May 31, 2020
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Why Maine’s hospitality-driven economy was so vulnerable to coronavirus

Bill Trotter|BDN
Bill Trotter|BDN
A woman walks along School Street in downtown Bar Harbor toward local hotel employee housing in 2019. Maine saw a bigger jump in unemployment filings from one week to the next than any state but New Hampshire as the coronavirus uniquely hits small businesses and the hospitality industry.

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AUGUSTA, Maine — Maine saw a bigger jump in unemployment filings than any state but New Hampshire from one week to the next this month as the coronavirus epidemic has proven especially damaging to an economy built on hospitality and small business.

Nationally, the seasonally adjusted unemployment insurance claims rose to nearly 3.3 million last week, according to the U.S. Department of Labor, a total that shattered previous weekly records. But Maine saw a percent increase in unemployment claims more than three times the national average. As many as one in seven hospitality workers here may have been laid off.

[Our COVID-19 tracker contains the most recent information on Maine cases by county]

As of Friday, there were 168 confirmed cases of the coronavirus in Maine, with 30 hospitalizations and one death. Public health experts say that restarting economic normal activity before the virus is controlled would increase the number of short-term cases and deaths while overwhelming the medical system.

Maine saw unemployment claims rise by an unprecedented 3,243 percent last week, trailing only neighboring New Hampshire by that measure. The surge comes on the heels of further restrictions on businesses by Gov. Janet Mills in an effort to slow the spread of the deadly virus.

On Tuesday, Mills ordered that all nonessential, public-facing state businesses shut down, after previously requiring restaurants to move to takeout or delivery and banning gatherings of more than 10 people. The measures, part of a social distancing strategy recommended by health officials, have taken a particular toll on Maine’s hospitality industry, which employs between 8 percent and 11 percent of workers here depending on the season.

Of the more than 21,000 new unemployment claims in Maine last week, nearly 8,000 were classified as workers coming from the accommodation and food services industries. It suggests that between 12 and 15 percent of employees in the industry were laid off in a single week. Maine employs these workers at a slightly higher rate than the U.S. national average — in terms of seasonally adjusted numbers, they occupy about half a percent more of the workforce here.

The sudden layoffs reflect a switch-like drop in demand as Mainers have stayed home under social distancing guidelines. While hotels are deemed essential services and allowed to remain open, the occupancy rate nationally is below 10 percent, said Greg Dugal, a lobbyist for Hospitality Maine, a trade group representing hotels and restaurants. Dugal said that restaurants trying to make take-out work have had mixed results.

Jim Libby, a business professor at Thomas College and a visiting economics professor at Colby College, said the effect of social distancing on demand was compounded by many Mainers’ desire to be cautious with their own spending as they see the economy in free fall.

“When people see this, they’ll buy short-term things that they need, but they’ll cut their expenses, so they’re not spending money on things you’d typically see them spend money on,” Libby said.

Many of the restaurants, hotels and other services in Maine are small businesses, which can make them more vulnerable to economic shocks. Firms with less than 500 employees accounted for 56.5 percent of Maine’s private-sector employment in 2019, according to data from the Small Business Administration. Nationally, that figure is around 48 percent.

Small businesses are more likely to have problems during an economic downturn than large corporations because they are often “close to the bone” in profit and have less access to credit, said Michael Hillard, an economics professor at the University of Southern Maine.

“There could be a lot of businesses close to the margins that are just going to say, ‘It’s not worth it to try and rebuild this, I’m going to go do something else,’” Hillard said. “There are others that just can’t take the financial stress.”

There is some help on the way for small businesses. On Friday, Congress passed a $2.2 trillion relief package, including $350 billion in loans for small businesses that can be forgiven if employees are paid for eight weeks. Dugal said applying should be straightforward once the federal government finalizes rules for the program championed by Sen. Susan Collins, R-Maine.

“Hopefully, it can get turned around fairly quickly,” Dugal said.

Businesses that get the loans could avoid layoffs or rehire employees. Adam Morrisette of Bangor, who was laid off from his bartending job at Orono Brewing Company nearly two weeks ago, is among the workers planning to return to his workplace once it can rehire him.

Morissette said the company had been “outstanding” in trying to help its employees. But he is still among the Maine residents experiencing problems with the state’s unemployment system. He said the website said his application was put into a pending status and that he should call to talk to a representative, though the office’s lines were always occupied when he called.

Hillard said businesses maintaining connections with their employees would make it easier for them to “bounce back” once the epidemic passes. But when that will be is still an open question for many.

“When does the public health recovery happen?” Hillard said. “Because that precedes the economic recovery.”

 


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