These are the American workers who will see the slowest wage growth

Editor’s Note: Gad Levanon is head of The Conference Board’s Labor Market Institute. The opinions expressed in this commentary are his own.

Widespread unemployment, soaring corporate bankruptcies and proliferating debt are just a few of the hallmarks of Covid-19’s economic legacy. As the pandemic continues, signs increasingly suggest it will leave another ugly stamp: bringing wage growth to a crawl.

While some sectors will inevitably fare better than others, America’s workforce should brace for the slowest pace of wage growth in recorded US history. What’s more, this deceleration will most harm the country’s low-wage earners — the group already bearing the brunt of record joblessness.

There are two key drivers of wage growth: the unemployment rate, which is likely to remain high in the June jobs report; and inflation, which has continued to fall over the past few months due to the worst economic crisis since the Great Depression. And this downturn is by no means fleeting: As the virus endures — and proliferates in the Sun Belt — the chances the economy springs back to life are remote.

As a result, US gross domestic product (GDP) is likely to be down between 5% and 10% from pre-pandemic levels by year’s end, and the unemployment rate will likely remain in double-digits for more than a year. To put things in perspective: The entire drop during the Great Recession was 4%, and the unemployment rate peaked at 10% after the recession.

Dan Kelley on his farm near Normal, Illinois.

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Labor market indicators are already showing that far fewer workers are switching jobs than they were before the pandemic. In April, just 1.4% of workers voluntarily quit their job.

At a time when many strong candidates are knocking on employers’ doors, and the risk of losing existing workers is minimal, companies can afford to cut wages and still maintain a highly qualified workforce. And there are signs that employers are beginning to react: A recent Conference Board survey shows that, in April, 40% of companies had already deferred pay increases or bonuses or were planning to do so by July.

How low could wage growth go? With 2020 unemployment rates soaring past those of the Great Recession, we should expect wage growth in the coming year or two to be even lower than at the lowest point during and after the Great Recession. That would be the worst in recorded history.

The upcoming jobs report won’t reveal this troubling trend. The report’s oft-mentioned ‘Average Hourly Earnings’ measure is an unreliable indicator of wage growth in a time of large employment swings. When mostly low-earning workers are losing their jobs, as has been the case since February, the average wage is likely to rise even if wages in the existing jobs do not change. More dependable gauges, such as the Employment Cost Index, will soon show a significant slowdown in wage growth.

Who will likely be hardest hit?

The magnitude of the slowdown in wage growth will vary across types of jobs. On the upside, computer-related workers are the one group for which the labor market may soon become tight again. In the next year or two, demand for such workers — for example, software developers and systems analysts — will likely be stronger than for most other workers. Covid-19’s fallout is leading to a rapid acceleration in technological adoption by both businesses and consumers, thus making these workers hot commodities.

Unfortunately, workers in industries highly vulnerable to social distancing will suffer most from job losses and anemic wage growth. Hard-hit sectors will include entertainment, travel, lodging, food services, transportation, maintenance and repair, cleaning services and personal care jobs such as manicurists. What’s more, minorities and less-educated workers make up a disproportionately large share of these jobs. This week’s jobs report is likely to again show a much more elevated unemployment rate for Black and Hispanic people.

These trends will likely exacerbate wage inequality in the coming years, after it had actually begun to narrow in recent years, due in large part to gains made by blue-collar workers. Relatedly, the risk of a sharp rise in poverty rates is also very real.

America’s economic future is bleak. The labor market will become a buyer’s market, where there are many more job seekers than job openings. The weakest wage growth in recorded history will soon follow, especially for some of the lowest-earning groups in our country. The dire labor market impact of the pandemic will outlast the disease itself. In such times, one of the main goals of our society should be to preserve the educational and labor market participation gains achieved in the past five years.