Staggering job losses hit California low-wage workers. Recovery won’t be easy after shutdown

Laid off from his serving job at the Cheesecake Factory in Sacramento, 30-year-old Michael Ware skipped the unemployment line and jumped right into a position loading and unloading boxes for Walmart.

It was one of the few places hiring after the restaurant he worked at for two and a half years stopped seating people inside. He’s noticed only small differences in pay but misses talking face-to-face with customers.

“I feel good because there’s job security at Walmart,” Ware said. “People are always going to need toiletries, food and groceries.”

He’d go back to the restaurant when it reopens but the Cheesecake Factory has already signaled in an email to employees that things will be different, Ware said. The typically packed, high-volume business will require gloves, face masks and temperature readings for employees — and there will be about half as many tables and likely an employee count to match.

“I don’t know how long it’s going to be before they’re back operating like they were a month ago, two months ago,” he said.

This is the uncertain job market for the region’s low-wage industries that were beaten up by the new coronavirus.

The depths of the job losses have been largely concealed since the mandatory reporting of mass layoffs to the state was suspended in March through what is known as the WARN Act. However, new data from the Urban Institute roughly calculates the scale of unemployment for different low-wage industries across the country and in California.

Researchers used job losses experienced in New York and Washington state to project the extent of unemployment for different trades. And the forecast shows: Across the country and in the West, low-wage industries are hurting.

In the San Francisco and Las Vegas metro areas, close to a quarter of a million people are out of work. In Los Angeles, it’s more than 800,000; and close to 155,000 people in the Seattle metro, according to the Urban institute’s estimates.

There are an estimated 121,000 out-of-work people in the Sacramento region, according to the Washington DC-based think tank. Close to one-third of those jobs were in food service, which has all but disappeared except for drive-thrus, takeout and curbside pickup.

The data, more or less, conforms to what early WARN Act filings suggested before companies stopped reporting mass layoffs.

Many of the closures are supposed to be temporary but for how long is anyone’s guess. Gov. Gavin Newsom outlined a strategy in four stages Tuesday that would allow the state to ease out of the intense social distancing that has brought on the economic downturns. What’s more, Newsom warned that if cases inched upward people could be back under the stricter stay-at-home order.

It’s clear to some observers that when some jobs do come back it will not be just like before.

“Certain parts of our economy are going to be very resilient and are going to come back. There are also going to be parts of the economy that are going to disappear completely,” said Barry Broome, CEO of the Greater Sacramento Economic Council. “That doesn’t mean they will not come back over time but they’re not coming back in a way that I would say is quick.”

Minorities in hard-hit industries

The first wave of jobs snuffed out by the economic shutdown was in food service, retail, hospitality, and to some degree construction. Those early job losses happened in industries dominated by minority workers, a fact that could widen existing inequality in the state if unaddressed, according to a recent report by the UC Berkeley Labor Center.

Researchers say it’s another example of how COVID-19 is exacting an uneven toll on the poor, black people and Latinos.

“We found that job loss is not equally distributed across the workforce. Low-wage workers are more likely to be working in these industries that have a higher risk of job losses,” said Sarah Thomason, a researcher at the UC Berkeley Labor Center.

“For many of the industries that have been hit the hardest, if you look at the demographics for these specific industries such as restaurants, hotels, transportation and retail they also typically pay low wages to their front line workers and are disproportionately people of color.”

That’s particularly troubling for the Sacramento region where the earnings gap between white people and people of color has widened in the past five years; and the poorest residents benefit less from overall higher employment, Broome said.

The region was ranked 51st out of 100 metropolitan areas for economic inclusion by the Brookings Institution in 2017, rising up from the 91st spot a decade before. More people found jobs over that ten-year period but wages didn’t grow much.

“We moved into (a higher) tier on inclusion because we acted in an intentional way,” Broome said. “The problem with our inclusion gains is they were in leisure and hospitality and construction.”

‘Next wave’ of construction projects

The construction industry may find it easier to restart because it never really stopped.

In Sacramento County, construction has been deemed an essential service so general contractors like MarketOne Builders were able to keep working during the shutdown. The Sacramento-based company has about 70 employees working at the Fort Sutter Hotel, which is expected to be complete by September.

James Fitzgerald, MarketOne’s director of project development, said he’s just as worried about the future as others.

Construction can be a fickle business that relies on the right permits and financing to get a project off the ground. None of that has been made easy by the economic shutdown, Fitzgerald said.

“Our biggest challenge is the next wave of construction projects and making sure they get through the permitting process and get the financing they need and it keeps moving,” he said.

“That’s what we’re keeping our eye on for the next 6 months is making sure the industry continues to build — not just the projects they were building before COVID-19 but turning on new projects.”

According to Broome, the region has about $6 billion in projects that are still underway — the Major League Soccer stadium for the Sacramento Republic, UC Davis’ Aggie Square in Oak Park, and Kaiser Permanente’s hospital.

Still, nothing is certain during an economic recession. Now economists are wondering if the job market will bounce back into shape, roaring just like before, or meander slowly to full employment.

“If the stay order is lifted by May 15, I’m not worried about it,” Broome said. “If we had a stay order into June I think it would start to run the risk of destabilizing the market.”

Unemployment claims in California surged through the roof in March as more than 3 million people applied for benefits. Broome said every week more people are added to the jobless line.

Christopher Thornberg, an economist who directs the Business Center for Economic Forecasting at UC Riverside, said most industries will likely snap back if they were in a healthy position before COVID-19.

Thornberg said this quarter will no doubt be a huge loss for most businesses. But retail was already getting hammered and some restaurants were strained prior to the shutdown so many of them may not make it, he said.

Thornberg said the economic shock brought on by the pandemic is without comparison in recent history. And it’s still too early to make meaningful predictions, he said.

“We don’t have any precedent for what’s going on; not in a modern sense,” Thornburg said. “We don’t really know what’s going to happen.”

This story was originally published April 30, 2020 at 5:00 AM.