1. Economics
December 11, 2020updated 16 Jul 2021 12:09pm

Unemployment hit large US cities hard, but they may have advantages in recovery

An analysis shows the largest US metro areas have been slower to recover the jobs they've lost since March.

By Aisha Majid

volunteers at the Food Bank for New York City hand out masks

The Food Bank for New York City hands out produce and masks to help New Yorkers during the pandemic. (Photo by Michael Loccisano/Getty Images for Food Bank for New York City)

The US is one of the hardest-hit countries by the Covid-19 pandemic, with the highest number of both cases and deaths.

That huge health impact has been coupled with a devastating economic fallout: lockdowns in spring and the resulting slowdown of the economy initially wiped out almost a decade of job growth, and April’s unemployment rate spiked to 14.7%, the highest the US has seen in more than 70 years. While a large portion of that job loss was reversed by early summer, the US overall still reported nearly ten million fewer jobs in November than it had in February.

The pandemic-related jobs crisis, while a global phenomenon, is playing out differently in distinct parts of each country. City Monitor‘s analysis for the UK, for example, showed how the pandemic is complicating that country’s divide between struggling northern cities and more prosperous southern cities.

In the US, the pandemic has similarly upended the job market across the board. Large, wealthy, globally connected US cities like New York and Seattle were hit hard by the onset of the pandemic but may be better positioned for a rebound. Meanwhile, other areas that were previously thriving, with economies organised around travel, tourism and hospitality – including Las Vegas, Honolulu and Orlando – may remain vulnerable if those hard-hit sectors take a long time to recover.

City Monitor examined economic, geographic and socioeconomic variables for metropolitan statistical areas (MSAs) as used by the Bureau of Labor Statistics (BLS), which includes over 400 MSAs and additional BLS-defined areas.

Global cities were hit hard and face hardship in recouping jobs

Unemployment data shows that the US’s global cities and major tourist destinations were among the earliest- and hardest-hit places.

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The Seattle area, where the US had its first reported coronavirus outbreak, led this trend when its unemployment rate surged from 3.1% to 5.7% between February and March. Unemployment ticked up in metro areas across the South and West during the first few weeks of reported outbreaks and was especially pronounced in Las Vegas at that point.

Not long after, the virus took hold in other global cities in the US, prompting shutdowns of businesses deemed non-essential. Los Angeles’s unemployment rate more than quadrupled between February and April, jumping from 3.9% to 19%. The proportion of jobless New Yorkers similarly surged from 3.5% to 15.8%.

“New York was among the hardest-hit and still today has an above-average increase in unemployment,” says Alan Berube, deputy director of the Metropolitan Policy Program at the Brookings Institution. “It was similar with Boston, San Francisco and Detroit. These are places where the virus arrived first on our shores, as they are global places.”

Our analysis shows that these cities are among those that have struggled the most to recoup lost jobs. As a group, the largest metropolitan areas in the US have seen employment return at a slower pace.

By October, metro areas with populations above six million had on average recovered 59% of the jobs lost between March and April. Smaller metros with 1.5 million to six million people had recovered 63% of lost jobs in that same time period, and those with 500,000 to 1.5 million people had recovered 66% of lost jobs.

As of October, New York had regained 58% of the jobs lost between March and April as tourists remained away and office workers continued to work from home. As a result, many of those in the city who once worked in restaurants, hotels, transport and building services that rely on travel, tourism and business activity for their employment remained out of work.

“If you think of all the people that are employed in the Financial District in New York or similarly in the Tech District in San Francisco, there’s nobody going into those offices right now, as all those people are working remotely,” Berube says. “That’s led to a sustainable collapse in demand for the kind of local services that employ a lot of people.”

Cities with many jobs in vulnerable industries also struggling

The mix of jobs within a metro area is important in understanding how vulnerable it might be to pandemic-related unemployment as well as what a recovery might look like.

Other factors are important, too, including the pre-existing economic vulnerability, for instance, or policy decisions by local officials in reaction to an outbreak. But some jobs are more likely to be affected than others. City Monitor found this to be true of the UK, although there the complexity of the situation made it harder to draw overarching conclusions. In the US, the jobs mix has a clearer – although not sole – role to play in explaining which cities have been affected most, and slowest to recover.

The Brookings Institution has identified several highly affected sectors that have seen double-digit employment losses since the onset of the crisis. Among the sectors that continue to be subject to the pandemic’s effects are industries like accommodation and food, air transport, arts and entertainment, and personal services.

“The industry mix continues to be a pretty important explanatory factor for city unemployment,” Berube says. “That mix [of highly affected sectors] alone continues to explain about 26% of what we see going on in terms of increased unemployment. The rest is due to levels of the virus, government response to that and severity of closure policies, and other demographic underpinnings in the vulnerability of different populations in the US labour market.”

Although many industries have been affected by lockdowns and the slowdown in demand, one sector where the impact has been particularly marked is leisure and hospitality, and cities with large workforces in these sectors are struggling to bounce back.

“The most severely affected places are big metro areas with a lot of jobs in tourism and hospitality,” Berube says. “That’s places like Las Vegas, Honolulu, Los Angeles, Miami and Orlando. All of these are top of the table in terms of the increase in the local unemployment rate since the pandemic began.”

City Monitor’s analysis in September also found that people living in the metros that rely the most on the hospitality and tourism industries were at highest risk of evictions and mortgage foreclosures due to these jumps in joblessness.

In April, at the height of the crisis, the leisure and hospitality sector lost 7.7 million jobs – far more than any other industry grouping.

As the pandemic has persisted, it has become clear that places that depend on jobs linked to tourism, food and accommodation continue to be badly affected. As of October, jobs in the industry remained down by 3.5 million since February, and some tourism hubs such as Honolulu and Orlando had recovered very little of the employment lost. Honolulu, for example, lost more than 18% of its non-farm jobs between March and April. As of October, the city had recovered less than one-fifth of the jobs it lost in the spring. Orlando, meanwhile, had recovered only 28% of the jobs it shed during that season.

Some smaller metro areas that depend on the oil industry have also struggled, as the US’s oil and gas industries have yet to recover from the disruption of the pandemic. Midland and Odessa, two towns at the heart of Texas’s energy sector, for example, had far fewer people on the non-farm payroll in October than March. The state’s oil production is still almost 20% below its high in January.

Still, big cities likely have an advantage in the longer term

Experts suggest that the places struggling to bounce back now won’t necessarily be those most affected in the longer term.

Despite the prediction of some economists that it might take two years longer for New York to recover than the rest of the country, overall the longer-term outlook for the country’s global cities is more positive than for other places.

“New York will bounce back, as will a lot of other places,” says Jennifer Steinfeld, director of entrepreneurship and economic development at the National League of Cities (NLC), an advocacy organisation for local governments in the US. “Places that can be flexible and absorb their workforces in other roles will bounce back.”

Berube is also positive that most big cities will make a recovery.

“I remain pretty bullish on the big global cities with diversified economies,” he says. “I don’t think businesses are going to empty out of their downtowns. People will be back, and business will resume. I think people will realise we all work better when we work near one another. Places like Los Angeles, Boston, New York and Chicago will rebound fairly strongly once the virus subsides.”

However, the outlook is less sanguine for places that depend on industries like tourism. Prior to the pandemic, these were among some of the fastest-growing cities in the country in terms of jobs and population.

“The places that are highly concentrated in tourism, such as Las Vegas, Honolulu and Orlando, I would be a little bit more worried about them,” Berube says. “These are places that rely on global travel and conventions, and I do feel there is reason to think that will recover more slowly.”

Although October data showed a tentative recovery in hospitality, with bars and restaurants adding 192,000 jobs, Covid case numbers have since surged again. Recovery in these industries – and in the cities that depend on them – is very vulnerable to a resurgence of the virus.

Cities struggling pre-Covid likely to bounce back more slowly

There’s reason to believe that places that were less well off before the pandemic will also be among the metros that find it harder to bounce back.

Prior to the pandemic, most of the places in the US with high unemployment were, unsurprisingly, cities where the average per-capita income was below the metro area average of $58,650. The average income of the top 20 places with the highest unemployment rate in January was just $44,159 – only two places, Ocean City in New Jersey and Salinas in California, had incomes above the metropolitan average.

In contrast, on average, the smaller group of places with the higher incomes saw bigger percentage point increases in unemployment from February to October.

However, although many wealthy places are currently facing a significant jobs crisis, poorer metros where unemployment was highest before the pandemic – including areas along the southern border and older industrial cities in the Rust Belt – are likely to see the effects of the jobs crisis longer-term. Joblessness has jumped significantly in many of these places since spring, as in some cases, Covid has widened the economic divide.

In past economic crises, older industrial cities like Detroit, Pittsburgh and Buffalo have struggled to recover quickly. Many of these locales have already suffered decades of declining population, high unemployment and poverty.

“They’re always last in when the economy is on the upswing, and first out,” Berube says. “To the extent that this is going to be a fairly long recovery period, as most economists are predicting, the return of jobs and economic activity to these older industrial places is going to be slow.”

Although a lot of these places have tried to improve their fortunes by reorienting their economies away from manufacturing, they are now also suffering from the loss of business related to conferences, entertainment and leisure industries, says Steinfeld.

“A lot of post-industrial cities focused on the restaurant and entertainment industries, which require foot traffic and crowds,” she explains. “A lot of the conversations in the post-industrial cities were about how we have to create a downtown, a neighbourhood with foot traffic.”

Local and national policy decisions can make a difference

Stephanie Martinez-Ruckman, legislative director of human development at the NLC, is concerned that a lack of federal support will leave some cities more vulnerable than others. A recent NLC survey into the effects of the first-aid package from the CARES Act, a $2.2trn economic stimulus bill passed by Congress in late March, found that many cities benefited from the money. But she says that more support is needed, particularly for smaller cities.

“The problem with the CARES Act is that the money is only for cities bigger than 500,000, which leaves out so many communities,” Martinez-Ruckman says. “Some states don’t have even one city of that size.”

Berube cautions against considering all cities to be in similar circumstances, as economic recovery will also depend on how effective national and city-level recovery policies are. Some older industrial cities, for instance, are already looking at how to reorient their economies once the pandemic subsides.

“Some of them are very smart and forward-thinking and are already putting plans together in terms of what kind of opportunities the pandemic is creating in fields like public health,” he says. “Places like Pittsburgh and Cleveland know a lot about that stuff, so there may be silver linings for some of them.”

“The prospects of places like Las Vegas and Orlando are also going to depend on the degree to which they use this moment to pursue an aggressive diversification strategy, not necessarily away from the tourism and visitor economy but leveraging some of the other hidden assets these places have in fields like renewable energy and advanced health services,” he adds.

Aisha Majid is a data journalist at New Statesman Media Group.

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