Central Oregon Unemployment Situation Improving, but far from “Normal”

by Damon Runberg

July 14, 2020

Central Oregon counties moved into Phase 2 of reopening in early June, resulting in fewer restrictions on local businesses to slow the spread of COVID-19. From the traditional economic metrics we know that the reopening process moves the needle. Unemployment rates improved slightly in May after moving into Phase 1 of reopening. The anticipation is that the improvement will be even more substantial when the June data becomes available after all counties had moved into Phase 1 and most counties across Oregon had entered Phase 2 of reopening. Although the traditional unemployment rate now captures the impact of COVID-19 on the labor market, it is still important to pay attention to unemployment insurance claim filing as it provides a more timely examination of the impacts COVID-19 is having on our economy.

New claims for unemployment insurance peaked for the week ending April 4th for Central Oregon residents, with nearly 3,700 claims processed in a single week. The weeks on either end of that peak were nearly as devastating with well over 3,000 claims processed in each of those weeks. Since early May we have seen the number of new claims being processed drop quite dramatically. The most notable drop in new claims was the week ending May 16th when the region moved into Phase 1 of reopening.
Although the region has been in Phase 2 for several weeks, we have yet to see the same large drop in new claims that we saw after moving into Phase 1. Over the past five weeks, the region averaged more than 600 new claims for unemployment insurance each week, more than twice as many as was typical before COVID-19. The elevated number of claims in June is even more dramatic when you consider that this time of year should be the seasonal low for unemployment insurance claim filing as summer is the region’s peak employment season.

As was well documented the vast majority of people who lost their job early after COVID-19 related health measures were enacted were concentrated in leisure and hospitality, health services, retail trade, and other services. These were the industries that were most impacted due to restrictions on large gatherings and an inability to effectively physically distance. Phase 1 and Phase 2 of reopening largely targeted these businesses in an effort to get customers back in the door in a safe manner. As of late June, the number of new claims for unemployment insurance is down for nearly every major industry sector compared with April and May. However, we have begun to see a shift in the concentration of these weekly claims. During the peak of unemployment insurance claim filing in early April around 25 percent of all claims were from workers who lost a job in the accommodation and food services sector; by late June only around 14 percent of new claims were coming from this sector. Although new claims from manufacturing are slowing, this sector has accounted for an increasing share of total weekly claims as the COVID-19 crisis ages. As of the week ending June 27th manufacturing accounted for 22 percent of all weekly claims in Central Oregon compared with only 9 percent back at the beginning of April.
From news stories on some of the recent manufacturing layoffs from local companies, such as Bright Wood Corp and Interfor, we know that recent durable goods layoffs are primarily due to a sharp downturn in customer demand. Put another way, those filing for unemployment insurance the past several weeks are likely structural losses due to a constricting economy rather than temporary losses due to COVID-19 restrictions.

The continued elevated level of new unemployment insurance claims after moving into Phase 2 of reopening combined with the wide swath of industries impacted tell us that the local economy is not going to snap back instantly. Many businesses who laid off workers have only called back a portion of those who lost their jobs. Others are seeing their hours reduced. In fact, the drop in hours is one of the more widespread and underreported impacts during this crisis. Based on responses from the U.S. Census Bureau’s Small Business Pulse Survey, one out of four Oregon businesses still had workers on reduced hours as of early June.

There are still many unknowns when it comes to this new recession and a timeline for recovery. There has been a worrying increase in the number of new COVID-19 cases reported across the nation and here in Oregon. The disease dictates our timeline for recovery and right now it looks like we may be taking a step backwards as several states, such as Texas and Arizona, are re-implementing restrictions to slow the spread of the disease.

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