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Jan. 3, 2021, 8:49 a.m. EST

COVID-19 has created a ‘flight to safety’ for American job hunters

‘Our findings uncover a flight to safety channel in the labor market,’ a new study says

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By Quentin Fottrell, MarketWatch


AFP via Getty Images
Job hunters have showed more flexibility, becoming more receptive to lower wages or jobs requiring relocation, a new study finds.

Americans are looking around at the job landscape and realizing that a major upheaval like the coronavirus pandemic affects some companies more than others.

“The COVID-19 pandemic shifted the focus of job-seekers toward larger and more resilient companies,” according to Shai Bernstein, an associate professor of entrepreneurial management at Harvard Business School; Richard Townsend, an associate professor of finance at the University of California, San Diego; and Ting Xu, an assistant professor of finance at the University of Virginia.

They studied job-search behavior on the AngelList Talent platform and found one common denominator: They showed greater interest in job advertisements from larger firms, particularly among searchers with more education and experience, after the onset of the pandemic. Job hunters also showed more flexibility, becoming more receptive to lower wages or jobs requiring relocation.

“The findings raise questions about how the pandemic, or other economic downturns, affect the flow of talent to start-up entrepreneurial firms,” according to their working paper , “Flight to Safety: How Economic Downturns Affect Talent Flows to Startups,” distributed by the National Bureau of Economic Research.

“We find that job seekers shifted their searches toward larger firms and away from early-stage ventures, even within the same individual over time. Simultaneously, job seekers broadened their other search parameters, considering lower salaries and a wider variety of job types, roles, markets, and locations,” Bernstein, Townsend and Xu wrote.

Early-stage ventures saw a decline in the number of applications driven by higher quality and more experienced job seekers. “This led to a deterioration in the quality of the human capital pool available to early-stage ventures during the downturn,” the authors said. “Our findings uncover a flight to safety channel in the labor market, which may amplify the pro-cyclical nature of entrepreneurial activities.”

The Moneyist: My wife and I have 3 kids. I also have 3 kids from a previous marriage. How should we split our house among these 6 children?

In November, long-term unemployed Americans hit 3.9 million, accounting for more than a third of the total number of unemployed people in the U.S. Although the overall unemployment rate fell in November, the number of people who were unemployed for 27 weeks or more rose. The labor-force participation rate, which measures how many people are working or looking for a job, also fell.

The U.S. unemployment rate has fallen by 8 percentage points over the past seven months to 6.7%, according to government data, but Scott Ruesterholz, a portfolio manager at Insight Investment, a London-based global-asset manager, said “it will likely take over 12 months to return to 5% unemployment and substantially longer to return to the pre-crisis 3.5% level.”

“This report is a clear reminder that while the U.S. economy continues to recover, the road will be bumpy, especially until the widespread rollout of vaccines,” he said. “This reality underscores the importance of targeted fiscal stimulus to impacted businesses and workers to bridge the economy until a return to normality and limiting permanent scarring.”

Related: COVID-19 forced working mothers to take time off work — rather than fathers

Millions of Americans have spent this year working from home, and employers have realized just how smoothly things can get done when they trust their staff to work remotely. But for those fortunate enough to work from home , will COVID-19 have a lasting effect on how they do their jobs? Or will millions of commuters return to cities if and when vaccines are made available?

A separate study released this month by Vanguard sheds some light on the future of work. “Work-from-home arrangements represent a sharp acceleration of a trend that was already under way before COVID-19,” said Joseph Davis, Vanguard’s global chief economist. “But the big question for the U.S. economy is how many jobs, and what types, could permanently become remote?”

“For example, if tech workers can just as easily do their jobs from home offices in Toledo or Tulsa or Topeka, do Silicon Valley firms need vast California campuses?” he said . “And what would that mean for businesses that rely on such a concentration of workers and for commuting patterns? What would it mean for real estate prices, both commercial and residential?”

“Roughly 15% of all U.S. jobs could be conducted remotely,” Davis found. “It represents potentially over 20 million U.S. workers.” He included a conservative model: A 60% effectiveness threshold was deemed good enough to complete the task in each respective occupation. “A higher threshold would mean that fewer occupations and workers could permanently work remotely,” he added.

Related: Dr. Fauci: ‘For the first time in more than 30 years, I’m not spending the Christmas holidays with my daughters’

There has been progress on vaccines — which, assuming they work, could eventually bring people back to their place of work. BioNTech SE /zigman2/quotes/214419716/composite BNTX +6.68% and Pfizer /zigman2/quotes/202877789/composite PFE +1.78% said a final analysis of their vaccine candidate showed 95% efficacy, and rolled out their first deliveries on Monday. Meanwhile, Moderna /zigman2/quotes/205619834/composite MRNA +5.26%  said its own candidate was 94.5% effective.  

A vaccine candidate from AstraZeneca /zigman2/quotes/200304487/composite AZN +0.89%  and the University of Oxford is safe and effective and showed an average efficacy of 70% in a pooled analysis of interim data, according to a peer-reviewed study published last week. Efficacy was 62% for trial participants who received two full doses of the experimental vaccine, but increased to 90% among a subgroup of volunteers who received a half dose, then a full dose, according to data published in The Lancet .

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US : U.S.: NYSE
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+0.64 +1.78%
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/zigman2/quotes/205619834/composite
US : U.S.: Nasdaq
$ 140.92
+7.04 +5.26%
Volume: 9.92M
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P/E Ratio
N/A
Dividend Yield
N/A
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$56.39 billion
Rev. per Employee
$617,996
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/zigman2/quotes/200304487/composite
US : U.S.: Nasdaq
$ 49.94
+0.44 +0.89%
Volume: 7.43M
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Quentin Fottrell is MarketWatch's personal-finance editor and The Moneyist columnist for MarketWatch. You can follow him on Twitter @quantanamo.

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