Two States Doing Badly and Two Doing Better Show the Economic Disparity of Coronavirus
By Korey Mathews and Sonya Swink
Every state in the US is facing its worst economic downturn since the Great Depression, with payrolls going down and unemployment going up in April, and for many the impact is devastating.
“I lost everything,” said Richard Morris of Tennessee, who recently lost his job, along with healthcare, “My daughter is finishing college and I can’t help her. There’s no work.”
Where Morris lives, in Clarkesville, he doesn’t have employment options other than commissions work selling anti-theft software on YouTube and elsewhere online.
The economic impact of the coronavirus has been felt in each state, but some have fared better than others. Several factors have caused these differences, such as the speed at which states process unemployment claims, the economic shape states were in prior to the downturn, and the industries that states rely on to provide most jobs.
Georgia has been badly hurt because its hub, Atlanta, is dependent on transportation and higher education. Michigan too has been hard hit by the shutdown of its large manufacturing base. But tech is cushioning the blow in Oregon and Colorado, where the workforce is well-educated, younger and more likely to work remotely.
An analysis shows two states faring poorly and two others doing better during the pandemic.
Georgia: Lack of Travel is Hurting
The state of Georgia has been particularly hard hit by the coronavirus. Its unemployment rate was 11.9% for the month of April, up from an all-time low of 3.1% in February.
The effect that the coronavirus has had on travel has been particularly challenging for the state. In addition to housing Delta, Hartsfield-Jackson Atlanta International Airport, the busiest airport in the world in terms of passenger and aircraft traffic, is in the state. On Thursday, 318,449 people came through TSA checkpoints nationwide. That’s down from 2,673,635 on the same day last year.
The impact of the virus on higher education is also having an effect on Georgia’s economy as well.
Vinod Singhal, the Charles W. Brady Chair Professor of Operations Management at the Scheller College of Business at Georgia Tech, pointed out the fact that the Atlanta area is home to several large universities. With many of the students going home, businesses that relied on student spending may see their revenue go down significantly. Worse, some of these students may not come back anytime soon, as universities around the nation grapple with the decision of continuing remote instruction into the fall semester.
Georgia Governor Brian Kemp was one of the earliest governors in the country to begin reopenings. He allowed establishments such as hair salons, gyms, and bowling alleys to open up on April 24.
But reopenings may not completely solve the state’s economic woes. With many states still having safer-at-home orders in place, and people still being wary of travel, Atlanta’s airport is unlikely to see an immediate jump in traffic.
In addition, many schools are already preparing to have at least part of their fall semesters online, keeping many of the students that contribute to Georgia’s economy at home.
Oregon: Tech Could Help State Stay Afloat
On the surface, Oregon’s economy is not doing great either. In fact, unemployment in the state rose to 14.2% in April, up from a 3.3% mark in February.
But Oregon’s economy has some aspects that will keep it in good shape.
One reason is its technology sector. Technology has gained a greater foothold in the state, giving way to the “Silicon Forest,” a term some have used to refer to the technology companies in the state. Businesses such as Tektronix are headquartered in the state, and Intel describes Oregon as the heart of its research and development, with over 21,000 employees located at its campuses in Hillsboro, according to their site.
The tech industry’s tangible impact can be seen as well; it contributes over $9 billion in GDP to Oregon’s economy, according to a report from a Technology Association of Oregon analysis conducted with eImpact Report. It also plays an important role in the state, as it accounts for 1.6 percent of overall employment, a rate higher than most states.
However, even though tech companies are typically safer from the layoffs faced by other industries, some employees have still been affected.
This was the case for Greg Lewis, who works in data analysis for a manufacturing company in Oregon. Lewis, who lives in Portland, Oregon, is now working halftime, as his employer looks to cut back on expenses. Lewis is on furlough two weeks a month, while working the other two weeks of the month from home.
Heading into the pandemic, like much of Oregon’s technology sector, Lewis’ company was doing well.
“It was busy and fast,” he said. “I work for a company that’s expanding quite a bit.”
The recovery depends on several factors, one of which is migration, which plays a key role in the state’s economy. Oregon ranked 10th-quickest in the country in rate of net migration from 2018 to 2019, at 6.9 per 1,000 residents. This migration provides economic expansion for the state, and more labor for companies to choose from.
The current recession will mean fewer people will move to Oregon, which will have an effect on Oregon’s economic outlook, says Josh Lehner, an economist at Oregon’s Office of Economic Analysis.
“Oregon will see fewer people move here this year and next than we thought prior to the recession,” Lehner wrote in a post. “This will have knock-on effects in terms of labor supply in the years ahead and lower levels of consumer demand for restaurants, housing and the like.”
While migration usually drops during any recession, the downturn created by the pandemic poses a special threat, as people across the country are staying put due to governments trying to limit the spread of the virus. The length of current shutdowns, and the speed at which individuals gain the confidence to move around again, will play a role in determining how quickly Oregon’s migration gets going again.
Oregon, like many states, is beginning the process of reopening. Governor Kate Brown announced on May 14 that 31 counties can begin reopening on Friday.
Michigan: An Aging State at Risk
Michigan was still climbing out of the hole it fell into during the 2000s, when the coronavirus hit.
By the middle of 2009, after the end of the Great Recession, the state had shed more than 859,000 jobs from its peak in 2000. The state was beginning to gain ground but lost it.
“We’re still looking at ¼ of businesses not coming back on the other side of this,” said Paul Isely, economist and Dean of Business School at Grand Valley State University in Michigan.
An aging workforce with a non-tech industry propping them up means the state will not fully recover jobs lost. The pandemic has only made recovery from last decade’s crash even more difficult. Michigan ranks in third-worst in the US now for unemployment, according to the state.
Unemployment stood at 3.6% in February. It’s 22.6% unemployed for April. Hardest-hit are the large blue-collar workforce reliant on factory jobs. Nothing could mask the state’s weaknesses when shutdown orders hit Michiganders in March and caused over one in four people to lose work by April. A whole industry jumped on unemployment at the same time.
“Michigan has a higher real 25-28% rate of unemployment due to the prevalence of manufacturing, whereas the rest of the US is much lower dependency on manufacturing,” said Isely, “You can’t do that from home.”
State unemployment also lets many fall through the cracks due to dated interfaces.
One laid-off worker, Ben Pierce, 35, former Account Administrator at Archway Marketing in Detroit, initially tried to file for unemployment money from the state and the CARES Act, which would’ve totaled $828 after taxes weekly, more than the $500 he took home weekly from his job after 401k and taxes. But he soon ran into problems when he stated that he was furloughed, not fired.
“Right after I submitted my certification I sent a message to unemployment asking for clarification on that and if I needed to change it. Never received a response.” said Pierce.
Pierce had no luck getting through to unemployment after almost four weeks of calling, emailing and even contacting state representatives. “I’m one of the lucky ones with a safety net but it’s getting smaller as I pay bills each week,” said Pierce, whose wife still takes home some money.
“My worry comes from me seeing my savings and stimulus get smaller each week and not being replenished.”
Wages in Monroe, near Flint, were at 13% below national average in 2019. Most there work for the hospital system or in retail for about $22.43 hourly on average, and that was a year ago. Reopening helps, but if technology can’t keep up to bring in college graduates, most people won’t make enough money to keep Michigan above cost of living.
The state partially reopened yesterday, starting up jobs in retail stores like Meyers and Walmart, but pay is poorer. Going forward, the CARES Act will run out at the end of July, putting unemployed people in a bind. It’s unknown if the federal government will renew the extra $600 monthly laid-off workers rely on at this time. Reopening also began this week in the auto industry, and workers are getting back, but the outlook is shaky for the next several months to get wages to cover living.
By 2021, economists at the University of Michigan predict Michigan will only have regained 80 percent of the jobs it lost since 2000, or about 688,000.
“We’re looking at Michigan looking a lot like 2009, if things go well,” said Isely.
The New Hires Quality Index measures the real wages of new job hires. Wages have dropped in Michigan according to the W.E. Upjohn Institute, a nonpartisan research institute in Michigan.
Colorado: Hot Tech Jobs Keeping Work Going
After years of growing one of the strongest tech economies in the nation, Colorado was able to withstand the pain of shutting down.
Ranking 7th nationwide in its ability to transition to remote work according to StorageCafe with strong internet access in most homes, Colorado is centered on reemerging with pandemic-proof work. Information even saw a slight gain in work for April.
The state is boosting businesses. Sandbox Solar in Fort Collins was one of several tech startups to receive brand-new grants from the state meant to bolster tech jobs. Co-founder Ian Skor, who went to SUNY in upstate New York and moved to Colorado five years ago for the sunshine, has pivoted into the commercial market of solar for agriculture.
“Our business will probably grow exponentially,” said Skor. He promises that with sales rebounding and the state grant kicking in, Sandbox will hire many locals and scale up nationally. “With this grant, most of our new positions will be sales positions (and) software engineers.”
Colorado at one point had the lowest unemployment claims due to a delay in processing. Overall, unemployment claims have gone down the last five weeks and are lower than the national average. But at 11.3%, the numbers are the highest since the state started tracking. This is a jump from a record-low 2.5% in February. The total number of people that have now filed is about a half million, much better than a state like Michigan.
However, some fell through the cracks as tech stayed steady. Women suffered most during shutdown orders in Colorado, representing over half of all initial unemployment claims since the coronavirus outbreak. April’s private sector declines occurred in leisure and hospitality (-148,100), education and health services (-43,800); industries dominated by women.
Restaurant shutdowns also explain the top number of unemployment filings in Colorado.
“All restaurants and bars, we all come off bad Februarys. But this? Oh my God. We got a whammy like you wouldn’t believe it,” said Chris Fuselier, owner of the Blake Street Tavern, a popular bar and grill near Coors Field, where the MLB Rockies typically play starting in April.
He’s using the federal loan to small businesses to pay workers from the time they closed in March, not the time they brought staff back in April.
“I have to bring back the equivalent of 45 full time employees by the end of June. I’ll overpay them, and they’ll probably just sit around. Then I’ll probably have to furlough them again. This is because the Paycheck Protection Program doesn’t accommodate us backpaying.” Fuselier said. “I’ll get new people like I did last recession though. We’ll make it.”
But tech has a strong outlook for overall rebound. Boulder, site of the University of Colorado, ranked No. 1 on Bloomberg’s Brain Concentration Index. Wages in Boulder were 26% higher than the national average in 2019, and will survive the stay-home order either with a switch to remote work or short furloughs. Most there worked for $32.29 hourly on average a year ago.
Amidst state budget cuts in the billions, Colorado will keep millions in state budget for tourism marketing and other programs meant to bolster small business as people come to the state to camp or otherwise vacation while social distancing. Restaurants have not yet been included in any kind of boost program, but other industries look to maintain survival by reopening.
Reopening began May 1st, an earlier date than many states, due to a strategic phased opening by Governor Jared Polis. Barbers, surgeons and others have returned to work, looking to revive their businesses and rile up a Millennial hotspot for home buying and startup businesses.
50-State Summary: Reopening and a Move Towards Tech Hold Promise
High double-digit unemployment is the biggest economic freefall all 50 states have seen since the Great Depression. Economists say it’ll go through the end of the year, even as each has made efforts to reopen in the last few days.
Underlying low wages, slack job growth and industries that aren’t tech hurt many states, including Louisiana, Nevada and West Virginia. Outdated unemployment systems were overwhelmed by the number of claims in each state, skewing numbers too. A total 38.6 million have filed for unemployment, and many make more on the combined federal/state program than they did at their jobs.
Overall, the outlook is muddied as each state carefully allows their economies to start back up, but the damage is done for the year for the nation, and longer for poorer states.