In April 2020, the onset of the COVID-19 pandemic bottomed out the economy, and Kentucky lost 294,900 jobs – or 15.0% of the workforce – in just two months. New jobs data for April 2023 shows that, in the three years since, Kentucky has experienced a remarkable recovery thanks to four rounds of significant federally-funded relief. Kentucky now has 53,800 more jobs than prior to the pandemic, having recovered 347,000 jobs in just three years.
To put the severity of the downturn and the speed of the recovery in context, the two recessions prior to the pandemic never came close to causing as much job loss as Kentucky saw in 2020. And yet, Kentucky returned to a pre-pandemic level of employment by Aug. 2022, just 30 months after job loss peaked. That was less than half the time it took the state to recover from the Great Recession (80 months) and two-thirds the time it took to recover from the dot com bust of 2001 (48 months). The Families First Coronavirus Response Act and the CARES Act, both passed in March of 2020, halted the plummeting economy. Those bills plus the American Rescue Plan Act passed in March of 2021 injected trillions of dollars into the national economy, spurring a speedy recovery.
Since that time, the composition of the economy has also shifted. Particularly notable is continued growth in Trade, Transportation and Warehousing, which has not only recovered the jobs lost in the pandemic, but added an additional 28,500 more jobs. Jobs in Leisure and Hospitality, while not yet back to pre-pandemic levels, have had a remarkable recovery, bringing back 89,000 jobs in three years and making up 25% of the total jobs recovery in just one industry.
The public sector, however, has not shared in the recovery. The private sector now has 3.7% more jobs than before the downturn, while government jobs are still 2.5% below pre-pandemic levels. This trend is not unique to Kentucky, nor is the decline in state employment, in particular, unique to the pandemic. Fifteen years of budget cuts eliminating public service positions along with stagnant public employee wages and diminishing benefits have taken a toll on state government employment, and recent cuts to Kentucky’s income tax will only exacerbate our public sector jobs crisis down the road.
Too often, the jobs discussion in Kentucky focuses on what state actors do. But the past three years of historic job growth has been mirrored in states around the country, pointing to the central role of robust federal aid in making this unique recovery happen. The federal funding to spur recovery from the Great Recession in 2008 was deeply inadequate, and while the causes of the two downturns were very different, the quick improvements from the COVID downturn should inform future responses to economic hardship.
Quick, large and sustained assistance to households, state and local governments, schools and businesses has the profound ability to mitigate harm. Austerity, like that being considered in Congress now, just makes matters worse. The threat of potential default on our national debt, combined with rapidly increased interest rates by the Federal Reserve, add to uncertainty about where this historic recovery goes from here.