Jobs and the Economy in the U.S. in the Wake of COVID-19: Key Issues Facing Governors

Even as the COVID-19 public health crisis lessens and the country increasingly focuses on a total “return to normal,” the pandemic’s legacy is likely to be profound and will present governors with ongoing challenges that are just now being revealed. These challenges will impact almost every policy area, from budget to healthcare, infrastructure to workforce development, and education investments. While many post-COVID developments are still in flux, key issues are emerging that are either generated by or exacerbated by the pandemic.

The brief provides questions about each issue that governors should consider and examples of states’ actions to address a particular problem. COVID-19 will have long-tail effects that continue to change the U.S. economy and present challenges to states. Governors are aware of some of these significant shifts and are incorporating changes into their planning processes. Key challenges will likely include new and varying health costs, a much-changed labor market, worsened demographics, higher inflation, and fewer China-focused business opportunities. Governors are learning and working together to address these issues, as well as many of today’s other pressing public policy challenges.

The format of the brief includes an overview of an issue, a list of questions about the issue that governors are facing, and examples of what states are doing to address the issue.

(This brief is 14 pages long.)

The authors recommended that governors consider incorporating into their policy agendas and longer-term planning the following:

• Ongoing health effects.
• Difficulties (re)building workforces in key sectors.
• Increase in remote work.
• New inflationary pressures and supply chain issues.
• Lower population growth.
• More geopolitical uncertainty.

Data, as of December 2021, on the economy and jobs in the US finds that:

• 8-20 percent of all workdays might be done from home moving forward, versus 5 percent before COVID.
• 40 percent of workers plan to change their job in a 6-month window.
• 4.8 percent of workers increased average hourly earnings.
• 6.2 percent CPI inflation, which is the highest in 30 years.
• 46 percent of small businesses reported domestic supplier delays.
• Five million suffer from post-COVID conditions.
• There were 300,000 fewer births in 2020.
• 3.9 million fewer payroll jobs than before COVID-19.

The authors identified states that are addressing the issues and have provided case studies for review. For example, to address the ongoing health effects, governors are engaging state agency, education, and healthcare sector partners to grow and retain the direct care workforce in their states by standardizing and streamlining roles and regulatory requirements for direct care worker positions across state agencies; developing intentional recruitment and training strategies; creating platforms for cross-sector collaboration to develop and deliver programs; and tackling wage issues that deter participation in direct care occupations.

To address the difficulties of rebuilding workforces in key sectors, several states are dedicating significant federal and state resources to aid workers and businesses most impacted by the pandemic, with a focus on equity and on sectors with urgent and growing workforce needs, including advanced manufacturing, construction, IT, health care, hospitality and tourism, AI and robotics, and clean energy.

Several states are attracting remote workers with incentives to relocate to their state, including financial reimbursement for relocation costs or income tax reciprocity agreements to facilitate remote work across state lines.

To address supply chain issues, states are supporting short-term training programs that connect job seekers with well-paying jobs in occupations that fill critical supply chain needs, such as semiconductor manufacturing, transportation, and logistics.

• Last Updated:
• Created:
• Resource Publication Date: 2021
• Author(s): Stephens, R.; Wescott, W.
• Funding Source: National Governors Association (NGA), Center for Best Practices
• Resource Availability: Publicly available
• Posted by: Justin Venneri
• Posted in: Workforce System Strategies