Tracking economic malaise and collapse through the lens of one northeast Minnesota county

A nail salon, as pictured on May 20, 2020, is one of many Minnesota businesses shuttered as part of the state's response to the COVID-19 pandemic. Rilyn Eischens/Minnesota Reformer

From 2005 to 2015 — the years bracketing the extended impacts of the Great Recession — northeast Minnesota sustained the greatest share of Minnesota’s small business losses. 

Losses associated with current COVID-19 restrictions are more abrupt and tougher on both employers and workers than in the previous period. As of 2017, which was the last official count, Carlton County hosted 683 businesses of all sizes. Half, or 366 of them, employed one to four workers. Another 147 businesses employed five to nine, and 101 businesses employed 10 to 19 employees (see Table 1).

As a group, how did these numbers change as a result of the slow recovery from the Great Recession? What’s happening to them now?  

Research by our state’s Department of Employment and Economic Development underscores the vulnerability of Carlton County’s small businesses. As this table shared by DEED’s northeast regional analyst Carson Gorecki shows, their ranks haven’t completely recovered from the Great Recession (Table 1). As of 2017, very small businesses, with one to four employees, accounted for 54% of county firms, with a net loss of 26 companies among their ranks since 2008.

Businesses with five to nine employees — 22% of all Carlton County firms — added a net four businesses over the same period. 

Those in the 20-49 and 100-249 size groups added businesses, up 25-26%.

One additional business in the latter group accounted for the total increase. Bear in mind: Changes in numbers of businesses by size group don’t necessarily reflect what happened to employment levels within groups or overall. 

Non-employer businesses — aka the self-employed — also experienced heavy losses during the Great Recession. Carlton County lost a net 245 businesses from 2007-17, a drop of 11%, or almost twice the rate of self-employed business losses statewide, according to the US Census Bureau. This group still accounted for over $72 million in receipts in 2017.  

Our current economic crisis is unfolding at a much quicker pace than did the Great Recession. Statewide, from March 16 to April 30 of this year, 593,810 people filed unemployment claims in Minnesota. In the same period, 3538 Carlton County workers filed for unemployment, 20% of the 2019 county workforce. 

One in five! You can stay updated on these totals here.  

Among the hardest-it employers and employees are those in food preparation and service. Not long ago, in the second quarter of 2019, Minnesota posted more job vacancies in these occupations than in any other group: statewide, more than 22,000

But COVID-19 social distancing strictures have shut down all but window and carry-out services. Many retail food establishments have closed their doors altogether for the interim, and many others have laid off workers. 

The rapidity and selectivity of these business and job setbacks are much more intense than during the Great Recession of 2007-2009. That event was precipitated by the collapse of banking and housing sectors, and the effects lasted through most of the following decade. The current ballooning of unemployment and sales implosions in many sectors place many of us in financial, and as well as physical jeopardy. 

As an economist, I consider the efforts of our state and federal governments to soften the blows to be necessary. The extensions of unemployment insurance, stimulus payments and small business forgivable loans are helping to slow the ravages of the crisis, helping both employers and employees weather the coronavirus. However, many small businesses are running into problems accessing funding and abiding by conditions imposed.

The least skilled, Minnesotans with physical challenges and/or suffering the accumulated consequences of racism and discrimination are the most vulnerable in the current crisis.

As my husband always says, “We’ll see.” 

Meanwhile, please keep up the social distancing!