When logger Greg Tibbetts heard Verso Corp. was shutting down its Duluth paper mill, he knew it would harm more than just the 225 people losing their jobs.
“It probably affects 1,000 people by the time it’s done … it goes a lot wider than that. That’s just a small percentage,” he said.
Tibbetts, owner of Tibbetts Trucking in Finland, said Verso had been his primary mill and the destination of almost half of the 34,000 cords of wood he cut last year. What does the indefinite idling of Verso mean for the future of his business?
“Not sure,” Tibbetts said. “I guess I'm hoping that something happens if somebody buys (Verso) or the economy picks back up. Short term, I'm OK, but long term, I'm not sure — pretty uncertain.”
The situation among loggers and truckers demonstrates the cascading effects just one closure in Duluth can have on the region. Since the start of the COVID-19 pandemic, the coronavirus-related closures and job losses have been piling up throughout the region. The April unemployment rates — the most recent month available — top 10.9% in Duluth and 12.8% in the Duluth metropolitan region — St. Louis, Carlton and Douglas counties.
From mid-March to mid-June, more than 18,000 people have filed for unemployment in Duluth. Jobs were lost in every industry, but some were hit harder than others. Layoffs at aircraft maintenance facility AAR, Essentia Health and the Verso Corp. paper mill were among the most notable, as each announced hundreds of layoffs.
AAR announced its closure and subsequent layoffs on May 21. The aircraft maintenance facility is scheduled to close July 24, resulting in job eliminations for its 269 employees. The company was expecting an 80%-90% decrease in business as significantly fewer people are taking commercial flights during the pandemic.
That same day, Essentia announced its plan to lay off 900 workers — or 6% of its workforce — to make up for lost revenue. Revenue fell due to low patient numbers, contributing to a $100-million loss between March and April.
On June 9, Verso Corp. announced it would indefinitely idle its Duluth paper mill by the end of June because of "unprecedented" market decline in graphic paper. Most of its approximately 225 employees would be laid off.
"These are, all three, really good employers that are paying family-sustaining wages and benefits. … When you see that number of individuals who work for an employer that has health care benefits go away — that's very bad news," said Brian Hanson, CEO and president of APEX, a Duluth economic development nonprofit.
Hospitality hit hardest
Data shows that nearly 20,000 jobs were lost over the past year in the Duluth-Superior area — a large majority of which were lost during the pandemic.
“I don't think there are many jobs that haven't been impacted,” Hanson said.
Those in food preparation and serving occupations make up the majority of unemployment applications in Duluth, with more than 3,500 people filing for unemployment insurance between March 15 and June 6, according to the Minnesota Department of Employment and Economic Development.
“Food and beverage serving workers has been the No. 1 occupation in terms of unemployment claims, and that is basically all off the back of the first couple of weeks (of the pandemic),” said Carson Gorecki, DEED's regional labor market analyst for Northeastern Minnesota, noting that almost 800 workers in that field applied for unemployment claims for the week ending March 21.
“But since then, (food and beverage jobs) have been kind of at the same rate as a lot of these other occupations," Gorecki said.
Construction, sales and health care jobs all had later peaks in unemployment insurance applications, Gorecki said.
Pre-pandemic, in 2019, the health care and social services industries employed over 32% of the Duluth workforce. The accommodations and food services industries employed more than 10%, according to data from DEED.
The city saw a major initial spike in unemployment claims because the state shut down restaurants at the start of the pandemic, impacting an industry where a large number of jobs are located, said Elena Foshay, director of workforce development for the city.
“(We lost) basically our entire hospitality industry,” Foshay said. “The good part is that unemployment insurance eligibility was expanded."
That led to a 14.2% drop in the number of jobs in the Duluth metro area from May 2019 to May 2020, the most severe decline in any Minnesota metro region, according to data released Thursday by DEED.
A drop in hospitality and health care jobs is to blame, Gorecki said.
“I think a lot of it has to do with industry mix,” Gorecki said. “So we do have large shares of some of the industries that have been hit harder — leisure and hospitality specifically. We have a larger-than-average share when you compare it to other regions in the state.”
But there are signs of a modest rebound as leisure and hospitality jobs increased 20% from April to May — from 6,800 people to almost 8,200. But that's still far below the May 2019 total of 15,300 people.
"A significant portion of those folks who were laid off (are) starting to get a return to work," Gorecki said. "Granted, the number in May is still down almost 50% from May of last year, but the positive number is the right direction."
The possibility of people returning to work depends on their skill set and education, Foshay said. There are job openings in the essential service jobs, like retail and grocery store workers and in long-term care and child care facilities. But, she said, the pay doesn’t match what someone could make in a manufacturing or health care career.
“Someone who is being laid off from a high-wage job at the city or Verso or even at Essentia is maybe going to have a hard time taking a job that pays a lower wage right now,” she said.
Workers seeking similar manufacturing jobs need to be prepared for a lengthy economic rebound.
“It’s just going to be tough and (depends on) how long people can … wait it out,” said Chris Fleege, the city’s director of planning and economic development.
As the pandemic continues, the risk of additional layoffs grows. But Hanson, of APEX, stressed the importance of safety to ensure COVID-19 case numbers don’t rise again.
Regardless of how case numbers change, most businesses are facing uncontrollable revenue declines. “We're, unfortunately, probably going to see more (layoffs) to come,” Foshay said.
Job creation needed, but difficult
A surefire way to mitigate long-term effects, the extent of which depends on government response, is by quickly creating new jobs, Hanson said.
But this isn’t an easy feat.
“A project like AAR doesn't come around and come to a community like Duluth or our Northeast region every day,” he said. Significant effort goes into securing a facility, hiring and training staff and locating natural resources for production.
Locating a buyer for Verso and keeping AAR’s facility intact for possible future use are a priority for the city, Fleege said. Their loss will affect not only city and state revenue, but personal incomes, contractors’ revenue, municipal services revenue and more.
For example, Verso contributed about $328,000 annually in city and state sales taxes, as well as about $710,000 annually in property taxes. It also spent about $18 million a year on wages and benefits and about $6 million on municipal water and waste costs, Fleege said.
“Our goal in the short term, for the next three months, is to really focus on assisting them with a sale, because the ideal thing is to sell that mill before the workforce begins to relocate and find other positions,” Fleege said.
With AAR contributing similarly, “losing those types of organizations is really difficult,” Fleege said.
No one is sure how the pandemic's economic impact will continue unfolding. Regardless, businesses may be hesitant to expand in the future, economic growth will likely be slowed in the region, and rehiring probably will be slow.
Even with several challenges ahead, Hanson said he’s positive workers can secure new jobs when they have “highly transferable skills.”
“I'm really optimistic that we're going to be able to leverage this massive skill set that we have available here,” he said. “But it's going to take a little while.”