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Five Things to Know Right Now About COVID-19 and the MSP Economy

Posted by Amanda Taylor on Friday, November 20, 2020

It has been a challenging week for all Minnesotans as COVID-19 cases surge and new state restrictions mean continued difficulty for so many businesses already battling survival. This week we decided to do a roundup of five things to know as we think about the wellbeing of our residents and the health of our regional economy at this difficult time.

1. COVID-19 cases are rising exponentially

Daily COVID-19 cases have risen considerably in the state of Minnesota and the MSP region. Minnesota is averaging over 6,000 new cases a day. GREATER MSP tracks confirmed and probable cases for the 15-county metro area where we saw an increase from 833 average daily cases the week ending October 23rd to 3,399 the week ending November 13th. That’s a 308% increase in a four-week time period. This second wave is a surge in cases from what was experienced in the early months of COVID spread in MSP when the highest number of daily cases (averaged by week) was 509, experienced in May.

Source: New York Times

According to state officials, health care workers are becoming sick or exposed in the community at increasingly high levels and can’t stay on the job. Hospitals have open beds but staffing shortages mean they can’t be used. Some hospitals are reporting that they have to turn new patients away.  Our hospitalizations and intensive care unit admissions are reaching their capacities. Statewide deaths are the highest they have been since the start of the pandemic, setting a record on Wednesday with 67. We are experiencing uncontrolled spread of the virus. 

2. New restrictions in place

To protect the health of Minnesotans and prevent further crisis, Governor Walz is taking additional steps to limit social interactions and stop the spread of COVID-19, announcing this week a four-week “pause” in a variety of social activities and business sectors.  This is after last week’s announcement of more targeted changes to stop the spread of COVID-19. Since that time, the pace of the virus has accelerated even faster than experts predicted, and state infection rates are now among the highest in the nation. 

New restrictions are significant for many small businesses, particularly restaurants and bars who are being restricted to delivery and takeout service only. Restaurant reservation activity has been down about 60% from 2019 levels this summer (July-September), but drops in activity have been growing deeper into the fall. The most recent data shows restaurant bookings down 73% from last year and is expected to return to a 100% drop for the duration of the restriction period. The limited time period for the new restrictions may help restaurants decide to keep employees on staff, but it is likely that we will see another drop in employment for the food services industry, specifically, and leisure and hospitality sector overall in November and December. For additional details on the new Executive Order visit this webpage

Source: OpenTable

3. Unemployment rate down, but many leaving the labor force

The latest unemployment rate for the metro area is 6%, reflecting conditions in September. This is a notable drop from the August unemployment rate of 7.8%. While it is true that the number of unemployed workers dropped, it’s important to know that the number of employed workers dropped too, in addition to the overall size of the labor force, distorting the reality of reemployment in the region. Over 43,000 workers left the labor force from August to September, the largest monthly drop in the size of the labor force on record for the region (since 1990).

Part of the drop is due to seasonality. Both August and September are historically big months for a drop in labor force due to summer jobs coming to an end. But the historical decline is also likely due to workers voluntarily leaving the labor force to care for children returning to in-home distance learning. New data from the Pew Research Center shows that parents are being hit especially hard by the pandemic. Nationally, the percentage of mothers not in the labor force jumped to 29.1% in September from 26.4% in September 2019. For fathers, the rate has increased to 7.8% from 6.2%. The employment challenge for working parents represented by this research supports what we learned from a GREATER MSP/TCB Magazine survey in October of working women in MSP, finding that 43% of working women with school aged children are providing daytime childcare while working. It is expected that new challenges for working parents could result in long term unemployment, which will have an impact on regional GDP. Along with the employment challenge for parents, expected layoffs in the food services industry due to new restrictions will likely result in the metro unemployment rate inching up in November and December.

4. Small business relief funding still available

We know that small businesses continue to face challenges in the region and anticipate that newly-enacted restrictions will dial up the need for relief. We are happy to report that relief funding is still accessible in parts of the region.

The Ramsey County Small Business Relief Fund has additional funds to assist in getting the business community over this next challenge. Businesses up to 75 employees are eligible for $15,000 in grant relief. Businesses that have already received support through the fund are also eligible for consideration and able to receive an additional grant. Funds can be used for operating expenses, including rent payments, mortgage payments, utilities, payments to suppliers, production of business contingency plans, technical assistance/reopening services, technology capital or marketing assistance/tools, security or other critical non-payroll business expenses (including expenses related to reopening) as approved by the fund administrator. Visit the Ramsey County Small Business Relief Fund webpage for more details.

Starting Monday, November 23, businesses in Hennepin County can apply for new grant funding to mitigate the impacts of COVID-19. Eligible businesses include restaurants/food service establishments, bars/drinking places, fitness centers/gyms, and event and entertainment venues. Businesses who have not previously received Hennepin County Small Business Relief funds can apply for grants of $15,000. Businesses that have previously received funds can apply for additional grants of $10,000. Funds can cover costs including commercial rent/mortgage payments, utilities and other non-payroll operating expenses, supplier payments, personal protective equipment, costs to comply with public health guidance, and other COVID-19 related expenditures. Visit the Hennepin County Small Business Relief Fund webpage for more details.

5. Expect economic recovery momentum in 2021

We know that this is a challenging time in MSP and Minnesota and we are all in need of some good news. One piece of good news – vaccines could be available by the end of December. Both Pfizer and Moderna aim to submit applications to the Food and Drug Administration for emergency use authorization, which could mean a much speedier process to get vaccines to patients.  News of vaccine effectiveness shot the stock market up earlier this week and provides additional upward momentum that was kickstarted by the report out of a considerable uptick in U.S. GDP in the third quarter. This week the Minnesota Chapter of the Urban Land Institute held its annual economic outlook event and we heard that the outlook for 2021 is a robust rebound thanks to encouraging leading indicators. With the surge in U.S. GDP in the third quarter, there is proof of concept that the economy can grow despite COVID-19. In the meantime, let’s all hunker down for the next few weeks and continue to remain hopeful that the predictive analytics prove accurate.