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The Impact of COVID-19 on Minnesota’s Labor Market

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 By Alessia Leibert
 December 2020

Between March and August 2020, 678,225 Minnesotans filed a jobless claim that was certified as eligible for a benefit payment. This figure is 85% above the baseline recorded during the same months in 2018 and 2019, representing a historic surge in unemployment attributable to the COVID-19 pandemic.

The fast-moving and unprecedented nature of the crisis makes it hard to differentiate long-term trends from short-term events. Some sectors experienced large layoffs in total but rebounded quickly and are not at risk of prolonged unemployment. So, how can the true job loss hot spots of the crisis be identified?

DEED has just launched a dashboard that addresses the following key questions:

 (1) Which segments of the economy (industries, occupations, and regions) are on the path to recovery and which ones are still struggling?

 (2) Who is being impacted most in terms of demographic characteristics, and who is more at risk of not being able to return to their jobs in the short-term?

 (3) Which kinds of customers will be hardest to serve or most in need of retraining services in the long-term?

The dashboard draws a profile of the overall distributional impact as well as the long-term risk of unemployment triggered by the COVID-19 recession. Identifying factors of influence and risk can help policy-makers target interventions toward higher risk populations and sectors and focus retraining resources and career counseling towards sectors that have shown the most resilience during this crisis.

The analysis is based on individual claimants. The dashboard tracks how many unemployed individuals stop requesting benefits and, therefore, have probably returned to work. It is regularly updated with the most recent data.

Dashboard Takeaways

The most important takeaways from our analysis of the first six months of the pandemic are outlined below.

By Race

Black claimants represent 10.5% of the jobless population while they made up only 5.9% of the labor force. This means they’ve been disproportionately impacted by layoffs during the pandemic.

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In terms of risk, Black workers have the highest average number of weeks claimed (16.8) followed by American Indians at 15.6%. This is a measure of risk because longer unemployment spells lower the probability of quick re-employment. In addition, Black workers have the highest rates of permanent separations (10.5%, represented by the blue bars) during the pandemic, meaning that one out of ten did not expect to return to their employer at the time of filing. Finally, Black workers have the highest likelihood of any race –45.7% – to still be requesting benefits after October 3, suggesting that nearly half of Black claimants are still out of work or working reduced hours. White, Asian and Hispanics/Latino workers were less likely to suffer permanent job losses (lighter blue bars) and white workers were the quickest to return to work (or stop claiming UI) after having filed a claim (lighter green bars).

By Education

Education level is one of the most significant risk factors in this recession. Claimants with no education beyond high school are not only overrepresented among claimants (making up 37.7% of the total) but also have the longest duration of unemployment (13.6 weeks) and the highest probability of still being out of work after October 3, as shown by the darker green bars.

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By Age

Another critical demographic factor is age, which is particularly interesting because the groups most impacted numerically are the young, but the groups at highest risk of prolonged unemployment are the old. The older the age, the darker the color of the bars. The most at risk category is age 65 and above.

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By Disability Status

Another vulnerable group is represented by workers with a disability, who are extremely more likely to experience permanent layoffs and still be out of work after October 3.

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By Industry Sectors

Figure 5 shows industry sectors ranked by average UI weeks, representing length of unemployment period.

Some industries rebounded from job losses very quickly while others are still struggling. Hospitals and clinics were able to weather the crisis thanks to their essential role in the fight against the virus, while hard hit sectors include Accommodation and Food Services, Temp Help agencies, Arts and Entertainment, Charities and Advocacy Organizations, Transportation, and Real Estate. In general, service-sector activities requiring personal contact with customers have the highest risk of prolonged unemployment. By far the most vulnerable sector is Accommodation and Food Services, which is not only numerically huge (13.7% of claimants) but also at high risk.

Finance and Insurance represents an interesting case because it has the highest rates of permanent separations (19.3%) and of workers who have not yet returned to work (38.6%), but these layoffs are only indirectly attributable to the COVID-19 pandemic. Restructuring and staff cuts in banks and medical health insurance firms pre-date COVID-19 and have been accelerated by it. Layoffs in Information (especially news media and cable services organizations) are also examples of how the pandemic has intensified pre-existing trends towards restructuring and automation.

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By Occupational Groups

Figure 6 shows occupational groups ranked by average UI weeks, representing length of unemployment period.

Unlike the Great Recession, job losses during the COVID-19 recession are spread out across a wide variety of occupations. The most impacted occupational group, not surprisingly, is Food Preparation and Serving, making up 13.6% of total claimants. The risk of prolonged unemployment is also highest in this group, with the highest average number of weeks claimed (17.5), a separation rate of 6.5 and a 30.2% likelihood of still being out of work after October 3. Other vulnerable occupational groups are Arts, Design, Entertainment, Sports and Media, Protective Services (especially security guards), Personal Care Services (especially hairdressers), Transportation and Material Moving, Building/Grounds Cleaning & Maintenance, and Sales and Related jobs, which have been impacted by the partial closings and reduced occupancy of stores, offices, and schools as more people were asked to work and learn remotely. Another important characteristic of at-risk occupations is their low educational requirements, which reinforces the previously mentioned correlation between education level and risk of long-term unemployment.

Knowing the occupation of origin of claimants helps anticipate what types of jobs and skills will likely be in over-supply in the economy and helps identify viable careers to focus on when developing effective job retraining programs.

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By 2019 Wage Level

Layoffs disproportionately affected workers whose earnings were below the statewide median wage of $21.49 per hour. This group made up 57% of claimants. In terms of risk of prolonged unemployment, the pandemic took a particular toll on the working poor. Individuals who were earning less than $14.70 an hour in the pre-COVID-19 period were also the most likely to be still out of work after October 3.

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By Work Status in 2019

We also discovered strong patterns with regards to employment status. Holding a full-time job in 2019 strongly mitigated the risk of prolonged unemployment despite the fact that this group comprised the largest share of claimants. Part-time and seasonal workers face a significantly higher risk of both permanent job displacement and long-term unemployment, as shown by the darker colored blue and green bars in Figure 8.

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Regional Trends

The highest share of claimants filing since the beginning of the pandemic, 64.4%, held jobs in the Twin Cities metro area. Central Minnesota was the second job loss hot spot, making up 9.2% of total claimants. The mix of impacted industries and occupations in these two geographies was slightly different, suggesting that policy-makers will need to design targeted interventions and focus job training and career counseling resources toward sectors most at risk locally.

In the Twin Cities metro, the hardest hit industries mirror the statewide lists displayed in Figure 5. In terms of occupations, Protective Services and Arts, Design, Entertainment, Sports and Media were hit relatively harder than in other regions not only because of a high concentration of offices, banks, gyms, art centers, museums, and sports clubs, but also because high population density forced many of these venues to close.

Conclusions and Implications

The evidence in this tool allows us to conclude that the most vulnerable jobs in the COVID-19 recession are part-time jobs in customer-facing industries and occupations, and the most vulnerable workers are those who worked part-time or seasonally and have lower educational attainment. Individuals with low education and low skill level will also likely have a harder time transferring to other sectors unless they receive retraining services, in part because in the current labor market there aren’t many places to look for economically sustaining employment options at their current skill level. Many will need to learn a new trade quickly to find re-employment to make ends meet. This suggests that education planning and resources will be critically important to support the economic recovery in the near future.

Finally, this evidence also points to the fact that existing inequalities in the labor market are likely to worsen as a consequence of the recession. It’s critically important for policymakers to be mindful of these disparities when deciding how to distribute resources. For the recovery to be inclusive, those most in need must receive well-designed and targeted career and retraining resources quickly.

Source: Occupational Employment Survey 2020 https://apps.deed.state.mn.us/lmi/oes/DetailedOccupationData?code=000000&geog=US,MN

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