BENTON HARBOR — The COVID-19 pandemic has wreaked havoc on the Southwest Michigan economy, with small businesses bearing the brunt.
In an online media roundtable Wednesday, Kinexus Group officials broke down some of the economic trends occurring in the region, while also presenting unemployment figures and the long-term outlook.
Among the biggest takeaways: the extent to which small businesses lost revenue, the drop in consumer demand and how low-wage earners have struggled since the state enacted a mandatory quarantine in mid-March.
Jake Gustafson, Kinexus chief operating officer, referred to the economic downturn from the global pandemic as a “once-in-a-generation” occurrence.
“The roller coaster ride continues, but we seem to be on an upward trend,” he said. “While the unemployment rate is still remarkably high, we are almost 10 points better than at the height of the pandemic.”
According to data pulled from the Michigan Department of Technology, Management and Budget, Berrien County posted a 13.7 percent unemployment rate in June.
While this is a 9.1 percent increase in unemployment compared to June of last year, it’s also a 4.8 percent reduction from May 2020
“We’ve seen record falls and record gains. If you fall into a 10-foot pit, you’re not out of the hole yet with a 6-foot ladder,” Gustafson said. “It will be a tough haul.”
Gustafson said the region can expect to remain in double digits for unemployment through the end of the year. Gustafson identified small businesses as the group that took the biggest financial hit during the pandemic.
He said the pandemic lockdown is going to have the highest degree of consequences for small businesses, based on the 33 percent drop in consumer spending in Berrien County.
“In times of uncertainty, folks are managing their household budgets and curtailing luxurious expenses,” Gustafson said. “For every $3 spent in Berrien County last year, $1 is gone. Small businesses are notoriously tough to track. Expenses have stayed the same and revenue has dropped for these businesses.”
Another thing to consider is the variability in the job reports, which have been wide in range.
The labor force is up significantly year-over-year due to several factors, including the amount of young adults moving in with parents to ride out the coronavirus and looking for work locally.
Between Berrien, Cass and Van Buren counties, Gustafson said the labor force has grown by 3 percent compared to last year.
Employment and earnings among low-income workers for the tri-county area was down by one-third, and 40 percent in Berrien County.
Gustafson said the region is not likely to see another unemployment rate decline of this scale moving forward.
However, he acknowledged there are factors that can’t be predicted.
Most of the components between the five to seven weeks of the state-mandated quarantine have been alleviated. But Gustafson said there are some gains to be expected in the workforce.
“This does not account for another lockdown or dramatic decrease in economic activity,” he said. “If Michigan had to go back to April or May levels of the quarantine, we would see this number backslide considerably. We are not clear of the woods.”
By the numbers
Manufacturing made up nearly 19 percent of the workforce prior to COVID-19 hitting Southwest Michigan.
According to state data, the regional manufacturing sector had 18,272 jobs prior to March. The projected COVID-induced job change shows a loss of 2,261. It marks the third-hardest hit sector, in terms of total job declines year-over-year.
“Manufacturing, one of our key sectors that drives the economy in Southwest Michigan, lost 11 percent, which in any year would be catastrophic, but in the moment looks like a bump in the road,” Gustafson said. “They are now doing the most hiring in the region.”
Health care had an employment baseline of 10,240 jobs prior to the pandemic. Projected COVID-induced employment change revealed a loss of 832 jobs – an 8 percent decline.
Gustafson said the health care sector surprised them, but they realized the numbers declined so much during the pandemic because of the amount of elective procedures that were canceled.
Leisure and hospitality was the hardest hit sector. Pre-COVID employment numbers showed 11,002 jobs, followed by a loss of 4,553 jobs.
“The numbers are pretty dramatic with the hardest hit being leisure and hospitality,” Gustafson said. “In our region, the job sector was down 44 percent, year to date. This is the part of our labor force that is lower paid to begin with. They are the folks most likely to absorb economic disruption.”