The economic cost of the Coronavirus shutdown continues to mount
Over the last couple of weeks I have written about Minnesota businesses – like Ginger Hop and Egg and and I in Minneapolis – which will not be reopening after the Coronavirus shutdown and about the explosion in unemployment in the state.
In February, there were 96,111 people unemployed in Minnesota and unemployment stood at 3.1% of the labor force. Between March 16th – when Gov. Walz’ shutdown order came into force – and the 24th, the state government received nearly 150,000 applications for unemployment insurance. On March 27th, it was reported that the number was up over 300,000. At the time of writing, the latest information I can find is that 409,574 Minnesotans have filed since March 16th.
If we assume that these folks have switched straight from the ‘employed’ to the ‘unemployed’ column, that implies an unemployment rate of 16.2%. Since the data began in January 1976, the previous peak was 8.9% between November 1982 and January 1983 – 7.3 percentage points below that current implied rate. The number of Minnesotans in employment would be back at the level of September 1998.
The same picture is seen across the country, but, so far, Minnesota is faring worse than many. As of April 4th, our state ranked 9th in the US for the share of its civilian workforce claiming unemployment compensation. When it comes to how many weeks of unemployment benefits our state’s trust fund can cover, Minnesota ranks 36th with funding for 13 weeks.
Some sections of the population have felt these impacts more acutely. Female-dominated jobs in leisure and hospitality and personal services have had the highest levels of unemployment insurance applicants, and in the last week of March women made up 54% of unemployment insurance applicants. And, between March 16th and April 7th, roughly 19.0 percent of people of color in the state’s labor force applied for unemployment, compared to 9.5 percent of white workers.
The longer these measures stay in place the higher the economic cost will be. For a rapid restart of our economy we need, not only the virus under control, but an economy ready to restart. Some concerning data comes from the US Chamber of Commerce, which found that one in four small businesses (24%) say they are two months or less from closing permanently amid the economic downturn caused by the Coronavirus pandemic, and one in 10 (11%) are less than one month away from permanently going out of business.
Data from the Census Bureau tells a similar grim story. In the Midwest Week Ending April 4th, Business Applications were down 29.5% year on year, High-Propensity Business Applications were down 34.2%, Business Applications with Planned Wages were down 38.5%, and Business Applications from Corporations were down 41.8%.
Of course, the economy cannot be the only consideration in deciding how to deal with the Coronavirus. And there are economic costs to not acting, to letting a new, contagious, and serious virus have its way with the population unimpeded. But we should take all factors into account. There is no greater issue currently facing our state, or our country.
John Phelan is an economist at the Center of the American Experiment.