Duluth took harder economic hit, having slower recovery than rest of state

DULUTH – The local economy was hit harder and has recovered more slowly compared with the rest of the state due to the large number of service industry jobs affected by the pandemic in 2020.

It could take a return to "normal," especially in the tourism industry, before a full recovery is realized and the labor force returns to pre-pandemic levels.

"That would be the ripple effect to jump-start the rest of the economy," said Jason Beckman, program director at SOAR Career Solutions in Duluth. "I'm optimistic; I think we're ready for it. Once people feel they're not going to be endangering their neighbors by going out and enjoying activities, they will."

Despite improved unemployment levels in St. Louis, Carlton and Douglas (Wis.) counties — the jobless rate was 5.7% in December — more than 7,000 people in the three-county area stopped working and looking for work in the past year. That's about a 5% drop, according to data released by the Department of Employment and Economic Development.

Over the same 12 months, Minnesota as a whole lost 3.3% of its workforce as layoffs, child care and concerns over the coronavirus sidelined thousands of would-be workers.

"We did experience a little bit more of an acute employment loss, and the recovery since then has not been as strong as in other areas of the state," said Carson Gorecki, regional labor analyst with DEED. "We'd like to say as we have more vaccines and more people become inoculated more certainty will return, but we won't know that for a couple more months."

Unemployment peaked in April and saw the Duluth area lose about 14% of its jobs compared with April 2019, which was above the statewide average. By fall just a third of the jobs initially lost had returned in Duluth, while in more rural areas in the region about 70% of jobs had returned.

The recovery is different this time as well. Beckman said that at the peak of the last recession in 2009, there were 16 applicants per job opening in Duluth. Now, as some employers struggle to find help due to the labor force decline, there are about 1.8 applicants per job.

"This is a great market for people who are looking, and who have the ability to work: Multiple people will be vying for your time," Beckman said.

Fewer workers and applicants mean slower growth and less flexibility to ramp up employment when business does pick up again — such as a hotel suddenly needing to triple its housecleaning staff as reservations spike.

"A lot of the issues we were facing with the tight labor market before the pandemic still exist," Gorecki said. There were more jobs than applicants in the area until COVID-19 hit.

There's a chance the labor market could rebound quickly when there is widespread immunity and more certainty about safely rejoining the workforce and keeping kids in school.

Health care, retail and warehouses/trucking all have openings in the region, though many jobs require skills that those laid off from hospitality jobs may need to work on. Training programs, many available virtually, have sprouted up to attempt to fill those gaps.

"How do we match up those who lost their jobs with places that are hiring?" Gorecki said. "Then you add to the mix the workers who are hesitant, for good reasons, to put themselves back out there. It's quite the Catch-22 of trying to protect people's health and protect the economy."