COVID Clobbered Philly’s Economy. Who’s Bouncing Back — and Who’s on the Brink?
Unemployment is above 10 percent. Tax revenue and transit ridership remain down. The newest COVID stimulus bill doesn't include aid for restaurants or city governments. But people are still buying things, and the Center City real estate market is hot.
The early numbers were so large that they dwarfed any sense of scale. More than 100,000 Philadelphia jobs were lost between March and April — 14 percent of the total workforce. Unemployment peaked at 18 percent in June. “We had 11 straight years of job growth in the City of Philadelphia,” Paul Levy, the executive director of the Center City District, said last week. “Five or six years of that were wiped out in one month with the pandemic and the stay-at-home order.”
That’s just one indication of how the first 10 months of the pandemic walloped Philadelphia. Still, in a new report about the future of Center City, the CCD says there’s reason for optimism — okay, tepid optimism — as the year winds down. The city’s first COVID-19 vaccinations began at hospitals across the city last week. And while some industries are still struggling, others are beginning to rebound. Here’s a sector-by-sector look at how the city is faring.
Employment: Slowly Rebounding (but Still Bleak)
Unemployment peaked at 18 percent in June. It’s now down to 10.6 percent — equal to the peak national unemployment rate during 2008 recession — or 76,000 people. Citywide, some of the industries to experience the biggest losses in employment between March and October of this year include leisure and hospitality (36.4 percent loss), education (7.8 percent), wholesalers (eight percent), and transit and utilities (5.7 percent).
What’s Next: While we’re doing better than New York when it comes to total employment and unemployment rate — Philly has lost 7.6 percent of its pre-COVID jobs, compared to 11 percent for the Big Apple, and NYC’s unemployment rate is 13 percent — no one would describe Philly’s 10.6 percent unemployment rate as “doing well,” and getting that figure below double digits is paramount.
Real Estate: Actually Booming
Office vacancies have remained flat at around 13 percent for most of the year, according to the CCD’s report. That suggests that even as huge swaths of employees work from home, companies haven’t torn up their leases. Meanwhile, construction has increased since April and is the only private-sector industry that saw job growth (12 percent) between March and October.
As of October, home sales were actually up 41 percent in Center City over the prior year, as were median sales prices, up 16 percent to $242,000.
What’s Next: Things may be rosy for homeowners and developers, but 31 percent of Philly-area renters report having missed their last month’s rental payment, and six percent are behind on their mortgages.
Retail: Holding Steady (for Now)
While shopping trends (and retail jobs) have shifted away from the clothing and luxury stores that populate much of Center City, employment in the retail sector citywide is down only half a percent compared to March 2020 levels — the lowest decline in any industry. In other words: People are buying things — just not the things that many Center City retailers have for sale.
There are lots of reasons for that trend, not least the fact that many people still aren’t inclined to spend money on discretionary items like the ones you might find along Walnut Street. But Levy has suggested an additional reason: lingering images of boarded-up Center City stores during the summer protests — even though, as one recent CCD analysis noted, there were just 27 boarded-up stores in early December, down from 276 earlier in the year. “We have an outdated image of Center City that we really need to work to recover from,” said Levy.
What’s Next: Unlike more residential commercial corridors like Passyunk and Frankford avenues, Center City can’t survive without office workers. More than 40 percent of the downtown workforce lives outside of Center City, and on any given weekday before the pandemic, 267,000 commuters took SEPTA to their jobs downtown. Ridership dropped nearly 90 percent in the first months of the pandemic and still isn’t close to approaching “normal”: As of October, Regional Rail ridership was at just 18 percent of its January 2020 total, while the Market-Frankford El, Broad Street Line and trolleys were each at about a third of their January ridership. “We need the rest of the cavalry to come back to support city businesses,” Levy said.
One reason for moderate optimism: The latest coronavirus stimulus package, set to be passed by Congress on Monday, includes a $14 billion allocation for mass transit, which should help SEPTA bridge the gap between now and when workers return to their offices.
Restaurants: Looking for a Lifeline
We all know the food-service industry isn’t doing well. There have been at least 50 permanent Philly restaurant closures, according to one online tracker, and of the more than 1,000 restaurants in the Center City District alone, more than 260 had shut down operations — at least temporarily — as of September. With outdoor dining becoming more difficult as the weather gets colder, that number figures to grow in the coming months.
What’s Next: Restaurateurs in Philly and across the country have been pleading for help for months, but the new $900 billion COVID stimulus bill doesn’t include direct grants to the restaurant industry. If there’s one piece of good news, it’s that outdoor dining has proven to be extremely popular and could be a boon to the industry in the warmer months to come. Roughly 20 percent of Center City restaurants currently offer some kind of outdoor dining option, and since June, outdoor seating capacity just in the Center City District has grown from 3,000 to 9,500 seats. Of course, that assumes most restaurants will still be around in the warmer months, which is far from guaranteed.
City Tax Revenue: Ouch
City wage tax collections in October were down 30 percent year over year, at least in part because many suburbanites who normally work in the city and pay the wage tax no longer have to do so while working from home. Sales tax in October was down seven percent when compared to the same period, and the hotel tax totaled just $1.9 million in October, compared to $7.1 million the year before. As in most big cities, those declines have forced Philly into significant budget cuts.
What’s Next: More pain. Just last week, Mayor Kenney’s chief of staff, Jim Engler, reported that the city’s bank account contains just $23 million, down from an all-time high of $438 million pre-pandemic. The Mayor himself recently described the city as “semi-broke.”And while state and local officials tried to lobby the federal government for inclusion in the COVID relief package, they were unsuccessful. City Council did recently pass a new construction tax, which could eventually raise $30 million in annual revenue to help fund affordable housing, but it won’t kick in until 2022.
Philadelphia magazine is one of more than 20 news organizations producing Broke in Philly, a collaborative reporting project on solutions to poverty and economic mobility in the city. Read all our reporting here.