomy itself remains difficult to forecast. Yet, we think some proposals may be more effective than others. Here, we consider which sectors are more vulnerable to layoffs and deserve priority for relief.
It is quite possible that employees in the accommodation and food service sectors could experience even more pain than those in the air travel sector. While airlines have already delivered their “wish list” to Washington, employment subsidy programs for hospitality and food service will likely offer more bang for the buck in term of keeping as high a number of people in jobs as possible.
A look back at these sectors’ employment experiences during 2001-02 (the 9/11 episode) and during 2008-09 (the Great Financial Crisis) is informative in regards to the type of impact we might see this time around.
9/11 was by far the worst experience for airlines and, in fact, air travel employment has not recovered from the retrenchment following the 2001 catastrophe. Figure 1 indicates the proportion of employment lost following 9/11 compared to the Great Financial Crisis. COVID-19 could ultimately be worse for activity, although airline operations are leaner today than in 2001 and, with a potential bailout, the employment losses may proportionally exceed the 9/11 experience. This doesn’t mean there won’t be layoffs, but it probably caps them to some extent.