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DEED's New Data Tool Demonstrates the COVID-19 Pandemic Recession Remains Unique from Past Recessions

 

February 19, 2021



The art and science of economics consistently uses models to predict the future. In downturns, we look to past recessions to try to guess what might happen next.

Yet the economic fallout from COVID-19 has been unlike anything we’ve seen before. The uniquely targeted effect of the virus has led to unique economic conditions as well. Past recoveries don’t offer the same kind of models for the future. And models are, after all, only models.

To illustrate just how different today’s economic crisis is from the past, our Labor Market Information team built a new Comparing Recessions data tool for the Minnesota Department of Employment and Economic Development (DEED). The tool underscores just how the pandemic recession is different from recent recessions in a number of important ways, and how it has had an unprecedented impact on employment in certain industries.

DEED’s Labor Market Information analyst Carson Gorecki relies on the DEED data tool to provide a visual comparison of our current downturn and previous recessions in the form of line charts, for both overall employment and broken out by key industries.

The dramatic drop, quick recovery and subsequent late-in-the-year employment dip of the pandemic recession look very different in comparison to the Great Recession and the 2001 recession, when looking at change in employment over the year, by month, during each recession.

And the industries hardest hit this time around are decidedly different than those most impacted during our most recent recessions. The industries that were hit hardest by job loss in those last two recessions – such as Manufacturing, Construction and Retail Trade – are faring relatively better in the current COVID-19 economic crisis. Meanwhile employment in Leisure & Hospitality, which remained flat during the previous two recessions, was devastated in the current recession.

Because of the particularly dramatic employment loss in Leisure & Hospitality and in some parts of the Other Services industry, service industry workers are more at risk for prolonged job losses now than in the past. From Unemployment Insurance data, we know those particularly at risk are people who are Black, women, and those who have not earned a postsecondary credential. Part-time, low-wage workers are among the hardest hit.

Reskilling is necessary because employment opportunities in some of the most affected occupations will take years to return to pre-pandemic levels – and some of those jobs may never return due to automation and other changes. The good news is that service industry workers have transferrable skills to many in-demand occupations, particularly in health care, but they may need education and training to help with knowledge gaps.

Information about how this recession differs from others can help us as we move through recovery. It reinforces the fact that approaches that worked in previous recessions may not work as well during recovery from this recession. The dramatic differences between our current recession and those of the recent past highlight the unique moment the Minnesota economy is currently in.

The Shape of a Recession is published in the March edition of Minnesota Economic Trends, published quarterly by DEED’s LMI office.

 

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