Economic Impact: Kentucky's Workforce

23 February 2021 - Liz Carey (Business Lexington)

The COVID-19 pandemic will have far-reaching consequences for Kentucky’s workforce and economy, experts say, and those hit hardest will be the industries that take the longest to recover.

Within a month of the first responses to the coronavirus, Kentucky’s workforce buckled. More than 325,100 jobs were gone in April 2020, compared with January, said Michael Clark, director of the University of Kentucky’s Gatton College of Business and Economics Center for Business and Economic Research (CBER). By October, he said, the state had recovered 67 percent of those jobs, but employment was still down 107,600 jobs.

Still, we’re a long way from a full recovery, he said.

“Although the aggregate impact on Kentucky’s economy mirrors the national impact, several of Kentucky’s industries were hit harder. Unfortunately, there is still a great deal that is not known about how the pandemic has affected the nation and Kentucky,” he wrote in the Kentucky Annual Economic Report released in early February.

Getting the jobs back will depend on how long it takes to get the vaccine distributed, how long it takes to open up schools and daycares, and how long it takes for consumer confidence to rise again, he said. But uncertainty in the recovery remains, he said because economic conditions are changing so rapidly.

What is known, however, is who the pandemic most impacted.

Statistics from the state’s Workforce Overview for Kentucky Regions show that Eastern Kentucky has suffered far more than Central Kentucky. Last October, Central Kentucky’s unemployment rate was 6.5 percent, compared to 6.7 percent for both the southern and western regions. The eastern region’s unemployment rate was 9.1 percent that same month.

Compared with the previous year, unemployment rates have almost doubled. In October 2019, Central Kentucky’s unemployment rate was 3.4 percent, while the southern region’s was 4.1; the western region’s was 4.2, and the eastern region was 5.9.

Nationally, the unemployment rate in October 2020 was 6.9 percent.


During the pandemic, Toyota Motor Manufacturing Kentucky has also shifted to producing medical equipment such as respirators.

But in terms of workforce participation, Kentucky is at the bottom of the barrel, said Beth Davisson, vice president of Workforce Development with the Kentucky Chamber of Commerce.

“We are 46th in the nation for workforce participation,” she said. “We were as low as 50th recently, and it is impacting our economy pretty greatly. Kentucky has been hit pretty bad.”

Close to 250,000 workers have left the workforce and stopped looking for work, she said. Disproportionately, the people who’ve left the workforce the most have been women.

“We’ve had almost 100,000 women in Kentucky leave the workforce due to childcare issues and school closures,” she said. “We haven’t seen this few women in the workforce since 1998. It’s unprecedented.”

Currently, about 63,000 jobs still have not come back online, she said, and most of those are in sectors that employ predominantly women.

“Leisure and hospitality have accounted for most of those job losses. Unfortunately, our manufacturing did also lose some jobs, but we’re starting to see those come back,” she said. “Conversely, when you look at some of our other super sectors in Kentucky, like transportation, warehousing and utilities, they’ve been relatively insulated from the pandemic. Actually, those industries saw a bit of growth in our economy from where they were pre-pandemic,” she said. “In those industries though, when you look at the demographics of who are in those jobs, it’s mostly men.”

As the economy strengthens, and people feel safe again, she said she anticipates those jobs will come back. But others might take a long time to come back, if they do at all.

According to a national study by McKenzie and Company, in a muted recovery scenario, it could take as long as five years for industries like arts and entertainment, leisure and hospitality, and education to come back to pre-pandemic levels.

“They also looked at what states were hit the hardest, and Kentucky was ranked as a top five state,” she said. “When it comes to our people in our jobs, what they found was we were top five in the nation for most unemployment claims and jobs that might not be coming back due to things like technology disruption.”

Employers who may have been putting off technology changes in their business — like robots, artificial intelligence and other upgrades — put them in place much sooner to cut costs and adhere better to COVID-19 social-distancing requirements, she said.

For Kentuckians, Davisson said, that means whatever jobs come back, Kentuckians may not be prepared for.

“If those jobs go away because they get replaced by technology, what will come to replace them is higher skilled jobs that require more education,” she said. “In Kentucky, you know, we’re not getting the post-secondary education that we really need for our citizens. We need more of our citizens getting an education and earning post-secondary credentials, degrees and certifications.”

A line item in this year’s state budget called for more resources to support efforts to increase opportunities and access for education, Davisson said.

Betsy Dexter, executive director of the business and education network at Commerce Lexington, said the chamber was working to find out what needs to happen to increase the workforce and workforce participation.

“What we’re doing right now is trying to understand the landscape — what are the trends out there? What jobs are available? What kind of skills do they require, and how do we communicate that?” she said. “What does the workforce look like moving forward and what kind of skills do you need moving forward?” she added. “What does the world look like in six to 12 months, or the next five years, or whatever it may be, and try to work from there.”

Once they’ve identified the issues, the chamber will work with various stakeholders to try and address those issues, she said.

The workforce and economy in 2021 will continue to be impacted by COVID-19, CBER’s Clark said.  

“Coronavirus was certainly the main economic story of 2020 and will continue to affect the economy for some time. However, Kentucky continues to face many of same challenges that existed prior to the pandemic including workforce development, labor force participation and racial disparities. In many ways, the pandemic has magnified these challenges,” Clark wrote. “We consistently note the importance of education to address these issues and shape Kentucky’s long-term economic and social well-being. This has never been truer. Investing in education and training increases productivity, raises wages, improves health and reduces economic insecurity.”