The National Counsel on Compensation Insurance just published it’s Quarterly Economics Briefing for the fourth quarter of 2020.

The Big Four service sectors – Leisure and Hospitality; Retail Trade; Professional, Business, and Other Services; and Education and Health Services – account for about four out of five lost jobs. In general, the Big Four service sectors are characterized by high physical proximity, low essentiality, or both. Physical proximity refers to the degree of interpersonal contact among workers or between workers and customers, and essentiality refers to the degree to which a service is non-discretionary and cannot be postponed.

The Leisure and Hospitality sector continues be hardest hit, with two out of five lost jobs coming from this sector alone. Restaurants lost employment from October to December following six consecutive months of employment increases. One-half of restaurant operators expect staffing levels to decline from December through February.

Employment recovery stalled during the fourth quarter, including a reversal in December following a massive pandemic resurgence. As the coronavirus recession persists, stresses for households and businesses have increased.

Small businesses contribute a big share of US jobs. One-quarter of US workers are employed at firms with fewer than 50 employees, one-half at firms with fewer than 500 employees. Small businesses also contribute to workers compensation premium in greater proportion relative to their employment because they are less likely than large businesses to self-insure and more likely to purchase non-deductible policies.

The coronavirus recession has been hard on small businesses, especially those in service sectors most impacted by reduced demand. A US Census survey from early December found that the 31% of US small businesses had experienced a “large negative” pandemic effect; for small businesses in various Big Four service sectors, this percentage ranged from 30% to nearly 70%.

The coronavirus pandemic galvanized remote work. While only 6% of the workforce was full-time remote before the pandemic, an estimated 24% worked from home in December. Several surveys conducted during 2020 found that most workers able to work from home would like to continue to do so after the pandemic, at least part-time.

Employer acceptance of remote work also increased during the pandemic. However, a review of recent research concludes that 60% or more of US workers cannot work remotely. As a general observation, occupations most easily adapted to remote settings involve tasks that can be performed on a computer, the internet, or by telephone.

It is increasingly clear that the post-COVID economy will be different than the pre-COVID economy. Changes affecting labor markets are also likely to affect workers compensation in a number of ways. The slowing rate of job recovery and increasing share of permanent layoffs at year-end 2020 suggests that US employment, and hence total workers compensation premium, is likely to recover more slowly during 2021 than during the summer and fall of 2020.