COVID-19 slammed Idaho’s economy in March, causing the most sudden and largest job losses ever. At first, most of the job losses occurred in the tourism industry, as fear of COVID-19 reduced international travel, then domestic travel. Then conventions were canceled, schools closed, classes moved online and the dominoes kept falling. Every day, more businesses shut down or laid off its workers. On March 25, Gov. Brad Little issued a statewide 21-day stay-home order and required non-essential businesses to close.
A significant number of Idahoans who became unemployed didn’t file unemployment insurance claims, because they were self-employed, independent contractors, gig workers, students who lost their work-study jobs and other people who aren’t normally eligible for unemployment insurance. However, the Pandemic Unemployment Assistance program, part of the federal CARES Act, expanded the pool of unemployed people who could receive unemployment insurance benefits during this crisis. The PUA will be available in Idaho by mid-May.
Many other Idahoans held onto their jobs, but had their hours slashed, so they also have been struggling with reduced incomes.
Accommodations and food services lost the most jobs in recent weeks. As restaurants and hotels closed across Idaho, their workers filed 19,361 unemployment insurance claims between March 15 and April 25. More than 27 percent of the sector’s workers have filed claims.
In the first six weeks of the coronavirus crisis, 14.4 percent of Idaho’s retail workers lost their jobs. Between March 15 and April 25, Idaho retail workers filed 12,579 unemployment insurance claims. Some retailers were considered essential and not required to shut down; those included pharmacies and stores that sell groceries, auto parts and building materials. Although convenience stores and gas stations are considered essential, they still cut employment in April, as exceptionally low gas prices and a huge reduction in gas purchases reduced profitability. The retail sectors hit hardest by the COVID-19 turmoil include clothing, furniture, electronics, sporting goods, books, department stores and automotive dealerships.
A survey of Idaho business, conducted March 18 through April 9 by Boise State University for the Idaho Small Business Development Centers, found that only 42 percent of respondents were optimistic about their businesses surviving the pandemic. Nearly 15 percent said they were not optimistic and the remaining 43 percent were unsure. The majority of respondents expected to lose more than half of their revenues in the next month.
With so many businesses shut down, they discontinued advertising. That will result in job losses at companies that make print ads, radio and television commercials, and hurt newspapers and other companies that rely on advertising dollars.
Idaho’s manufacturing sector experienced significant job losses. Between March 15 and April 25, 6,907 workers — about 10 percent of Idaho manufacturing workers — filed unemployment insurance claims. U.S. factory output dropped 6.3 percent in March — the sharpest drop since 1946.
As of April 25, Idaho’s forest products sector had not experienced large job losses, but falling lumber prices and a slowdown in U.S. construction activity is likely to result in layoffs in the next few weeks. U.S. housing starts fell 22.3 percent from a seasonally adjusted annual rate of 1.56 million units in February to 1.22 million units in March. The Random Lengths composite price for a thousand board feet of framing lumber fell 18 percent from $428 on March 6 to $353 on April 24. Decreased U.S. construction activity led PotlatchDeltic to shut down its plywood plant in St. Maries April 20 for at least two weeks.
COVID-19 has introduced uncertainty for Idaho farmers. Prices of wheat, potatoes and other commodities rose in March, but the price for cattle, milk, onions and some other commodities fell. If the worldwide downturn turns into a recession of several months as expected and the American dollar keeps appreciating in value, American farmers will find fewer buyers abroad, depressing prices in the long run.
More than one-third of Idaho’s potato crop is grown for processing. Contracts with processors will give Idaho potato growers a 2 percent price increase this year, but contract volume is down about 20 percent. Retail demand for potatoes soared in late March, and potato prices in stores nearly doubled, but that increase in demand did not offset the loss from reduced sales to restaurants and school food services. According to U.S. Department of Agriculture Market News reports for the Twin Falls and Burley district, 50-pound cartons of restaurant-grade potatoes cost between $22 and $23 on March 16. By April 23, prices had fallen to between $10 and $12 per carton.
Restaurants normally use a large percentage of Idaho’s beef and commercially raised trout. Their closures have sharply reduced sales of trout and beef. The June futures contract for live fed cattle, which was $112 per hundredweight in February, closed at $80 April 13. In additions, America’s beef and pork suppliers have become heavily dependent on exports, and the global downturn will reduce sales abroad. The Idaho State Department of Agriculture says aquaculture ranks as the state’s third-largest food-animal industry and employs about 800 people.
Onion growers in southwestern Idaho and neighboring Oregon counties also sell most of their products to restaurants. With restaurants closed across the U.S., the large onions they produce are no longer in demand, and onion growers and wholesalers are putting some in cold storage in hopes they can be sold later and destroying what they don’t have space for. USDA Market News on March 13 reported the region’s colossal onions sold for $6 to $8 per 50-pound bag. By April 30, they sold for $5 to $7. Year-to-date shipments as of April 30 were down 17 percent.
COVID-19 is hurting the Idaho’s dairy industry, concentrated in the Magic Valley around Twin Falls. Dairy farmers had expected 2020 to be a year when they would recover from the losses of the past four years. The closure of restaurants and school food services, which used more than a third of processed milk products, led to a sharp reduction in demand for dairy products. In January, a hundred pounds of milk was selling in the $17 range. By early April, the price dropped below $13. Magic Valley dairies typically break even at $16.50 per hundredweight. That forced many Idaho dairy farmers, like their counterparts across the nation, to dump about 5 percent of the milk their cows produce. For a shift to a different market segment, dairy product makers would need to spend months and millions of dollars to change equipment and packaging materials. Meanwhile, dairy farmers must continue to feed and milk their cows, whether they can sell the milk or not.
By late March, there were signs that residential and commercial construction would slow down for at least a month or two. The need to maintain social distancing hampered some construction projects, as crew members were kept further away from each other and subcontractors took turns sending their crews into work sites. Some construction firms also are hampered by supply-chain problems, getting the materials they need from China or Europe. Job losses and decreased business revenue is likely to reduce demand for new residential and commercial construction for several months. It’s highly unlikely that 2020 and 2021 will see many new hotels, restaurants and retail stores under construction. The U.S. homebuilder segment plunged in April to the lowest level in more than seven years.
The fall in the stock market also contributed to the slowdown, as it wiped out many Americans’ nest eggs, hitting baby boomers on the brink of retirement especially hard. It reduced the ability of many companies to make investments that would have led to job growth and reduced the wealth of many Americans, decreasing their ability to spend. That wealth loss will especially depress sales of high-end consumer goods, including residential construction, automobiles and vacations.
In the first six weeks of the coronavirus economic crisis, 6,018 Idaho construction workers filed for unemployment insurance – about 11.7 percent of Idaho’s construction workers.
Construction impacts many other economic sectors: real estate, finance; title companies; architects, civil engineers and surveyors; gravel and rock mining; concrete companies; landscapers; appliance, building material, furniture, lawn and garden supply retailers and wholesalers; and lumber and other wood product manufacturers.
Governments, Nonprofits and Hospitals
State and local governments will have tighter budgets because of the coronavirus-caused economic problems. With so many people out of work, other consumers reducing their spending, businesses struggling and the decline in stock market, revenues from sales and income taxes will fall sharply. Subsequently, Gov. Brad Little instructed Idaho state agencies to reduce spending by 1 percent.
Nonprofits throughout the states are struggling to meet the rising need for their assistance, while their resources are shrinking. Food banks, trying to feed nearly twice as many people as they did before the pandemic, are competing for limited supplies and dealing with increasing prices for foodstuffs, toilet paper and other necessities, while social distancing rules forced many to suspend fundraising events in the past two months. Their thrift stores are closed as well, sharply cutting revenues. That also reduces job opportunities and workforce training for people with disabilities and other nonprofit clients. The turmoil in the stock market and the economic downturn most likely will reduce donations this year.
Idaho’s rural hospitals are struggling financially during the pandemic as they increase spending on personal protective equipment and other supplies, while the virus has forced them to discontinue their most lucrative services — elective procedures and other outpatient services. Hospitals also lost revenue in the last few weeks because fewer people visited emergency rooms, opting instead for virtual visits with a medical professional. The CARES Act includes $100 billion to provide assistance to hospitals and other health care providers to deal with a surge in patients.
The Hardest Hit Idahoans
The hardest hit Idaho families are low-income, who tend to live paycheck to paycheck. In a Federal Reserve survey last year, 39 percent of Americans said they would be unable to handle an unexpected $400 expense. The loss of their livelihoods has quickly make it difficult to pay rent and buy groceries for their families.
Teens and young adults have borne the sharpest job losses. That’s partly because they were more concentrated in the hard-hit retail, food service and accommodation industries and partly because employers tend to keep workers with greater seniority and let go of less experienced workers during downturns. While people under 25 years old made up 15 percent of Idaho’s covered employment in 2019, they made up 21 percent of the Idahoans who filed unemployment claims in the first six weeks of the coronavirus crisis. Similarly, people ages 25 to 34 made up 21 percent of covered employment, but made up 28 percent of Idaho workers filing for unemployment insurance.
The high levels of student debt and credit card debt also will make it especially hard for many families to endure this economic storm. The Federal Reserve reported in March that overall household debt in the U.S. had risen to a record $16.1 trillion
How This Crisis is Unprecedented
In a normal economic downturn, job losses and business revenue declines take place over a matter of months, starting out relatively small and then growing. In this downturn, however, massive losses occurred in just a few weeks. That makes the job losses in the U.S. in the last three weeks of March, the most sudden losses ever.
The economy soon will be subject to supply shocks, as the closures of factories and other industrial facilities around the globe limits the availability of the raw materials, parts and other goods needed by American companies. Some manufacturing and construction firms already have experienced major interruptions of their supply chains, because of the closures of Chinese factories earlier this year. The prevalence of just-in-time practices, where most companies do not stock up on the inputs they need but just order the supplies they need for a week or two, makes the supply chain issues more severe than they would have been 30 or 40 years ago.
The Challenges of Statistics During Such Rapidly Changing Conditions
Economic number crunchers are struggling to keep up with the speed of the slide. With conditions changing so rapidly, economic data, which takes time to collect, analyze and publish, is not able to provide a full picture of current conditions. For example, the U.S. Bureau of Labor Statistics and the Idaho Department of Labor’s data provide information every month about what happened to employment and unemployment the month before. The data always is for the week of the 12th of the month, so the data released April 17 was for the week of March 12. Since the impact of COVID-19 wasn’t felt until after the week of March 12, complete information about its impact on employment and the unemployment rate will only become available when the April U.S. data is released May 8. State and county data will be released May 22.
Unemployment insurance claims statistics, published weekly, provide the best snapshots of what happened the previous week.
Kathryn.Tacke@labor.idaho.gov, regional economist
Idaho Department of Labor
(208) 799-5000 ext. 3984