On the Mark: Past economic challenges offer lessons

Through interviews, we’ve been learning about Carlton County’s small-business challenges with COVID-19 social distancing requirements and mandatory shutdowns of many kinds of businesses. Here’s a look back at the last decade of small business experiences in Carlton County, charting the impact of the Great Recession that resulted in many (especially small) businesses folding. I focus on food preparation jobs — especially hard-hit under COVID-19 distancing restrictions — and how this sector fared during the late stages of the Great Recession recovery. I end with a look at the recent unemployment hikes related to the coronavirus in Carlton County and statewide, with a special focus on food-related jobs.

From 2005 to 2015, the years bracketing the extended impacts of the Great Recession, northeastern Minnesota sustained the greatest share of Minnesota’s small-business losses. Losses associated with current COVID-19 restrictions are more abrupt and tougher on both employers and workers than in the prior period. As of the last official count (2017), Carlton County hosted 683 firms of all sizes. Half, or 366 of them, employed 1-4 workers. Another 147 firms employed 5 to 9, and 101 firms employed 10 to 19 employees.

As a group, how did these employer groups’ numbers change as a result of the slow recovery from the Great Recession? What’s happening to them now?

Research by our state’s Department of Employment and Economic Development underscores the vulnerability of Carlton County’s small businesses. As this table shared by DEED’s Northeast Planning Region’s analyst Carson Gorecki shows, their ranks haven’t completely recovered from the Great Recession. As of 2017, very small firms with 1-4 employees accounted for 54 percent of county firms, with a net loss of 26 companies among their ranks since 2008. Firms with 5 to 9 employees — 22 percent of all county firms — added a net four firms over the same period. Those with between 20-49 and 100-249 employees were up 25-26 percent. One additional firm in the latter group accounted for the total increase (data from federal County Business Patterns, 2019). The changes in the numbers of firms per size class don’t necessarily reflect what happened to employment levels within the groups or overall.

Nonemployers, aka the self-employed, also experienced heavy losses during the Great Recession. Carlton County lost a net 245 firms during 2007-17, a drop of 11 percent, almost twice the rate of self-employed firm losses statewide (U.S. Census Nonemployer Statistics, 2017). This group still accounted for more than $72 million in receipts in 2017.

Our current economic crisis is unfolding at a much quicker pace than did the Great Recession. Statewide, from March 16 to April 30 of this year, 593,810 people filed unemployment claims in Minnesota. In the same period, 3,538 Carlton County workers filed for unemployment, 20 percent of the 2019 county workforce. One in five.

Among the hardest-hit employers and employees are those in food preparation and service. Not long ago, in the second quarter of 2019, Minnesota posted more job vacancies in these occupations than in any other group: statewide, more than 22,000. But COVID-19 social distancing strictures have shuttered all but window and carryout services. Many retail food establishments have closed their doors altogether for the interim, and many others have laid off workers.

The rapidity and selectivity of these business and job setbacks are much more intense than during the Great Recession of 2007-2009, precipitated by the collapse of banking and housing sectors whose effects lasted through most of the following decade. The current ballooning of unemployment and sales implosions in many sectors place many of us in financial and as well as physical jeopardy.

As an economist, I consider the efforts of our state and federal governments to soften the blows to be necessary. The extension of unemployment insurance, stimulus payments, and small-business forgivable loans are helping to slow the ravages of the crisis, helping both employers and employees weather the coronavirus. Yet many people, especially those least skilled, with physical challenges, and/or suffering the accumulated consequences of racism and discrimination, are the most vulnerable.

As my husband always says, “We’ll see.” Meanwhile, please keep up the social distancing.

Find out more online at: http://www.census.gov/newsroom/press- releases/2019/2017-cbp.html and mn.gov/deed/data/data-tools/unemployment-insurance-statistics