As the coronavirus pandemic shows no signs of ending, California is still recovering from the most damaging recession since the Great Depression. By October, California had regained only about two-thirds of the 2.7 million jobs lost in the early months of the pandemic.

The state lags behind the rebound rate in the rest of the U.S., and isn’t likely to see a full recovery until the end of 2023, according to a recent report from the California Center for Jobs & The Economy.

One of the biggest challenges is getting people back to work, especially as new coronavirus variants continue to emerge and cause uncertainty.

Within a couple of hours after health officials confirmed that the first U.S. case of the omicron variant had been detected in San Francisco, CalMatters and the Milken Institute co-hosted a discussion Wednesday, moderated by CalMatters economic reporter Grace Gedye and titled “The Post-COVID Recovery: California’s lagging employment rate.”

Panelists discussed why the lag exists: While California has always had a relatively high unemployment rate, the state was also hit harder by the pandemic, in part because its economy relies on the tourism and entertainment industries.

COVID has changed everything

The threats of COVID-19 have necessitated a lot of adapting — to new safety protocols, as well as new consumer behaviors. Manuel Pastor, director of USC’s Equity Research Institute, noted a few of those structural changes to the economy, including the shift from services to goods as businesses ceased traditional in-person services.

Pastor described what he called an “economy based more on mutuality” — one in which business owners have a heightened sense of the well-being of their employees. And he noted the rise of a “just-in-case” economy, where business owners have become better prepared for supply shortages or workers needing to take time off.

Perhaps the most lasting change: The switch to remote work, which Pastor predicted will continue as companies try to grapple with the fact that many workers do not want to return to the office.

Somjita Mitra, chief economist for California’s Department of Finance, said that the pandemic accelerated trends that were already in place, such as less shopping at brick-and-mortar stores and the decline of manufacturing.

Small business owners also saw those trends take hold, noted Reign Free, owner of The Red Door catering company in Oakland. “People aren’t having large events and coming out to dine, so how can we service our clients where they are, in a responsible way?” Free said.

Free also said the pandemic emphasized the need for business owners to own their own space, instead of being “at the mercy of your landlord.”

Reason to be optimistic

While there’s plenty of reason for concern, there are also some points of optimism.

According to Mitra, while the recession has been the worst to hit the state since the 1930s — and there’s still a long way to go, the economy has snapped back relatively quickly. She also pointed to indications that residents are optimistic about the economy, including another way to look at the “Great Resignation:”

“People don’t quit jobs if they think the economy is going to crash soon,” she said. “The fact that people are quitting and trying to find better employment, or start their own businesses, or move — there’s a lot of optimism that people have in terms of the recovery.”

Pastor said that while there certainly have been hardships, especially among lower-income Californians and the most vulnerable, the billions of dollars in state and federal relief and other actions were “remarkable” in preventing a recession that affected everyone.

Instead, there was more of a micro-recession. In addition to workers in some industries being able to work remotely, rising housing prices and the stock market boom meant “wealthy people cleaned up,” he said.

Small businesses are struggling

Pastor called the pandemic recovery a transformational moment for workers — not so much a “Great Resignation” as a “Great Awakening,” in which people are rethinking the role of work in their lives. Besides unemployment benefits, there are a number of reasons why people may not return to work, including child care needs or health risks, Free said.

But while large companies may be able to stay afloat through this transformation, small business owners need more support.

Julian Cañete, president and CEO of the California Hispanic Chambers Of Commerce, said that grants and loan assistance provided a bridge for many small businesses, but many still had to close their doors.

“It wasn’t just the pandemic that hit,” he said. “When you’re hit with the wildfires in some of the areas of the state, that also has an impact on everything — on employment, on recovery, everything else.”

“I just hope,” Cañete added, “that the legislators and policymakers realize that these small investments have been important to small business, but it’s important to our future economic growth and we need to continue them.”