If you want to understand why Massachusetts has the highest unemployment rate in the country, a good place to start is dress shirts.
Christa Hagearty, owner of Dependable Cleaners, once considered laundering men’s and women’s work shirts as “recession proof.” But that hasn’t held up in the era of coronavirus and video conferencing: Revenue from Oxfords and poplin tops is down 68 percent from pre-pandemic levels as professionals continue to work from home — and leave their office clothes untouched in the closet.
“We’re all so interconnected,” said Hagearty, who has slashed hours for her 190 employees to offset the revenue decline. “The little decisions we make have big impacts.”
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COVID-19, which hit here early and hard, has disrupted the state’s economic equilibrium in ways other recessions didn’t. Governor Charlie Baker’s decision to shut down earlier than most states — and reopen more cautiously — slowed the virus’s spread but at a high cost: a nation-leading jobless rate of 16.1 percent in July.
The pandemic has hurt the state’s previously recession-resistant health care and education sectors, and has driven a broader change in habits, beyond ditching suits and ties, that has made it harder for businesses to bounce back and hire again. People are buying less and saving more, especially affluent households, and low-wage service workers whose jobs depend on consumer spending are getting hurt more than they usually do when the economy weakens.
Restaurant tabs in Massachusetts have tumbled 25 percent since January, according to data tracked by Opportunity Insights, a research project at Harvard University. Spending on recreation and entertainment is off a staggering 55 percent. Ridership at Uber and Lyft has plummeted.
“Low-income workers are being hit very hard in part because their jobs, their livelihoods, have become increasingly dependent on higher-income households and their spending,” said David Williams, director of policy outreach at Opportunity Insights. “Until people have confidence on the public health side of the crisis, it will be really hard to build back our economy in a way that will be uplifting everyone.”
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Massachusetts is a high-income state with an above-average concentration of knowledge-based jobs, blessings that have accelerated growth in good economic times and tempered past downturns such as the Great Recession and the dot-com bust.
The last recession was sparked by a crisis on Wall Street, but its face was traditional blue-collar workers in solidly middle-class jobs. Manufacturing accounted for 26 percent of all job losses in the state. Another 20 percent came from construction.
When it comes to the number of people thrown out of work, however, the Great Recession pales in comparison with the ferocious two-month collapse that followed the coronavirus outbreak.
The state’s jobless rate is nearly 6 percentage points higher than the national average. (US unemployment fell to 8.4 percent in August; the Massachusetts figure for last month will be released Friday.)
From peak to trough, Massachusetts payrolls fell by 4 percent in 2008 and 2009. In March and April of this year, the state lost 19 percent of its jobs.
When Baker ordered a shutdown of nonessential businesses in mid-March amid a surge in COVID-19 cases, low-wage workers were the first to get laid off.
Nearly two-thirds of the jobs in leisure and hospitality disappeared as restaurants and bars were forced to close. In Boston and Cambridge, hotels normally packed with business travelers and tourists were empty.
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The sector accounted for 35 percent of all job losses, compared with 5 percent during the last recession.
Another significant difference today: The state’s core health care and social services providers reduced their ranks in March and April; in the Great Recession, they boosted employment. The pivotal education industry, which held its own during the previous recession, has also cut jobs this time around.
Meanwhile, employers in Massachusetts have been among the most reluctant in the country to hire amid depressed revenue and rising concern about the virus surging again in the colder months. Job postings in the state fell 29 percent in September compared with a year ago, according to job site Indeed.com.
“Urban states tend to have more jobs in arts, entertainment, and hospitality, all of which have been hit hard in the pandemic,” said Jed Kolko, Indeed.com’s chief economist. “Tech and finance job postings are down, too. Even though those higher-wage sectors haven’t shut down or had severe layoffs, they have slowed hiring.”
By July, as more of the economy reopened, Massachusetts had recouped about one-third of the pandemic-induced job losses, but that lagged behind national payrolls, Labor Department data show.
Massachusetts residents are spending 10 percent less time outside their homes than in January, according to Opportunity Insights data. That’s up nearly 20 percentage points since the start of April.
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Still, people are driving less, and that’s hurting Direct Tire & Auto Service, where revenue is off by one-third compared to a year ago, according to chief executive Barry Steinberg.
Steinberg furloughed 20 workers during the height of the pandemic but has since brought back all but seven of them. For remote workers and others, he said: “The car is their secondary thought right now. They are just not using it.”
Hagearty, president and owner of Dependable Cleaners, said in other recessions her business dropped 15 percent at the most; this time revenue is off over 50 percent. She expected to clean fewer party dresses and other formalwear but not dress shirts, which make up half of her business.
“We’ve never seen a decrease like this in dress shirts,” said Hagearty, whose family has owned the business for three generations.
Dependable, which has 16 locations in Greater Boston, was able to secure a federal Paycheck Protection Program loan, but Hagearty said she used up that money two weeks ago. While business has picked up, she is worried that people will hunker down again in the winter when COVID-19 cases are expected to rise.
To survive, Hagearty urges Washington to pass another rescue package for small businesses like hers.
“We are losing money every week right now,” she said. “The uncertainty of political games is not helping anyone.”