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How Bad Was It? Central Minnesota’s Job Loss in 2nd Quarter of 2020

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By Luke Greiner
luke.greiner@state.mn.us
November 2020

The COVID-19 pandemic sent an economic shock through the global economy in 2020 and recently released data can reliably show what areas were hit the hardest in Central Minnesota. Unfortunately, reliable and timely employment data aren’t available for geographies outside of designated metropolitan statistical areas. This means waiting for the release of Quarterly Census of Employment and Wages data, commonly referred to as “QCEW”. While QCEW data lags roughly four months in Minnesota, it is the most reliable count of employment and wages and serves as the benchmark for more timely datasets. This article examines the job change that occurred in the second quarter of 2020 by comparing them to the employment levels in the second quarter of 2019. Readers should note most recent statewide data indicate that about half of the jobs that were lost earlier this year have been regained by September.

What’s Included in QCEW?

There are no minimum hour requirements to be counted as a job in QCEW. All establishments covered under the Unemployment Insurance Program are required to report wage and employment statistics quarterly to the Minnesota Department of Employment and Economic Development. Federal government establishments are also covered by the QCEW program. These data are edited and verified for research and analysis purposes.

The Unemployment Insurance Program covers about 97 percent of Minnesota employment. Workers and jobs excluded from these statistics include proprietors and the self-employed, railroad workers, family farm workers, full-time students working for their school, elected government officials, insurance and real estate salespeople, and others who work only on a commission basis. Employment at federal government establishments is covered by the QCEW program.


The Shock

Quarterly data from QCEW show that statewide, Minnesota’s employment declined 12.4% from the second quarter of 2019 to the second quarter of 2020, reflecting the loss of over 362,000 jobs. While still bad, Central Minnesota fared better, shedding -10.7% of jobs from the second quarter of 2019, representing 30,141 fewer jobs.

Regionally, Northeast Minnesota saw the largest decline while in the opposite corner, Southwest Minnesota suffered the smallest job loss. The industry mix of each region’s economy and geography pointed out some defining strengths or weaknesses. For instance, Northeast Minnesota has a higher share of jobs than Central Minnesota in Health Care and Social Assistance, Accommodation and Food Services, and Arts, Entertainment and Recreation and also had much more dramatic declines in each of those industries. Meanwhile Southwest Minnesota had a smaller percent decline in many industries, including Manufacturing that has roughly the same amount of jobs as Health Care and Social Assistance in that part of the state (see Figure 1).

Figure 1. 2nd Quarter Change, 2019-2020

Compared to the state as a whole, Central Minnesota fared better in a number of industries with a smaller negative change from the second quarter of 2019 to 2020. For example, the Health Care and Social Assistance industry is the largest industry for both Minnesota and Central Minnesota, and was held to a -4.3% drop in the region compared to -7.3% statewide. For perspective, if Health Care employers in Central Minnesota experienced the same percent decline as Minnesota, employers would have lost another 4,426 jobs. Small percentage differences in this topic are incredibly important.

In Central Minnesota the hard hit Accommodation and Food Services industry represents a higher share of total employment so it would seem like this would be a disadvantage for the region, but the industry shed a smaller share of jobs than the state. The related Arts, Entertainment and Recreation industry suffered badly in the 2nd quarter, but losses in Central Minnesota were limited to a decline of -37%, compared to -53% statewide.

Central Minnesota’s largest industry, Health Care and Social Assistance fared better in the region than Minnesota, but Manufacturing, the region’s second largest industry, sliced almost 8% of jobs from the second quarter of 2019 to the second quarter of 2020 compared to a -6.8% decline statewide. This amounted to 3,313 fewer manufacturing jobs than just a year prior, almost the same losses experienced by the Retail Trade sector.

The industries that suffered a larger decline regionally than in the state were: Manufacturing, Educational Services, Professional, Scientific, and Technical Services and Real Estate and Rental and Leasing (see Figure 2).

Figure 2. 2nd Quarter Change, 2019-2020

Where Nobody Knows Your Name

The largest negative economic impacts from COVID-19 can be seen in the crippled Accommodation and Food Services industry. Central Minnesota lost over 9,300 jobs in the Accommodation and Food Services industry in the second quarter of 2020, a staggering 38.5% of all jobs in the sector. This industry contributes about 8% of all jobs in the regional economy, but accounted for 31% of all job loss in the second quarter of 2020. Diving into the data a bit deeper reveals a 60% loss in Accommodation jobs and a 34% loss at Food Services and Drinking Places. Second quarter Accommodation employment losses were split between regular Hotels (-618 jobs) and Casino Hotels (-1,917 jobs).

Meanwhile, the Food and Drinking component of the broader industry sector also struggled with layoffs. Restaurants lost 32% of jobs and Drinking Places (bars) declined by 54% from the year prior. Although Drinking Places lost more than half of their total employment (-698 jobs), Restaurants shed many more jobs with 5,687 fewer jobs in the second quarter of 2020 compared to the year prior (see Figure 3).

Figure 3. Accommodation and Food Services Industry in Central Minnesota

Another nuance of recent employment disruption is seen in wages and payroll. The change in average weekly wages from the second quarter of 2019 to 2020 increased from $519 to $702 in the Accommodation industry, a 35% increase; while Food Services and Drinking Places saw average wages rise only 2%. This could indicate that employment losses in the Accommodation sector was more concentrated in the lower paid positions, while losses at Food and Drinking Places were either more evenly distributed among workers with different wages, or hours were reduced for the jobs that remained. Both scenarios could limit the average weekly wage from increasing.

Figure 4 illustrates both the number of jobs lost during the second quarter of 2020 and percent change to control for the size of the industry. For instance, the Arts, Entertainment and Recreation industry was devastated by losing 37% of jobs, but the actual number of jobs lost was considerably less than Retail Trade, which lost -3,263 jobs, representing an -8.9% decline.

Figure 4. Central Minnesota's 2nd Quarter Change, 2019-2020

Overall, 15 of the 19 industry sectors in the region lost jobs, while four had more jobs in the second quarter of 2020 compared to 2019. Modest gains throughout the second quarter were found in Construction, Agriculture, Finance and Insurance, and Mining. Altogether these sectors gained 732 jobs from the year prior, which while positive, was not nearly enough to offset the immense losses experienced elsewhere in the economy.

In closing, it’s difficult to overestimate the drastic swing in Central Minnesota’s economy, from full employment to record high unemployment and employment losses in just one quarter. Optimistic signs have emerged in job openings and statewide employment gains, but the speed of the economic rebound is closely tied to the spread of the COVID-19 pandemic and that’s proven to be stubbornly difficult to predict and understand.

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