Many of the state’s 180,000 unemployed will have difficulty finding work when the economy opens back up, says an Iowa economist

More than 27,900 Iowans filed initial unemployment claims last week, new data shows. Since mid-March, 233,824 Iowans have filed first-time claims. Source: Iowa Workforce Development

Many of the almost 180,000 Iowans who filed unemployment claims last week will likely struggle to find new jobs when the economic recovery from the pandemic begins, according to one Iowa economist.

Hardest hit will be those who worked in businesses that were among the first ordered closed in order to stem the spread of the novel coronavirus, Dave Swenson, an economist who works at Iowa State University, told the Business Record. 

“There are many sectors of the economy that simply cannot bounce back until there are adequate health protections,” including vaccines and widespread immunity, Swenson wrote in an email. “That means that eat-in establishments, bars, movie theaters, fairs, festivals, concerts, sports and other entertainment venues – anything that allows people to congregate closely – will be the last to open up.”

Iowa Workforce Development today released new unemployment data that showed 27,912 Iowans filed initial unemployment claims for the week that ended April 18. Overall, 179,758 Iowans received more than $48 million in jobless benefits paid out of the state’s unemployment compensation trust fund.

In Iowa, 17% or 39,904, of the newly jobless since mid-March had worked in restaurant, bar and lodging industries, state records show. Another 10.6%, or 24,806, newly unemployed had worked in retail. A survey released this week by the Iowa Restaurant Association showed that 10% of Iowa’s estimated 6,300 restaurants and bars will remain permanently closed if mandated closures extend past May 1. 

“The longer these on-premise service suspensions are extended, the more operators we will permanently lose,” Jessica Dunker, president and CEO of the Iowa Restaurant Association, said in a prepared statement. 

Nationally, economists and others are predicting that department and other stores that were financially struggling before the pandemic will have difficulty reopening when closure mandates are lifted.

Swenson and other economists also expect a slow recovery with jobless numbers declining slowly. They also predict another surge in jobless claims as businesses that tried remaining open end up closing. “Unemployment will spike in a few months,” wrote Swenson.  

And even if retailers and others are able to reopen, consumer spending will be less than it was before the pandemic, likely meaning retail-related businesses will need fewer workers, according to Swenson. Household “incomes will have lowered, their debts will have increased or not been attended to, and their bundle of consumer goods and services will be leaner for a fair amount of time.”

Consumers whose incomes haven’t been adversely affected by the pandemic will likely be reluctant to quickly return to activities when the businesses are allowed to reopen, Swenson wrote. “Overall, economic uncertainty overlaid with personal health anxiety makes for a timid shopper.”

In addition, only a small percentage of the small businesses that sought federal assistance through the Small Business Administration’s Paycheck Protection Program received the forgivable loans, Swenson wrote. And while Congress is on the verge of authorizing more money for the program, those funds also will only reach a small portion of small businesses, he wrote. “Many small operations will close down.” 

The jobs those businesses generated will disappear, Swenson and other economists say.

Ben Ayers, a senior economist for Nationwide Insurance, believes it’s too early to understand how many jobs will actually be refilled once the economy is reopened. While the service sectors have taken the biggest employment hits because of the forced shutdowns, “we do not know yet what restrictions will remain in place for businesses that can reopen or how many operations will be forced to close permanently,” he said.

Nationally, 4.4 million new unemployment claims were filed last week, down from the previous week when more than 5.2 million new claims were filed, according to the U.S. Department of Labor. 

Nationwide, the number of workers receiving unemployment insurance reached a record 16 million for the week that ended April 11. The advance seasonally adjusted unemployment rate for the week ending April 11 was 11%, according to the labor department. Reporting of the continuing claims data lags one week behind other information released by the federal department.

In Iowa, the 179,758 Iowans who filed for unemployment benefits last week represent 11.3% of the workers who were employed in the state in February, state data shows.

Federal unemployment funds
More than 253,500 Iowans who have lost jobs due to the pandemic have received the additional $600 weekly benefit that was part of the $2 trillion Coronavirus Aid, Relief and Economic Security Act, according to Iowa Workforce Development.

In all, more than $169.6 million has been paid to Iowans from the Federal Pandemic Unemployment Compensation fund during the first nine days the money was paid. More than $6.3 million has been paid to 13,152 self-employed Iowans through the federal Pandemic Unemployment Assistance fund.

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Related: 
Iowa’s unemployment trust fund down 10% since start of year