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Pandemic hits state economy hard, but Nebraska once again better off than most

Pandemic hits state economy hard, but Nebraska once again better off than most

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When Krysette Long reopened her men’s hair salons after a two-month pandemic-forced shutdown, she saw some long-haired clients, as well as victims of “corona-cuts” — guys who in the interim had tried to cut their own hair.

“We fixed those as best we could,” said Long, owner of the Men’s Salons at Aksarben Village and at Lakeside. “We had some shaggy guys, taking off a lot of hair.”

But such shearing was nothing compared with the haircut the Nebraska economy has taken in the face of the coronavirus pandemic.

Since the virulent bug sparked the nation’s biggest economic downturn since the Great Depression, more than 121,000 Nebraska workers have filed for unemployment — among them more than 4,100 hair stylists and cosmetologists.

But even amid such economic carnage, it still could have been much worse. As has been the case with many past national economic calamities, Nebraska has not been hit as severely as most of the rest of the nation.

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While roughly one in 10 Nebraska workers filed initial claims for unemployment between mid-March and early May, that was almost half the national average. Relative to workforce size, only two states had fewer claims than Nebraska.

And though Nebraska reached its highest unemployment rate on record in April, that figure likewise ranked third lowest in the country.

Economists and business leaders say there are a number of reasons Nebraska has fared so much better.

Nebraska’s diverse economy is heavily weighted in some industries that have been only lightly affected by coronavirus-tied lockdowns, among them food production, insurance and financial services. Conversely, the state’s economy is less dependent on some industries currently being slammed, including tourism and oil production.

“When you think about it, Nebraska’s economy produces a lot of necessities,” said University of Nebraska-Lincoln economist Eric Thompson. “Food production is essential, and the demand will be there even as people have to cut back.”

It’s likely that another factor was at play, too: Nebraska’s social distancing measures were not as restrictive as those in many states.

Governors across the country have had to perform a balancing act, as limitations on gatherings hindered the virus’s spread but also disrupted business activity.

Gov. Pete Ricketts was one of only seven governors to shun a statewide stay-at-home order, instead tailoring restrictions to regions of the state based on a plan first drawn up by pandemic experts at the University of Nebraska Medical Center.

“I think (Ricketts) has done a pretty good job threading the needle here,” said James Blackledge, the CEO of Mutual of Omaha.

Leave no doubt, though: The virus has inflicted severe damage that continues to flow through the Nebraska economy. Even under the best-case scenarios, there likely won’t be a full job recovery until sometime next year.

State officials and business leaders are now focused on the long road back.

Though it’s not yet clear that the virus has peaked in Nebraska — particularly in the Omaha area, where cases have surged in the last month — Ricketts has begun the process of reopening the state.

Restaurants, hair salons, dental and medical offices in much of the state were able to resume operations earlier this month, with some limitations. Ricketts announced Thursday that bars, movie theaters and reception halls can reopen June 1 in 89 counties.

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Bryan Novak gives Alex Shekhtman a haircut at the Men’s Salons at Aksarben Village. The salon is open after a two-month shutdown.

The lifting of restrictions may already be making an impact. The total number of Nebraskans collecting unemployment has dropped in two of the past three weeks.

Looking further ahead, some state business leaders see opportunities for Nebraska to leap ahead economically in the post-pandemic world.

The coronavirus is expected to create lasting and fundamental change in the business world, from consumer spending patterns to where and how people perform their jobs. With change comes uncertainty but also opportunity, said David Brown, CEO of the Greater Omaha Chamber of Commerce.

“Our goal is not just to reclaim what we lost, but to accelerate the trajectory,” he said.

The Nebraska economy was humming along quite nicely entering March. Its biggest obstacle was not unemployment but a shortage of skilled workers needed to fuel job growth.

But as the virus began to quickly spread across the country, Ricketts became one of the first governors to adopt a public health recommendation limiting gatherings to 10 people. It had the overnight effect of shutting down many bars and restaurants, and closures of salons and other businesses where people closely interact soon followed.

By the end of that first week, more than 15,000 Nebraskans had filed for unemployment, about 30 times the number who file in a typical week. And each subsequent week has brought another wave of newly laid-off and furloughed workers.

Looking at unemployment filing data by industry and occupation, you can see how the virus’ economic impact rippled through the Nebraska economy.

The first two weeks, the highest job losses were in hospitality — mostly restaurants, bars and hotels. Creighton University economist Ernie Goss said he recently talked to a representative of an Omaha hotel that had employed 255 people in food services. That number is currently down to four.

The next two weeks, Nebraska’s biggest job losses were in retail. Then the two weeks after that, the hardest-hit area was health care and social assistance, a category that includes medical, dental and day care workers.

Now over the past three weeks, the greatest job losses have been in manufacturing.

While factories have not been directly affected by the restrictions intended to stop the virus’s spread, they’ve become a collateral casualty, as the general slowing of the economy has started to curb demand for goods. Construction and real estate are now being similarly affected, too.

“It’s a strange recession,” Goss said. “Normally, manufacturing leads the recession. Now manufacturing is lagging by a substantial amount, with leisure and hospitality being the drivers.”

Unemployment filings suggest that across the state, more than one in four workers in hospitality were thrown out of work. The downturn has also cost jobs for roughly one in four service workers, one in five in arts, entertainment and recreation, one in eight in retail and one in 10 in construction and manufacturing.

Only a handful of industries have been largely spared. Layoffs have hit only about one in 50 workers in banking and insurance and very few within government.

Reflecting the stability of the insurance industry, Blackledge said Mutual of Omaha has not had to lay off workers and at this point is still projecting that it will need to add roughly 300 employees by the end of the year.

Mutual also moved quickly and mostly seamlessly to working remotely after a worker at its headquarters became one of the first people in Omaha to test positive for the coronavirus. Today, out of more than 5,000 employees who work for the iconic Fortune 500 company, only about 150 are going into the office to work.

The fact that the company could still see net job growth amid the pandemic “is remarkable when you think about it,” Blackledge said.

It’s still possible that sectors that haven’t been directly bitten by the bug could feel its effects eventually because of ripples in the economy. State and local governments have yet to fully respond to lower tax collections due to reduced retail sales and lower incomes.

“One thing we learned in this process — which we already knew — is how interconnected our economy is,” said Bryan Slone, president of the Nebraska Chamber of Commerce and Industry.

One way this unique recession hasn’t differed much from most past ones: Nebraska is once again riding it out better than most states.

During the Great Recession a decade ago, Nebraska by percentage suffered only about half the job losses of the rest of the country. One study coming out of the recession ranked Omaha as the least affected among the nation’s 100 largest metro areas.

This time, only Utah and South Dakota as of early May had lower rates of new unemployment claims. The rate in Nebraska was one-third that of the hardest-hit states of Georgia, Kentucky and Hawaii.

When state unemployment estimates for April were released Friday, Nebraska’s 8.3% rate likewise was third lowest, behind only Connecticut and Minnesota, and well below the 14.7% national rate. Unemployment rates aren’t based on jobless claims but on a monthly survey of U.S. households.

Each state in the pandemic has its own unique economic story.

Nebraska is buoyed by a workforce that’s doubly weighted to insurance underwriting and claims processing and even heavier in food production. Utah already had one of the nation’s lowest unemployment rates entering the downturn.

On the negative side, Georgia is a major airline hub suffering from the sharp decline of air travel, and Hawaii is heavily dependent on tourism.

Another plus for Nebraska was that its small businesses were quick to take advantage of the massive federal loan program created to help them retain and pay their workers. One study rated the state’s level of participation in the Paycheck Protection Program as the top in the nation.

It also might not be coincidental that Utah, South Dakota and Nebraska were among the states that shunned statewide stay-at-home orders. A recent study by Creighton’s Goss found that states with such restrictive measures had on average lost more jobs than those without.

Besides tailoring rules to regional conditions within the state, Ricketts has used the availability of hospital beds and ventilators, rather than cases and deaths, as his primary guide in setting coronavirus restrictions. While Nebraska has seen above-average numbers of cases because of major outbreaks in several meatpacking plants considered essential, the state’s per capita death toll as of last week ranked 35th nationally.

Slone said he thinks that the way Ricketts handled restrictions has helped economically. Governors who handed down blanket restrictions in many cases unnecessarily restrained business operations, he said, particularly in areas that had few cases of the virus.

“The idea of shutting down businesses deemed to be nonessential arbitrarily created unemployment in other states,” Slone said. “I think Nebraska did that better.”

Regardless of what restrictions states have had in place, almost all are beginning to loosen them now. And in Nebraska, the moves appear to be making an economic difference.

While the state announced last week that another 6,000 Nebraskans applied for unemployment, the total number receiving benefits was down almost 10,000 from its high three weeks earlier.

“It’s very, very bad, but there are bright spots,” Blackledge said.

Slone thinks that Nebraska’s unemployment numbers should improve rapidly after July, when a stimulus bill provision that adds $600 to regular weekly unemployment benefits is set to expire. He said that has had a distorting effect on jobless numbers, as low-wage workers have been able to make more money on unemployment than on the job.

He’s even predicting that by the end of this year, some sectors of Nebraska’s economy will once again be back to confronting shortages of skilled workers.

But there can’t be a complete economic rebound until people again have the confidence that they can safely sit down to eat in a restaurant, mingle in a bar or climb aboard a plane.

“As we slowly open the spigot, we have to rebuild that trust,” Slone said.

In addition, the threat remains for a second wave of infections next fall and winter — an outbreak some see as inevitable as restrictions are loosened. Until there’s a vaccine, the virus remains in charge.

But there will come a time when the pandemic passes, and some Nebraska business leaders are already preparing for that day.

Last week, the Greater Omaha Chamber released a playbook to help businesses in the months ahead as they think about operating in “the next normal.” The plan also included creation of a task force that’s looking for ways to accelerate the region’s economic growth.

The first job of the task force will be helping those out of work pick up the pieces, either by helping them find new jobs or by training them for new careers.

But the task force will also seek to take advantage of profound and lasting changes to the business climate that are expected in the wake of the pandemic.

Both workers and employers in recent weeks have grown used to getting business done remotely, and many more will choose to adopt that as a permanent way of operating going forward. Without need for big offices and employment centers, that means that both companies and employees can choose to locate anywhere.

And the pandemic has illustrated the pitfalls of putting businesses in densely packed urban centers like New York City.

A recent analysis by Moody’s Analytics said such cities may be seen as risky for some time, prompting the next generation to choose smaller cities. Moody’s mentioned Omaha and Des Moines as cities that could benefit from such a trend, citing their lower density and relatively high levels of education.

“Firms will need to follow these workers,” the report said.

Slone believes that people in larger cities who have had the opportunity to work from home may now rethink their two-hour daily commutes. Nebraska tends to benefit when people make such quality-of-life assessments.

“You can have a quality career and still make it to all your kids’ games,” Slone said. “There is an enormous opportunity for Nebraska to be successful.”

Tim Burke, CEO of the Omaha Public Power District and the chairman of the Omaha chamber’s board, said businesses that have seen disrupted supply chains may also choose to move manufacturing back from overseas — another opportunity for a low-cost manufacturing state like Nebraska.

“If we do it right,” Burke said, “we think we can be one of the areas that comes out of this growing the fastest.”

On a much smaller scale, Long similarly sees her hair salons rebounding from the virus and thriving into the future.

She remembers the scared look on her employees’ faces when they were forced to close down shop in March. But through the Paycheck Protection Program, Long was able to get a forgivable loan that let her bring back all furloughed workers who wanted to return.

Since May 4, when her stylists — now wearing required masks — were able to resume cutting hair, business has been good. In fact, it’s so good that Long is actually employing slightly more people now than before the pandemic.

“We are rebuilding and starting over — that’s what it feels like again,” she said. “We are all super happy to be back at work and taking care of everyone.”


Our best staff photos of May 2020

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Reporter - Metro News

Henry is a general assignment reporter, but his specialty is deep dives into state issues and public policy. He's also into the numbers behind a story, yet to meet a spreadsheet he didn't like. Follow him on Twitter @HenryCordes. Phone: 402-444-1130.

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