On Ice: Hot job market catches cold with COVID-19
A cold and blustery day wreaked havoc on recruiters, who filed into the Hagerty Center carrying cumbersome displays and props for the 14th annual job fair hosted by Northwestern Michigan College in early March.
There, a range of employers were hopeful that the job fair would yield potential new hires, but numbers suggested otherwise.
“There are more jobs than there are people,” said Michelle Socha, who helped organize the job fair and had to turn away employers due to unavailable space. “The economy is really good and the unemployment is low. It is an employees’ job market right now.”
As of January 2020, the unemployment rate was at 3.6% nationally, while Michigan stood at 4.1% as of October 2019.
Socha is a business services representative for Michigan Works! — a nonprofit that falls under Networks Northwest. She has been with the organization for the past 34 years and works with businesses to recruit, hire and train.
She said having a hot job market has its downfalls. She has seen businesses eliminate departments, decrease hours or turn down work because they don’t have enough employees.
Jan Witte, recruitment and employment manager at Grand Traverse Resort and Spa, had just finished setting up a display and was ready to start answering questions from candidates at the job fair. She was looking to fill 150 positions in addition to the 500 workers who are currently employed at the Resort.
“It is really challenging,” Witte said. “The unemployment rate is so low and most people that are looking for jobs have jobs. There’s a lot of jobs out there and there’s a shortage of people.”
At the end of the day, Witte deemed the job fair a success and was feeling optimistic about filling several positions.
“Everything went good with the job fair,” Witte said. “We met quite a few people. It was definitely up from last year and I think some have come to our website to apply.”
Six days later after the fair, everything changed.
State and federal agencies took drastic measures to curb the spread of the COVID-19 virus by shuttering schools and businesses. Initially, 117,000 businesses were directly impacted by Governor Gretchen Whitmer’s order to close or limit service at bars, movie theaters, fitness centers and restaurants.
“We were supposed to go to a job fair at Michigan State (University) for summer interns. And as we were on our way, we found out Michigan State was closed,” Witte said. “That was our first oh (shoot) moment. Everything was good … and then all of a sudden you’re like, this is not good.”
By the next day, the resort started shifting gears and going into a different mode, Witte said.
“Unfortunately with all this coronavirus, our hiring is at a freeze right now,” Witte said. “So, we’re not able to act on those candidates from the job fair.”
Due to efforts to fight COVID-19, almost all businesses from every sector of the economy have felt the same negative impacts that the Grand Traverse Resort has experienced.
As the hot job market melts down, employees are now faced with the reality of filing for unemployment, while business – big and small – look for ways to keep their doors open as the world potentially enters a recession.
By mid-March, unemployment websites reportedly started to crash due to high volume as more than 100,000 Michigan workers filed for unemployment in one week, according to the Michigan Department of Labor and Economic Opportunity.
Restaurants Hit Hardest
Restaurant workers have been hit the hardest. According to the National Restaurant Association, there are 447,200 restaurant and food service jobs in Michigan, which account for 10% of the employment in the state. Restaurants were asked to shut down by government, but could still offer takeout and delivery.
Trout Town Eatery and Tavern in Kalkaska had one of its best winter seasons. Owner Dan Bloomquist was looking forward to an equally busy spring.
“It was a hot market,” Bloomquist said, who also owns Breakfast and Burger Express in Kalkaska. “We’ve been busy. Our winter was one of the best we’ve ever had.”
Bloomquist – who also sits on the National Trout Festival board – helped make the decision to cancel the event. The festival has only been canceled one other time, which was during World War II.
“(Trout Festival) is probably our second busiest week of the year behind Fourth of July week,” he said. “But it had to be done. When we made that decision, there were already festivals after us in May that were canceled. We just saw the writing on the wall with the CDC guidelines. It just wasn’t going to happen.”
In an effort to keep his businesses open and employees working, Bloomquist adapted to the mandates and started offering takeout and delivery through a garage door at Trout Town and a side window at Breakfast and Burger Express.
After about a week, he decided to close all operations. His decision came hours before Governor Whitmer issued an executive order that residents should remain at home and only essential businesses stay open for three weeks.
“The bottom line is there’s a lot going on out there and it is spreading more and more. For the safety of our staff, I think it makes sense to close,” Bloomquist said. “Secondly, it’s just not sustainable with what we’re doing with carry outs to keep up open.”
Under the takeout and delivery-only model, Trout Town was doing less than a third of its normal business. Additionally, servers were being paid more than their normal wages to compensate for a loss of tips.
“We had to lay off a lot of employees,” Bloomquist said, who employs about 40 workers between his two restaurants.
Instead of filing for employment, one Trout Town employee took a job at Northland supermarket until the restaurant reopens, Bloomquist said.
“No one’s going to stay laid off,” he added. “We got to play it day to day after we open back up. If business doesn’t come back to where it was when we closed, the hours aren’t going to be there for some people. We’re going to try to employ everybody and give them some hours of some form. Hopefully, business gets back to normal and everybody’s employed. And then we go forward.”
‘Changed Very Quickly’
In mid-March, the University of Michigan released a revised economic outlook for the United States and Michigan economies. The revised edition was due to the “substantial economic disruption” since the analysis was originally released in February, according to the report.
“Things have changed very quickly,” said University of Michigan economist Gabriel Ehrlich, who is the director of the Research Seminar in Quantitative Economics at U of M. “I can’t remember a time in my career the outlook has changed so quickly and sharply.”
The report looks at two different scenarios — effective mitigation and prolonged fallout — essentially, a best and worst case scenario.
The effective mitigation scenario assumes that the mitigation measures are effective at slowing the spread of the disease relatively quickly, resulting in a sharp but short-lived contraction in economic activity.
The prolonged fallout scenario assumes that the mitigation measures taken so far prove insufficient, resulting in severe financial stress and a larger and more prolonged contraction in economic activity.
In the effective mitigation scenario, the state’s unemployment rate rises from 4.1% in 2019 to 5.8% in 2020 before declining back to 4.5% in 2021.
In the prolonged fallout scenario, the state’s unemployment rate jumps to 8.1% in 2020 and 8.8% in 2021 before beginning to decline, reaching a peak quarterly rate of 10% in the third quarter of 2020, according to the report.
In either scenario, Michigan can expect to lose 155,000 to 400,000 jobs, the U of M report states.
The International Labor Organization released its global analysis, also based on two different scenarios similar to the U of M report. It estimates between 5.3 and 24.7 million workers will be unemployed. In comparison, the 2008 financial crisis increased global unemployment by 22 million.
Health Care Still Hiring
In a hot job market, some of the hardest positions to fill are entry-level, which offer lower salaries with little to no benefits, according to Socha. Now, those jobs are in even more demand, but there are a lot more potential candidates who are willing to settle for less due to the lack of available jobs.
Fear and government-mandated conditions, like social distancing, to prevent the spread of the virus have created an influx of jobs in certain sectors.
Amazon plans to hire 100,000 workers throughout the U.S. during the pandemic and will temporarily raise the minimum pay to $17 an hour, according to a blog post by Amazon Senior Vice President Dave Clark.
Walmart also plans to hire 150,000 new employees through May. Though the jobs are temporary, they could become permanent, according to Walmart.
Michigan-based companies like Kroger and Dominos Pizza also have 10,000 job openings across the U.S.
The health care industry is in a league of its own. The virus has exhausted the industry, which is in need of more employees, but some positions require extensive training and cannot be filled immediately. One job that is in constant demand, pandemic or not, is a Certified Nurses Aide (CNA). The position requires training, but it is not as extensive and candidates can get on the job sooner.
David VanSlembrouck is the human resources generalist at the Grand Traverse Pavilions, which houses more than 300 elderly residents. The facility depends on CNAs to care for the residents. On the Pavilions’ website under the employment tab, the first three positions posted were for CNAs.
VanSlembrouck was at the NMC job fair in early March looking for CNAs and hoping to fill other positions. He described the job fair as a success and has already interviewed and offered a job to a candidate.
“Hiring has not been terribly affected from a candidate standpoint yet because even with the virus people still need jobs and can seek them out from the safety of their own homes,” VanSlembrouck said. “We are continuing to interview, hire and orientate because the needs of our residents have not changed. That being said, with time and the continued spread of the virus, the Pavilions expect that fewer people will wish to venture out of their homes for in-person interviews and others may wait until everything settles before they continue their search.”
He added that the Pavilions continues to accept applications, but electronic forms of communication – including FaceTime and Skype – will be used more often.
Stocks are the Canary in the Coalmine
Most experts and government leaders remain optimistic that the economy will bounce back and employees will return to work. However, no one knows for sure when things will return to normal or if they will bounce back fully.
According to the International Labor Organization, the impact on global unemployment could be significantly lower if there is an internationally coordinated policy response in three areas: protecting workers in the workplace, stimulating the economy and employment, and supporting jobs and incomes.
Ehrlich stresses that a response needs to happen quickly.
“Two weeks ago the labor market was so tight, and now there’s going to be a lot of people losing their jobs. It takes time to get those people reemployed,” the economist said. “I think the larger concern is if we have to see more drastic mitigation measures, like entire industries and entire states shut down. You know if that persists for a long time, I think the effects on the economy will persist beyond the end of the year.”
The measures taken to fight COVID-19 have already taken its toll on the U.S. stock market, with the Dow Jones Industrial Average dropping 24% in March. This is the second largest drop since September 1931 when the market lost 30.7% and the unemployment rate was at 15.9%.
Ehrlich points out that the stock market is typically more volatile than the job market.
“The reason we pay so much attention to the stock market is because it’s fundamentally a forward-looking indicator,” he said. “Whereas the job market is going to take a while to start showing up in the data.”
The stock market does have a direct effect on the economy, which is a wealth effect, Ehrlich added. When people have money, they spend it. This includes hiring contractors to do home improvements and other projects, or take vacations, buy cars or purchase homes.
“When the stocks are doing well and when people’s retirement accounts are doing well, they’re more likely to pull the trigger on bigger purchases,” Ehrlich said. “We’re hearing anecdotally – I don’t have hard data on this – but a lot of home improvement projects are being canceled or postponed. It’s hard to know for certain people’s psychology. It’s a time of very high uncertainty and things have changed very quickly.”
At the Grand Traverse Resort, Witte said the resort remains open with a skeletal staff with limited services, but that they are staying positive and focusing on golf, something Governor Whitmer has not mandated to be shut down as of late March. She added that the Resort was looking forward to rolling out its new Den Bar located inside the game center, which offers pub food, cocktails and axe throwing. The employment manager was hoping to attend a few more job fairs before the busy summer season arrives.
“We were like full force recruiting and now that has been put on hold. Our big thing is just to make sure that we’re treating our employees the right way so that they know we care about them. So, when we are back ready for business, they’ll be back with us as well.”