(April 8, 2020)--Summary: The
economic deterioration resulting from the coronavirus plague worsens daily
in the U.S., in Europe and here in Pennsylvania and the Pittsburgh metro
area (MSA). Based on data through the end of March, a rough estimate
of the unemployment levels for the region can be calculated.
calculation looks first at the household data for the number of people
newly out of work as measured by unemployment claims. Since
March 15, Pennsylvania has recorded 844,000 new unemployment claims. That
represents roughly 13.6 percent of the number of Pennsylvanians working as
of February. Assuming that percentage also applies to the Pittsburgh
MSA (which is reasonable in light of the governor’s mandated statewide
business closing orders) there would have been 155,600 unemployment claims
in the MSA. The unemployment rate which stood at 5.2 percent in
February—the latest official number—could be close to 18 percent as of the
end of March and will almost certainly worsen further in April.
No doubt the claims will continue to rise in the weeks ahead, perhaps more
slowly since the mandated closings have already had their heaviest
impact. However, the situation will continue to worsen as the effect
of rapidly rising unemployment in many sectors not under the governor’s
mandate begins to push unemployment claims upward. Travel-related sectors
such as hotels, airlines, taxicab services, etc., will almost certainly be
much worse off in the days ahead.
A rough estimate of the job losses by business sector can be made by
focusing on the businesses ordered closed by the governor and the ones
allowed to remain open. The Bureau of Labor Statistics provides MSA data
for the broad industry sectors, including retail, leisure and hospitality,
goods producers, transportation, wholesale, education and health, finance
and professional services.
However, within the broad sectors there are many subcomponents for which
there are no data. In several cases involving retail components some
are under mandated closure orders and some are not. By applying the retail
subcomponents’ percentages of national retail to Pittsburgh MSA total
retail jobs, a reasonable approximation of the area’s employment in the
subgroupings can be obtained. For example, nationally, pharmacies
make up 4.5 percent of all retail jobs and grocery stores account for 17.5
Using the national percentages means that in the Pittsburgh MSA for
businesses still open, there are close to 6,000 jobs in pharmacies, 21,000
in grocery stores, 7,000 in gas stations (including attached convenience
stores) and 14,500 in super centers. And there are others such as building
supply, pet supply stores, auto parts and non-store businesses, including
electronic (internet, etc.) ordering services that could add another
10,000-12,000 to those allowed to remain at work.
All told, employment in retail likely stands at about 59,000 jobs while
approximately 57,000 are out of work, including motor vehicle dealers;
clothing stores; appliance and electronics; sporting goods and hobby;
furniture and other “non-essential stores”.
Note that some grocery stores and supercenters have added jobs but that
number is not available. To the extent that is occurring, the 57,000 out of
work figure would be a little lower.
The other very hard-hit sectors are in the leisure and hospitality group.
In February this group had 118,000 jobs. Of that number, eating and
drinking establishments employed 88,500; accommodations (hotels, motels,
and others) had just under 10,000 employees, and the arts, recreation and
entertainment group had roughly 20,000.
Eating and drinking establishments were ordered closed but many restaurants
are offering take out. It is reasonable to assume that no more than 40
percent of these employees are required (note about 35 percent of eating
places’ employees work at fast food restaurants that are less affected by
the closing order) that would mean about 52,000 food and drink workers are
not working. Meanwhile, hotels have been hard hit by the enormous drop in
travel. One can assume that with the occupancy rate at 23 percent
nationally for the week of March 22-28 (Pacific
Business News, April 3, 2020) that the rate in the Pittsburgh
MSA would be fairly close to that figure. In that case, there would most
likely be some serious layoffs of personnel, perhaps as many as half so
far. That would mean 5,000 fewer jobs.
Finally, the arts, entertainment and recreation component of 20,000 jobs has
also taken a major hit owing to mandated closings. Assuming that 20 percent
or so of these employees are office workers and can work from home, this
component would add another 16,000 to the unemployed roll.
In total, leisure and hospitality would have around 73,000 workers off the
job. And with 57,000 off the job in retail there are an estimated
130,000 fewer jobs in the region owing to the coronavirus in just these two
industry groups. And the number of people not working are
being added to daily by local and state government employees being sent
home. Some may be working from home and some will be on layoff status.
Moreover, other sectors are being affected by the economic slowdown
including airports, local trucking, and wholesalers. However, there
is no direct or reliable indirect way as-of-yet to estimate the number of
Education and health, a very large sector of 260,000 employees, has likely
not yet been significantly affected. Education, including public
education, continues by remote instruction at least until the spring
semester is over. Health and public assistance might well be adding
help. There is no news on that.
Mining and logging and most of the construction sector were locked down on
March 20th but extraction industries are now open again.
Construction employment in the MSA stood at 69,000 in February. Some
manufacturing (mostly durable goods except for primary metals) is closed by
edict amounting to roughly 50,000 employees, as are many business services and
legal services. However, since many of these business services jobs
can be carried out from home, the numbers actually out of work cannot be
reliably estimated although the total affected by the mandatory closing
order is at least 150,000.
At some point employers might decide to lay off business service employees
as opposed to letting them work from home because of reduced demand for
their services and falling revenue as the economy slows dramatically. In
that case unemployment claims will swell further and the unemployment rate
in the April report will rise to a catastrophic level.
The obvious question has become crucially important. When is the cure worse
than the disease? There should be much more effort to find ways people can
work safely at their regular workplace. Otherwise the downturn becomes a
self- sustaining downward spiral as incomes dry up and demand
plunges. While the massive federal spending plan will soften somewhat
the effects of the jobs lost because of the mandated closings by replacing
some of the lost wages and business revenue, it will not replace the
massive loss of output that is occurring. The economic damage is real
Haulk, Ph.D., President Emeritus
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