With COVID-19 cases rising rapidly, indoor dining going away, and federal support for small businesses stalled in Congress, Brandon Bortles made an excruciating decision last November — he closed his Abejas and Nosu Ramen restaurants in Golden and directed about 30 of his remaining workers to apply for state unemployment benefits.
“My capital was so low I couldn’t float them. Our hand was forced,” said Bortles, who doesn’t know when he will reopen, despite an easing of restrictions on indoor dining last month.
His layoffs were part of a much larger 24,300 jobs lost at restaurants and bars across the state in December, according to senior state labor economist Ryan Gedney. Losses in food service employment, combined with a surge in people rejoining the labor force, helped push up Colorado’s seasonally-adjusted unemployment rate from 6.4% in November to 8.4% in December.
As 2020 came to an end, Colorado had 269,200 people without a job and actively looking for one, a higher total for the state than at any month during the Great Recession, according to the U.S. Bureau of Labor Statistics. It also had the nation’s fourth-highest unemployment rate after Hawaii, California and Nevada. Entering the pandemic, Colorado had the fifth-lowest unemployment rate at 2.5%.
Officials in every state have engaged in a grim calculus during the pandemic — balancing the need to protect human life against preserving livelihoods. Colorado’s calculation was effective in lowering case counts, but it also may have derailed one of the most robust labor markets in the nation.
“It appears the on-again, off-again efforts to find a balance between the economy and the number of COVID-19 cases killed the economy from an employment perspective,” said Gary Horvath, an economist based in Broomfield.
WalletHub, a personal finance website, studied 14 measures to determine how states compared in their restrictions to combat the novel coronavirus. The laxest states include Oklahoma, South Dakota, and Iowa, while California, Massachusetts and Virginia are among the strictest. In the fourth quarter, Colorado ranked 46th when it came to having the fewest restrictions, although in January the move from Level Red to Level Orange in the largest counties had moved it to the 38th spot.
More so than COVID-19 case rates or the concentration of jobs in tourism and other hard-hit industries, the severity of the restrictions that state and local governments put in place appears to have the strongest correlation to how a state’s economy performed last year.
“The fact that the state (Colorado) has a lot of restrictions in place leads to it having the fifth-lowest COVID-19 death rate in the country. On the flip side, the large number of restrictions also creates higher unemployment,” said Jill Gonzalez, an analyst with WalletHub.
Conor Cahill, a spokesman for Gov. Jared Polis, said the state rolled out several programs to help the economy, among them launching a $24 million relief fund, providing aid and tax breaks to restaurants and other small businesses, and distributing $357 checks to 435,000 unemployed workers in the state.
“The Polis administration has sought an aggressive balanced approach to saving lives while allowing for the maximum amount of economic and social activity. Governor Polis and legislative leadership stepped up to the plate when Congress faltered,” he said.
The chief argument for having stricter rules is to reduce infection rates, keep hospitals from getting overwhelmed and save lives. As an added benefit, playing it safer was supposed to set the stage for a stronger economic rebound once the pandemic passed.
So far, that doesn’t seem to be playing out. Restriction-light South Dakota now has a lower unemployment rate, 3%, than it did before the pandemic started, but it is also wrestling with higher COVID-19 case and death rates than Colorado.
Nor is it a regional issue. Utah and Idaho have regained all the jobs lost during the pandemic and even grown employment, while Colorado faces a deficit of about 150,000 nonfarm jobs lost last year. But Gedney notes Colorado has the 8th highest-concentration of in-person dining establishments, while Utah is near the bottom.
“The restrictions were prudent and I’m not arguing that we shouldn’t have had them, but I am not convinced we are primed for a better recovery,” said Brian Lewandowski, executive director of the Business Research Division at the University of Colorado Boulder’s Leeds School of Business. “The lost output is something you never recoup.”
Optimistic vs. pessimistic approach
For reasons she still doesn’t understand, Sonia Riggs, president and CEO of the Colorado Restaurant Association, said Colorado officials chose to take a harder line against bars and restaurants than other states did.
They did so without presenting studies to show restaurants were a significant contributor to the spread of COVID-19 cases, she said. For example, capacity was capped at 50, even if a dining space was large enough to handle many more using the 6-foot distancing recommended by the Centers for Disease Control.
Based on the premise that the more people drink, the more likely they are to get sloppy about safeguards, the cutoff for serving alcoholic drinks was moved earlier. But Riggs said pushing up last call didn’t make sense in restaurants where patrons were seated and not moving around.
A heavy blow came when indoor dining was cut off as temperatures were moving lower in late November. And while restaurants welcome being allowed to go to 25% capacity last month or 50% in the case of Denver, which moved to Level Yellow on Saturday, that won’t be enough to get them into the black, she said.
“If we don’t start seeing capacity increase change dramatically over the next few months we will see more restaurants closing,” Riggs said. “True recovery won’t begin for this industry until dining capacity is at 100%.”
As the state was doing its calculations in the face of rapidly rising COVID-19 caseloads, restauranteurs like Ryan Fletter responded with their own math. He made the difficult choice in November to close his youngest restaurant, Chow Morso, so his more established one, Barolo Grill, could have a better chance of surviving.
“When the governor closed indoor dining rooms before the holidays, all restaurants went into a tailspin,” he said.
For Chow Morso, the lunch crowd of downtown office workers had vanished in the early days of the pandemic, along with the tourists and evening crowds attending events. Civil unrest and demonstrations in the summer were followed by concerns about election turmoil in the fall, putting a damper on dinner traffic, Fletter said.
Restauranteurs, with their first round of Paycheck Protection Program money long spent, were hopeful that Congress would pass another round. But those hopes vanished in partisan bickering and forced some difficult choices, Fletter said.
Barolo Grill, around for 27 years, had strong support from the surrounding Cherry Creek neighborhood and was the obvious choice to keep going. But closing Chow Morso cost 30 jobs.
Data from Zenreach shows a more severe decline in visits to restaurants and retailers in Colorado than elsewhere late last year. The San Francisco-based company provides software that public venues can use to measure foot traffic based on cell phone pings made to the local Wi-Fi system.
Early in the pandemic, Colorado suffered a somewhat sharper decline in foot traffic, but by summer rebounded to half of the normal levels. Through November, Colorado tracked with U.S. averages. In December, traffic dropped to just under 30% of pre-pandemic levels, while other hard-hit states dropped to under 40%.
“It was one of the more dramatic declines,” John Kelly, CEO of Zenreach, said of what happened in Colorado.
Kelly notes that states that took an “optimistic” approach when it came to fighting the novel coronavirus never saw their foot traffic dip below 50% after the initial wave of lockdowns. States in the “pessimistic” camp have experienced much lower consumer activity in public spaces.
Colorado consumer spending has also trended lower than the national averages, said Silverstein. For health services, spending fell 18.8% in the state versus 9.5% nationally. Restaurant and hotel spending was down 44.3% in Colorado compared to a 28.7% decline nationally.
Can Colorado catch up?
The grim leisure and hospitality numbers in Colorado’s December employment report masked some good news. Manufacturing employment was up by 2,000 on the year and the state ranked third for its growth in manufacturing jobs, an unusual area of strength, Lewandowski said.
Employment in professional and business services, a source of high-skilled jobs paying some of the highest wages in the state, was up by 8,700 jobs. And even trade, transportation and utilities, which includes the hard-hit retail sector, has regained in terms of job counts, while the financial activities sector is almost there.
For the sectors in the top tier in terms of average weekly wages, employment is almost fully recovered, Patty Silverstein, president of Development Research Partners, told an online audience attending the Vectra Bank of Colorado’s Economic Forecast on Thursday.
Those households are saving money at a high rate and more likely to enjoy the robust gains in the housing and stock markets. They will represent a tremendous amount of pent-up demand once the economy reopens and people are more comfortable traveling, attending shows and dining out, she said.
The flipside of the “K-shaped” recovery is that the workers in the lowest-paying tier of industries, who typically lack the savings and other resources to weather a recession, have suffered the most economically. They are more likely to be women, minorities and younger workers. They are also more likely to be renters, meaning they haven’t enjoyed the uptick in personal wealth that strong home price appreciation provided last year in Colorado.
As of December, employment in leisure and hospitality was only 73.6% recovered in December. One out of four jobs from before the pandemic is still missing, bolstering the argument that the sector needs special attention this year.
Government employment is 93.3% recovered and down by 30,800 jobs, making it the second biggest contributor to job losses in Colorado. Lewandowski said Colorado has been much more diligent than other states in tracking student workers, which could be boosting the counts there.
Mining, which includes oil and gas, is about 87% recovered, with future gains dependent on commodity prices and the direction of regulatory limits. Construction, information, and education and health services are about 95% to 96% recovered.
Cahill also noted that the increase in the unemployment rate was heavily influenced by 42,400 people joining the labor force in December, which outweighed the drop of 20,300 in employment. jobs lost.
“The growth in the labor force is a positive sign for Colorado’s economy going forward, as it shows increased worker confidence in the prospects for finding employment,” he said.
The state also continues to see stronger population growth than most other states, ranking 12th, but the growth is some of the most muted since the oil and gas bust of the early 1980s. And having one of the highest unemployment rates of any state could deter young adults from moving here if it is sustained.
Gedney said that Colorado has run in the middle of the pack for unemployment when coming out of the last two recessions. And if the state’s unemployment rate is averaged across all of 2020, it is 7.1%, which ranks 24th among states.
Although it is possible Colorado could recoup its lost jobs later this year, Silverstein doesn’t think Colorado will regain pre-pandemic levels of employment until 2022. That means Colorado’s economy could be playing catch-up for a while.
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