The Road to Recovery: Greater Philadelphia’s Professional and Business Services Industry
  • mike shields
Categorized As:
Regional Direction

The Road to Recovery: Greater Philadelphia’s Professional and Business Services Industry

In our second installment of our Road to Recovery series, we take a closer look at Greater Philadelphia’s professional and business services industry - a super-sector that includes all professional, scientific, and technical activities, management and administrative work, consulting and secondary business services, and waste management and remediation services [1].

 

Key Takeaways

  • Greater Philadelphia’s professional and business services industry experienced a 7.7 percent decrease in employment from March to April 2020 – less than half the rate of employment attrition in the metropolitan region as a whole.

  • Greater Philadelphia’s professional and business services industry lost roughly 8.6 percent of its pre-pandemic (February 2020) employment and only gained back 4.8 percent between March and November 2020 – a 3.8 percent employment deficit.

  • Assuming the rate of recovery seen between June and November 2020—a period of stabilization after the initial flux of spring--Greater Philadelphia’s professional and business services industry is not projected to recover to pre-pandemic employment levels until April 2022.

 

The Work-From-Home Sector

While employment in Greater Philadelphia’s professional and business services industry declined at the onset of the pandemic, its decline was less precipitous than that of other regional industries. Figure 1 compares overall regional employment with that of Greater Philadelphia’s professional and business services industry. When indexed to pre-pandemic levels (February 2020), it is plain to see that the professional and business services industry fared much better than the region as whole; its initial decline from March to April (7.7%) is less than half of the decline experienced in the region as whole (14.9%).

 

FIGURE 1

NOTE: Data obtained from the U.S. Bureau of Labor Statistics, Current Population Survey, Not Seasonally Adjusted Monthly Employment

 

The smaller employment decline of this industry largely reflects its ability to easily transition to remote work. As news of COVID-19 cases spread in February and early March 2020, and as authorities began to consider work-from-home policies, many businesses had to plan for the possibility of staff conducting work from their homes. Plans and preparations varied by business, but—since most work is this industry is now conducted via electronic communication—it became relatively easy for professional, scientific, technical, consulting, and secondary business services to transition to remote work. Thus, many businesses saw no need to furlough or layoff staff who could fulfill businesses needs from their new work environments. Of course, some furloughs and layoffs did occur since payroll cuts are often a first line of defense for businesses facing financial turmoil, but not to the degree of other more customer-focused service industries [2].

 

A High Recovery Deficit

While employment attrition in the region’s professional and business services industry were much smaller than other sectors in the region, recovery has been more sluggish. Figure 2 shows the total monthly employment losses and gains of the five largest industries in Greater Philadelphia. They are normalized as percentages of each industry’s February 2020 (or pre-pandemic) employment count.

 

FIGURE 2

NOTE: Data obtained from the U.S. Bureau of Labor Statistics, Current Population Survey, Not Seasonally Adjusted Monthly Employment

 

Figure 2 illustrates that Greater Philadelphia’s professional and business services industry posts the largest recovery deficit of the region’s five largest industries. It lost roughly 8.6 percent of its pre-pandemic (February 2020) employment and only gained back 4.8 percent between March and November 2020 – a 3.8 percent deficit. The region’s overall recovery deficit is 5.0 percent.

 

A Slow Recovery

Considering the role of the professional and business services industry in providing new business opportunities, innovations, and investment opportunities in the region - the burgeoning biotech sector serves as a prime example - the slow recovery of this industry could have a profound impact on the region’s economic vitality and competitiveness. To project how long it may take the sector to recover to pre-pandemic levels given its current rate of recovery, figure 3 uses a slope of employment growth between June and November 2020—a period of stabilization after the initial flux of spring. By our calculations, Greater Philadelphia's professional and business services industry is not projected to recover to pre-pandemic employment levels until April 2022.

 

FIGURE 3

NOTE: Data obtained from the U.S. Bureau of Labor Statistics, Current Population Survey, Not Seasonally Adjusted Monthly Employment

 

This projected recovery only considers five months of growth. It can fluctuate based on external factors and events like: (1) the dissemination of COVID-19 vaccines in the region, (2) the possible spread of new COVID-19 mutations, (3) more economic relief opportunities from the federal government, etc. These factors could considerably impact the pace of the projected recovery, but only time will tell.

 

Works Cited

[1] U.S. Bureau of Labor Statistics. 2021. “Industries at a Glance: Professional and Business Services.” U.S. Bureau of Labor Statistics. Retrieved from: (https://www.bls.gov/iag/tgs/iag60.htm#about).

 

[2] Zeidner, Rita. 2020. “Cutting Staff in Times of Crisis.” SHRM. Retrieved from: (https://www.shrm.org/hr-today/news/all-things-work/pages/cutting-staff-due-to-coronavirus-fallout.aspx).