As Minnesota continues to reopen under the Stay Safe MN Plan, businesses and employers of all sizes, industries and backgrounds are making adjustments to the size and makeup of their workforce. In support, DEED produced the Workforce Optimization Cycle (WOC), a process to identify the unique challenges to each business, and the best strategies when reestablishing their workforce.
As part of the Planning for Economic Recovery series, each week we expand on a different stage of the WOC. This week’s focus is stage 2: Project Labor Demand. It’s clear the current economic conditions are vastly different than pre-COVID-19. Understanding the new economic landscape will help to forecast revenue, at least in the short-term, and inform businesses how their demand for workers has changed.
Many factors influence revenue and labor demand. Some inputs, like change in product orders and supply chains will serve as initial indicators to future sales. Less predictable is how well consumer confidence will rebound. On a macro-level, consumer spending accounts for approximately 70% of GDP. While concerns about health, safety and financial stability are likely to linger and affect spending patterns, there are some tools to help business owners gauge what has changed and anticipate future behavior.
The U.S. Bureau of Economic Analysis publishes monthly data estimates on consumer spending at the national level. Despite an increase in personal income, which is largely attributed to government stimuli via the CARES Act, consumer spending fell by 13.6% in April 2020. In other words, consumers concerned about their employment status are saving more, and are likely to continue doing so until their long-term income level is more predictable. According to DEED’s Current Employment Statistics, nearly 360,000 jobs in Minnesota were lost in April this year, at least temporarily, due to COVID-19. That number is quite staggering, but it will provide context during the recovery as a benchmark to the number of jobs employers bring back. Nationwide, it appears employment is already beginning to rebound, as the Bureau of Labor Statistics reported 2.5 million jobs were added across the country in May.
If this rebound continues, consumer confidence may also improve. However, federal support for various programs will factor in heavily. While programs like the Paycheck Protection Program and Families First Coronavirus Response Act (FFCRA) allow employers to keep workers on the payroll for now, that could change when the programs are exhausted. Most economic forecasts suggest the U.S. will not return to the same growth trajectory we saw before the pandemic, meaning employment may not return to its previous level for several years. In addition, Federal Pandemic Unemployment Compensation (FPUC), which increases UI benefit payments by $600 per week, will expire at the end of July and leave those who were not brought back to work with much less disposable income.
To help identify trends in unemployment, DEED developed an online tool that tracks Unemployment Insurance (UI) claims on a daily and weekly basis. For example, the average daily number of layoffs fell from 12,598 in April to 5,092 in May, a 60% decrease. Users can also see the number of claims at the county level, the demographic characteristics of those making claims, and what occupation they worked in.
A stunning 99% of UI applicants through April characterized their layoff as temporary. While layoffs may have been initially intended as temporary under the Stay at Home order, it will be up to employers to determine how many of the layoffs remain temporary. By bringing back more of their workforce, employers provide financial stability for their employees, but consumer confidence will depend on activity across multiple industries and geographies with a variety of COVID-19 policies. For that reason, some employers may want to base their labor decisions on workforce trends within their sector and location.
Fortunately, the Small Business Pulse Survey by the U.S. Census Bureau examines business conditions at various levels, and provides weekly updates to stay informed on how activity is trending. Among other data points, the survey indicates whether small businesses are increasing or decreasing employment levels. During the last week of May, 11.1% of small business owners in Minnesota added employees, while another 14% decreased their workforce. It also provides insight to how different businesses believe the recovery will go for them. Nationwide, 19% of business owners in Accommodation and Food Services indicated their business will not return to its usual level of operations, while only 8.6% of manufacturers said the same about their business.
On the consumer side, the Census Bureau also has the Household Pulse Survey, which shows how Americans are responding to the changing economic and business conditions. In Minnesota, the percent of adults who expect a loss of employment income in the next four weeks dropped from 34% in the last week of April to 27% in mid-May.
Each of these state and national tools will help employers forecast revenue during the recovery and consider the amount of staff needed to optimize their business. Local input, however, is just as important. In particular, customer-facing businesses whose sales are primarily local or based on tourism should be gauging local conditions and their specific roadblocks to recovery.
Workforce Strategy Consultants are working with business communities across the state to provide more detail on local dynamics. For example, we are working with University of Minnesota Extension to share local industry snapshots, and local chambers to conduct customer confidence surveys. You can find out more about our work with University of Minnesota Extension to plan for economic recovery in this video. Our network of workforce partners, economic development professionals and labor market analysts are available to support your business community as well. Conditions will continue to change as more is learned about COVID-19 and its effects on the economy, meaning employers may return to this stage in the cycle often. But in the end, economic recovery will depend largely on how well small and mid-size businesses are able to navigate these choices together.
Follow DEED’s Workforce Strategy Team as we look closer at each stage of the Workforce Optimization Cycle, talk with subject matter experts from organizations throughout the state, and share resources to help along the way. Visit the Workforce Optimization Cycle page for regularly updated content.
Workforce Strategy Consultant Author:
Chet Bodin - Workforce Strategy Consultant for NW Minnesota
Related CareerForceMN.com content:
Main Workforce Optimization Cycle page
Previous Workforce Optimization Cycle blog post in series: Project Labor Demand
Next Workforce Optimization Cycle blog post in series: Workforce Gap Analysis