With COVID-19 cases rising rapidly, indoor dining going away, and federal support for small businesses stalled in Congress, Brandon Bortles made an excruciating decision last November — he closed his Abejas and Nosu Ramen restaurants in Golden and directed about 30 of his remaining workers to apply for state unemployment benefits.

“My capital was so low I couldn’t float them. Our hand was forced,” said Bortles, who doesn’t know when he will reopen, despite an easing of restrictions on indoor dining last month.

His layoffs were part of a much larger 24,300 jobs lost at restaurants and bars across the state in December, according to senior state labor economist Ryan Gedney. Losses in food service employment, combined with a surge in people rejoining the labor force, helped push up Colorado’s seasonally-adjusted unemployment rate from 6.4{540ccc4681f92a8237c705b0cdebbb9da373ec200da159e6cc1fd9f393be00be} in November to 8.4{540ccc4681f92a8237c705b0cdebbb9da373ec200da159e6cc1fd9f393be00be} in December.

As 2020 came to an end, Colorado had 269,200 people without a job and actively looking for one, a higher total for the state than at any month during the Great Recession, according to the U.S. Bureau of Labor Statistics. It also had the nation’s fourth-highest unemployment rate after Hawaii, California and Nevada. Entering the pandemic, Colorado had the fifth-lowest unemployment rate at 2.5{540ccc4681f92a8237c705b0cdebbb9da373ec200da159e6cc1fd9f393be00be}.

Officials in every state have engaged in a grim calculus during the pandemic — balancing the need to protect human life against preserving livelihoods. Colorado’s calculation was effective in lowering case counts, but it also may have derailed one of the most robust labor markets in the nation.

“It appears the on-again, off-again efforts to find a balance between the economy and the number of COVID-19 cases killed the economy from an employment perspective,” said Gary Horvath, an economist based in Broomfield.

A homeless man holds his dogs ...

William Woody, Special to The Denver Post

A homeless man holds his dogs while waiting for a pop-up food bank organized by Grand Junction Mutual Aid to open in the parking lot of the Unitarian Universalist Congregation of the Grand Valley in Grand Junction on Nov. 24, 2020.

WalletHub, a personal finance website, studied 14 measures to determine how states compared in their restrictions to combat the novel coronavirus. The laxest states include Oklahoma, South Dakota, and Iowa, while California, Massachusetts and Virginia are among the strictest. In the fourth quarter, Colorado ranked 46th when it came to having the fewest restrictions, although in January the move from Level Red to Level Orange in the largest counties had moved it to the 38th spot.

More so than COVID-19 case rates or the concentration of jobs in tourism and other hard-hit industries, the severity of the restrictions that state and local governments put in place appears to have the strongest correlation to how a state’s economy performed last year.

“The fact that the state (Colorado) has a lot of restrictions in place leads to it having the fifth-lowest COVID-19 death rate in the country. On the flip side, the large number of restrictions also creates higher unemployment,” said Jill Gonzalez, an analyst with WalletHub.

Conor Cahill, a spokesman for Gov. Jared Polis, said the state rolled out several programs to help the economy, among them launching a $24 million relief fund, providing aid and tax breaks to restaurants and other small businesses, and distributing $357 checks to 435,000 unemployed workers in the state.

“The Polis administration has sought an aggressive balanced approach to saving lives while allowing for the maximum amount of economic and social activity. Governor Polis and legislative leadership stepped up to the plate when Congress faltered,” he said.

The chief argument for having stricter rules is to reduce infection rates, keep hospitals from getting overwhelmed and save lives. As an added benefit, playing it safer was supposed to set the stage for a stronger economic rebound once the pandemic passed.

So far, that doesn’t seem to be playing out. Restriction-light South Dakota now has a lower unemployment rate, 3{540ccc4681f92a8237c705b0cdebbb9da373ec200da159e6cc1fd9f393be00be}, than it did before the pandemic started, but it is also wrestling with higher COVID-19 case and death rates than Colorado.

Nor is it a regional issue. Utah and Idaho have regained all the jobs lost during the pandemic and even grown employment, while Colorado faces a deficit of about 150,000 nonfarm jobs lost last year. But Gedney notes Colorado has the 8th highest-concentration of in-person dining establishments, while Utah is near the bottom.

“The restrictions were prudent and I’m not arguing that we shouldn’t have had them, but I am not convinced we are primed for a better recovery,” said Brian Lewandowski, executive director of the Business Research Division at the University of Colorado Boulder’s Leeds School of Business. “The lost output is something you never recoup.”

Hyoung Chang, The Denver Post

Guides for social distance and mask rule are placed on each table of Barolo Grill in Denver on Wednesday 3, 2021. The restaurant service includes indoor dining at 25{540ccc4681f92a8237c705b0cdebbb9da373ec200da159e6cc1fd9f393be00be} capacity, as well as outdoor dining & curbside pickup.

Optimistic vs. pessimistic approach

For reasons she still doesn’t understand, Sonia Riggs, president and CEO of the Colorado Restaurant Association, said Colorado officials chose to take a harder line against bars and restaurants than other states did.

They did so without presenting studies to show restaurants were a significant contributor to the spread of COVID-19 cases, she said. For example, capacity was capped at 50, even if a dining space was large enough to handle many more using the 6-foot distancing recommended by the Centers for Disease Control.

Based on the premise that the more people drink, the more likely they are to get sloppy about safeguards, the cutoff for serving alcoholic drinks was moved earlier. But Riggs said pushing up last call didn’t make sense in restaurants where patrons were seated and not moving around.

A heavy blow came when indoor dining was cut off as temperatures were moving lower in late November. And while restaurants welcome being allowed to go to 25{540ccc4681f92a8237c705b0cdebbb9da373ec200da159e6cc1fd9f393be00be} capacity last month or 50{540ccc4681f92a8237c705b0cdebbb9da373ec200da159e6cc1fd9f393be00be} in the case of Denver, which moved to Level Yellow on Saturday, that won’t be enough to get them into the black, she said.

“If we don’t start seeing capacity increase change dramatically over the next few months we will see more restaurants closing,” Riggs said. “True recovery won’t begin for this industry until dining capacity is at 100{540ccc4681f92a8237c705b0cdebbb9da373ec200da159e6cc1fd9f393be00be}.”

As the state was doing its calculations in the face of rapidly rising COVID-19 caseloads, restauranteurs like Ryan Fletter responded with their own math. He made the difficult choice in November to close his youngest restaurant, Chow Morso, so his more established one, Barolo Grill, could have a better chance of surviving.

“When the governor closed indoor dining rooms before the holidays, all restaurants went into a tailspin,” he said.

Rachel Ellis, The Denver Post

A reflection in a closed pop-up shop shows a few people walking up and down 16th Street Mall on Thursday, Aug. 6, 2020.

For Chow Morso, the lunch crowd of downtown office workers had vanished in the early days of the pandemic, along with the tourists and evening crowds attending events. Civil unrest and demonstrations in the summer were followed by concerns about election turmoil in the fall, putting a damper on dinner traffic, Fletter said.

Restauranteurs, with their first round of Paycheck Protection Program money long spent, were hopeful that Congress would pass another round. But those hopes vanished in partisan bickering and forced some difficult choices, Fletter said.

Barolo Grill, around for 27 years, had strong support from the surrounding Cherry Creek neighborhood and was the obvious choice to keep going. But closing Chow Morso cost 30 jobs.

Data from Zenreach shows a more severe decline in visits to restaurants and retailers in Colorado than elsewhere late last year. The San Francisco-based company provides software that public venues can use to measure foot traffic based on cell phone pings made to the local Wi-Fi system.

Early in the pandemic, Colorado suffered a somewhat sharper decline in foot traffic, but by summer rebounded to half of the normal levels. Through November, Colorado tracked with U.S. averages. In December, traffic dropped to just under 30{540ccc4681f92a8237c705b0cdebbb9da373ec200da159e6cc1fd9f393be00be} of pre-pandemic levels, while other hard-hit states dropped to under 40{540ccc4681f92a8237c705b0cdebbb9da373ec200da159e6cc1fd9f393be00be}.

“It was one of the more dramatic declines,” John Kelly, CEO of Zenreach, said of what happened in Colorado.

Kelly notes that states that took an “optimistic” approach when it came to fighting the novel coronavirus never saw their foot traffic dip below 50{540ccc4681f92a8237c705b0cdebbb9da373ec200da159e6cc1fd9f393be00be} after the initial wave of lockdowns. States in the “pessimistic” camp have experienced much lower consumer activity in public spaces.

Colorado consumer spending has also trended lower than the national averages, according to Patty Silverstein, president of Littleton-based economics consulting firm Development Research Partners. For health services, spending fell 18.8{540ccc4681f92a8237c705b0cdebbb9da373ec200da159e6cc1fd9f393be00be} in the state versus 9.5{540ccc4681f92a8237c705b0cdebbb9da373ec200da159e6cc1fd9f393be00be} nationally. Restaurant and hotel spending was down 44.3{540ccc4681f92a8237c705b0cdebbb9da373ec200da159e6cc1fd9f393be00be} in Colorado compared to a 28.7{540ccc4681f92a8237c705b0cdebbb9da373ec200da159e6cc1fd9f393be00be} decline nationally.

Helen H. Richardson, The Denver Post

John Schwarz, chief design officer for Simple Homes, right, helps guide a pre-built wall being lowered by a crane, into position with the help of carpenter Richard Schmidt, center and David Schultz, COO, left, at a home the company is building in the Painted Prairie subdivision on March 2, 2020. Simple Homes, borrowing on technology developed in Sweden, claims to have found a design and manufacturing method that could shave 20{540ccc4681f92a8237c705b0cdebbb9da373ec200da159e6cc1fd9f393be00be} off the cost of a home. Components are built in a factory with fewer workers.

Can Colorado catch up?

The grim leisure and hospitality numbers in Colorado’s December employment report masked some good news. Manufacturing employment was up by 2,000 on the year and the state ranked third for its growth in manufacturing jobs, an unusual area of strength, Lewandowski said.

Employment in professional and business services, a source of high-skilled jobs paying some of the highest wages in the state, was up by 8,700 jobs. And even trade, transportation and utilities, which includes the hard-hit retail sector, has regained in terms of job counts, while the financial activities sector is almost there.

For the sectors in the top tier in terms of average weekly wages, employment is almost fully recovered, Silverstein told an online audience attending the Vectra Bank of Colorado’s Economic Forecast on Thursday.

Those households are saving money at a high rate and more likely to enjoy the robust gains in the housing and stock markets. They will represent a tremendous amount of pent-up demand once the economy reopens and people are more comfortable traveling, attending shows and dining out, she said.