Coming Soon: A Massive Rise in Local Unemployment

Bars closed.  Cinemas and theaters and sporting arenas closed.  Concert halls closed.  Graduations and ring day and parents/family weekend-all canceled.  Hotel occupancy dropping through the floor.  Restaurants struggling to make a go of it serving food to go.  Companies are hurting.

But it’s not just companies that are hurting.  These businesses have many employees, and locally the businesses in the Leisure and Hospitality industries account for 13.7% of employment. These businesses are largely shut down or operating in a manner that generates much less revenue than normal.

In January, our local unemployment rate was 2.7%, and had been holding at that number for many months.  What happens when there are massive layoffs caused by the coronavirus and responses that include social distancing and business closings? The initial impact will be on the 13.7% of local employees working in the affected industries. 

We explore two alternative scenarios.  If we somewhat conservatively presume that one-fourth of workers in the three industries mentioned here are laid off or otherwise unemployed as a result of the current pandemic, this 13.7% share of local employees will decrease to 10.3% with a large increase in the unemployment rate.  How large of an increase?  We estimate that the local area unemployment rate for April could be as high as 6.1%.  If we presume that half of workers in this industry group are laid off or otherwise unemployed, these three industries would see their share of employment decline to 6.9% and lead to an unemployment rate of 9.6%, flirting with double digits.  This latter rate would represent a historic high, and a historically rapid increase in unemployment locally.  Over time, other industries would be impacted, some growing in employees and some shrinking, and the impact will be spread over various industries and over various other geographies as some workers move toward available jobs.  The longer-term impact on the unemployment rate will depend on how long the crisis continues, and on how the government’s response to the crisis evolves over time.

The economic pain will get worse, much worse, before it gets better.  Unemployment benefits will help.  The federal government’s various stimulus measures will help.  But until there is a return to normality within the impacted industries, the pain can be ameliorated but not eliminated.    


Posted: March 20, 2020 by Dennis W. Jansen, Andrew J. Rettenmaier