Three quarters of businesses in the federal reserve district that includes North Dakota report significant negative effects from the COVID-19 epidemic on their year-to-date sales, according to a survey conducted by the Federal Reserve Bank’s Ninth District.
About one-third of the businesses have cut staff at the time of the survey, March 15 through March 21. Wisconsin had almost 70,000 applications for unemployment benefits, compared with 5,200 the same period last year, and Minnesota had 95,000 applications, most due to the closure of restaurants, bars, and other businesses that cater to social gatherings.
North Dakota Gov. Doug Burgum has said unemployment claims in the state are coming in quickly. There were 600 on Wednesday, 1,600 on Thursday, then 2,600 on Friday, Burgum said during a press conference Saturday.
He has issued executive orders easing administrative requirements and is looking at further steps to speed unemployment checks to those who have been laid off.
North Dakota’s economy, meanwhile, is taking double body blows right now. Oil prices have cratered on top of the coronavirus impacts that have prompted the closure of onsite consumption at restaurants and bars, as well as forcing health clubs, movie theaters, and the like to close.
As one North Dakota manufacturer of supplies for the oil and gas industry told the Federal Reserve, “Up until this week, we had multiple positions open in the company. It came to a screeching halt this week with preparing some employees to collect unemployment. Phones noticeably quit ringing,” and order traffic nearly stopped. The company’s sales outlook was poor because the oil industry “historically takes much longer to recover than it does for the bottom to drop out.”
Unemployment funds, meanwhile, may not be ready for such large spikes in unemployment, a different Federal Reserve study finds. Nationwide, 42 percent of states and jurisdictions are short of solvency. Among the worst are California, New York, Texas and Illinois.
Unemployed residents of these states will still get paid the benefits they are owed, of course, even if the fund isn’t solvent. The states would, in that case, have to borrow from the U.S. treasury. They would then be on a three-year clock to repay that, or risk higher federal unemployment taxes for their employers.
North Dakota, meanwhile is among states with larger cushions in their trust fund. The state is at 119 percent solvency right now. Neighboring Montana is at 153 percent, South Dakota at 181 percent, and Michigan 114 percent.
Minnesota, also in the Ninth District, however, is at 94 percent solvency and Wisconsin at 97 percent.
The federal government is rushing to put together an aid package, to help mitigate the economic effects of COVID-19. Burgum has been among governors advocating that unemployment funds would be a good target for this type of aid.
At the beginning of the COVID-19 pandemic there were concerns about sourcing supplies from China, where the outbreak began. That’s still a concern for many, but consumer demand has eclipsed that worry since then.
Close to two-thirds of businesses in the Ninth District had an optimistic outlook going into 2020. That has now flipped. Less than 10 percent have an optimistic outlook now.
A Montana flooring company said it had not yet seen any major pullbacks in construction projects. “But I fear it’s coming.”
Even if it does not, the respondent said, large suppliers might shut down, “which means we can’t keep installing jobs, which means we can’t bring in revenue on completed work.”
A South Dakota manufacturer employing more than 250 people meanwhile said the outlook “is really cloudy out even to next week. But if we don’t get people comfortable and able to work and commute again soon, confidence and spending are sure to decline. This is going to leave a mark.”
A U.P. manufacturer said it had not seen any negative effects in the short-term. But two large projects are half its 2020 income, and both require an on-site installation. It’s not clear when or if the company will be able to do that.
If it can’t install the equipment in a timely fashion, “that will be very detrimental to our operating capability,” the company said.
These types of uncertainties puts them — like many other businesses across the Ninth District — in a wait-and-see mode as the coronavirus continues to spread across the United States and around the globe.