Oregon’s COVID Reopening and the Labor MarketJune 11, 2020 The impacts of COVID-19 on the labor market have been immense. Restrictions and closures across the state, nation, and globe on businesses to slow the spread of the disease led to mass unemployment and a considerable drop in consumer spending. With the easing of those restrictions, we are beginning to see many of the businesses that were closed reopen and those that curtailed operations slowly go back to a new “normal.” The unemployment rate gives us a pretty good idea of the impact on the labor market, but below the surface things get a little more complicated than whether someone is simply employed or unemployed.
The national unemployment rate for May made big headlines when the rate dropped from 14.7 percent in April to 13.3 percent in May. Although the unemployment rate remains very high, the decline was a surprise to many experts. Many states began to reopen before Oregon (May 15) and that gives us some hints at how reopening may impact Oregon’s labor force more broadly. The first big takeaway is that reopening moves the needle. Fewer COVID-19 restrictions resulted in fewer unemployed workers. Another big takeaway is that the vast majority of unemployed workers identify their layoff as temporary. There was some question about how temporary many of these layoffs were in reality, but the drop in the unemployment rate was largely due to a decline in the number of Americans who were on temporary layoff (-2.7 million in May).
Not a factor in the traditional unemployment rate are those who are employed part-time for economic reasons. There were 10.6 million in this group in May and remained little changed from April. Many workers lost hours due to COVID-19, but remained employed. It is hard to say how some of the federal or state programs interact with these data. For instance, the Paycheck Protection Program (PPP) helped keep many workers on their employer’s payroll, but have those workers seen their hours cut?
In response to the rapid changes we are seeing to the labor market, the U.S. Census Bureau developed the Small Business Pulse Survey, a survey of businesses to gauge labor and business conditions on a weekly basis. This resource provides a more timely and deeper understanding of the labor market conditions than our traditional labor market information.
The Census Bureau now has five weeks of survey responses for the week ending May 2nd through the week ending May 30th, the end of April through the end of May. Many of Oregon’s counties entered phase 1 of reopening in the middle of this dataset (May 15) with the Portland Metro area not moving into phase 1 until the beginning of June.
The impact of COVID-19 on Oregon businesses is widespread, with 87 percent of businesses identifying negative impacts due to the disease for the week ending May 30th. However, these negative impacts likely peaked the week ending May 9th. With each subsequent week, the share of businesses impacted has slowly declined. Still, by the end of May the vast majority of Oregon businesses continued to report negative impacts of the pandemic on their business conditions.
The impacts these businesses are experiencing are widespread and severe. As of the week ending May 30th, the most widely cited impact to businesses across the state has been a drop in revenue (55.5% of businesses). The drop in revenue directly impacted workers as 30 percent of businesses responded that they had cut hours to their employees in response to the COVID-19 pandemic. This correlates well with the large surge of nearly 11 million Americans identifying as “part-time for economic reasons.” Much of the attention during this COVID crisis has been on layoffs, but more businesses have responded by cutting hours.
The next two largest impacts to businesses also directly impact the workforce, temporary closures (25.0% of businesses) and decrease in employment (14.5% of businesses). These impacts are what has been driving the unemployment rate up across the state and nation. During the peak of the COVID-19 impacts for the week ending May 9th, nearly one out of three Oregon businesses were temporarily closed. Things have improved over the past several weeks, but one out of four businesses remained temporarily closed as of May 30th.
Combine these business closures with the share of businesses who have remained open, but decreased employment you can see how we have reached historic levels of unemployment in a short period of time. As of the week of May 30th, 14.5 percent of Oregon businesses are operating with decreases to their workforce. Once again, we see reopening has helped to drop that share down from 23.0 percent for the week ending May 9th.
The impacts COVID-19 continued to have on Oregon’s economy by the beginning of June were tremendous; however, this weekly pulse survey offers some glimpses of hope. As was mentioned earlier, the share of businesses that are seeing negative impacts to their revenue, employee hours, closures, or decreases in employment have declined since the peak of the COVID impacts in early May. The final question in the survey provides both hope and some anxiety. It asks, “How much time do you think will pass before your business returns to its normal level of operations relative to one year ago?” Of those businesses impacted by COVID-19, 41 percent said they believed they would return to normal operations within the next six months or less. However, 13 percent of businesses anticipated that they would never return to normal operations, meaning that the scar from COVID will be deep and lasting for many of Oregon’s businesses.