Leading Indicators

Impact of COVID-19 on Urban Labor Markets

This Leading Indicator looks at the impact of the COVID-19 pandemic on private wage, employment, and establishment growth using recent estimates from the U.S. Bureau of Labor Statistics (BLS). We dig deeper into the short-term impact of the pandemic across these economic metrics for the 20 largest U.S. cities while also take a closer look at these metrics for the hardest hit industry sectors—Leisure and Hospitality and Education and Health Services—to better understand how Philadelphia’s economic recovery compares with its peer U.S. cities.

What You Need to Know

Philadelphia has experienced a modest recovery of its labor market compared to other large U.S. cities.
Philadelphia ranked 13th out of the 20 largest U.S. cities with a post-pandemic average weekly wage increase of $215, after accounting for inflation.
Seeing a loss of roughly 43,000 jobs since the start of the COVID-19 pandemic, Philadelphia ranked 13th in job loss among the 20 largest U.S. cities.
Neither wages nor the number of private establishments have grown as fast in Philadelphia after the pandemic as in peer U.S. cities.
Philadelphia has seen the lowest increase in total wages–at roughly $1250 per employed resident–of the 20 largest U.S. cities
Only roughly 153 new private establishments have opened in Philadelphia over the last two and half years.
Philadelphia’s labor market in the Leisure and Hospitality sector has fared relatively well compared to other large cities
Average weekly wages in Philadelphia’s Leisure and Hospitality sector have seen the second highest average increase among 20 largest U.S. cities – at roughly $140, after adjusting for inflation.
Philadelphia’s Leisure and Hospitality sector has experienced little to no increase in private establishments since the start of the pandemic.
Philadelphia’s Education and Health Services sector is recovering more slowly compared to its Leisure and Hospitality sector.
At $152, Philadelphia saw the sixth lowest increase in average weekly wages in its Education and Health Services sector, when accounting for inflation.
With a deficit of roughly 5,400 jobs, employment in Philadelphia’s Education and Health sector has not recovered to its pre-pandemic levels.
Philadelphia is the only major U.S. city in our analysis which has not recovered its loss of private Education and Health Services establishments since the start of the pandemic.

Major Cities’ Labor Markets Before and After the Pandemic

Major U.S. cities are experiencing a relatively positive build-back of their labor markets since the start of the COVID-19 pandemic in 2020. Figure 1 compares the mean pre- and post-pandemic differences across a series of economic metrics for the 20 largest U.S. cities (proxied by their home counties). To calculate differences, we computed pre- and post-pandemic averages across private metrics of average wages, total employment, and total establishments. Pre-pandemic averages were calculated from nine quarterly statistics of average wages, employment, and establishments from the fourth quarter of 2017 to the fourth quarter of 2019 while post-pandemic averages utilized the same quarterly statistics from the first quarter of 2020 to the first quarter of 2022. To understand the impact of the pandemic on the labor market, we simply subtract the pre-pandemic average from the post-pandemic average. The closer a city’s difference is to the zero line, the more its current labor market resembles a pre-pandemic version.

FIGURE 1

SOURCE: Data obtained from the Bureau of Labor Statistics’ Quarterly Census of Employment and Wages and American Community Survey.

NOTE: All cities are measured by their home counties (e.g., estimates for Maricopa County are proxied for Phoenix). All labor market estimates of employment, wages, and establishments in the figure are taken from businesses under private ownership. All wages are real wages adjusted for inflation (in 2022 dollars) and residents refer to employed residents in each county. Quarterly averages for nine quarters before and after the pandemic also account for large unemployment trends in the initial months of the pandemic.

According to our analysis, Philadelphia has fared relatively well compared to other cities when it comes to total private employment and average wages. Average weekly wages in Philadelphia have increased by roughly $215 in the two and half years since the pandemic, after accounting for inflation. This puts Philadelphia at a similar ranking with Los Angeles, Phoenix, and Indianapolis, which experienced similar increases in their respective average weekly wages. Seattle, San Jose, and San Francisco remain the outliers; these cities saw increases as much as $1000 in their average weekly wages. Philadelphia saw a relatively lower loss in total private employment—at roughly 43,000 jobs—since the start of the pandemic. Cities like New York City, Los Angeles, and Chicago saw larger declines in their total employment over the same time-period. It is important to note, however, that these changes in total private employment do not account for total population of each city.

On the other hand, Philadelphia did not experience gains in its labor market in terms of total wages and number of private establishments. This might just reflect slow economic growth observed in the region prior to the pandemic [1, p. 4]. While other large U.S. cities have seen an increase in the total wages their employees have started earning since the pandemic, Philadelphia has seen the lowest increase of $1250 per employed resident, when accounting for inflation. This might be explained by the slow growth of new establishments in Philadelphia - 153 new establishments on average - compared to other large U.S. cities. Los Angeles and Phoenix, for example, have seen an increase of approximately 21,000 and 14,400 new private establishments respectively since the pandemic.

The Hardest-Hit Industries

To further understand how Philadelphia’s economic recovery compares with peer U.S. cities, we take a closer look at each city’s Leisure and Hospitality and Education and Health Services sectors. Previous analyses have shown that these sectors have been the most negatively affected by the COVID-19 pandemic for a variety of reasons. Since employment recovery has been the slowest within these service-providing sectors, we sought to compare Philadelphia’s experience to that of its peers.

Figure 2 shows the state of the labor market in the Leisure and Hospitality sector for the 20 largest U.S. cities (proxied by their home counties). As in Figure 1, we computed pre- and post-pandemic averages across metrics of average wages, total private employment, and total private establishments. Negative numbers for each metric indicate that the corresponding sector, in this case Leisure and Hospitality, has not returned to its pre-pandemic level; zero means that the metric for the corresponding sector is the same as before the pandemic; and positive numbers mean that the sector is performing better on that metric two years after the pandemic.

FIGURE 2

SOURCE: Data obtained from the Bureau of Labor Statistics’ Quarterly Census of Employment and Wages and American Community Survey.

Philadelphia’s labor market in the Leisure and Hospitality sector has fared relatively well compared to other large U.S. cities. Average weekly wages in Philadelphia’s Leisure and Hospitality sector have seen the second highest average increase of roughly $140 since the start of the pandemic, when accounting for inflation. San Francisco is the only city that has seen an unusually high increase in its average weekly wages of $1,430 over this time-period. Increased demand for labor in Leisure and Hospitality sector, resulting from high resignation rates in this industry after the pandemic, explains the increase in average weekly wages seen across these cities [2, 3]. Philadelphia has also seen a relatively minor loss in private employment and total wages; with an employment decline of roughly 23,000 and a total wage gain of $102 per employed resident, when accounting for inflation. Some East-Coast cities, like Washington D.C. and New York City have seen considerable loss in total wages and number of employees in their Leisure and Hospitality sector. Philadelphia has, however, fared slightly worse in private establishments in this sector compared to other large U.S. cities. While most peer cities have seen some growth in Leisure and Hospitality establishments since the pandemic, Philadelphia has experienced little to no increase in this sector. This means that while Philadelphia’s Leisure and Hospitality market has returned to its pre-pandemic level, in terms of number of private establishments, it has not seen growth on par with peer U.S. cities.

Figure 3 compares labor market estimates for the Education and Health Services sector of the largest U.S. cities (proxied by their home counties). Our analysis shows that Philadelphia’s Education and Health Services sector is recovering more slowly compared to its Leisure and Hospitality sector. While average weekly wages have increased in the Education and Health Services sector across all 20 cities, Philadelphia saw the sixth lowest increase of $152, when accounting for inflation. Similarly, private employment in Philadelphia’s Education and Health sector has not returned to its pre-pandemic level, which is currently experiencing a 5,400 deficit. Philadelphia is also the only major U.S. city in our analysis which has not recovered its loss of private Education and Health Services establishments since the start of the pandemic. Total wages per resident is the only metric that showed positive signs for Philadelphia’s Education and Health Services sector, where it ranked fifth overall.

FIGURE 3

SOURCE: Data obtained from the Bureau of Labor Statistics’ Quarterly Census of Employment and Wages and American Community Survey.

Takeaway

U.S. cities have started to recover their labor market since the COVID-19 pandemic and in some instances have improved beyond their pre-pandemic levels. In comparison, Philadelphia’s labor market fared modestly well – except for private establishment growth. Wages are on the rise in Philadelphia and our employment losses are on par with peers. Private business growth, however, seems to lag many other U.S. cities. This relationship seemed to play out across the hardest hit industry sectors as well. While wages are on the rise in Philadelphia’s Leisure and Hospitality and Education and Health Services sectors and private employment losses are comparable to peers, private establishment growth continues to falter – especially in the Education and Health Services sector where Philadelphia remains the only large U.S. city to have not recovered in private establishments.

Works Cited

[1] “Economy League - Philadelphia’s Economic Competitiveness – PART 4: City to City Business Growth,” Economy League of Greater Philadelphia. http://http://economyleague.org//providing-insight/leadingindicators/20… (accessed Oct. 19, 2022).

[2] G. Iacurci, “Despite higher wages, inflation gave the average worker a 2.4% pay cut last year,” CNBC. https://www.cnbc.com/2022/01/12/higher-pay-eclipses-inflation-bite-for-… (accessed Oct. 19, 2022).

[3] J. Cox, “A record 4.5 million workers quit their jobs in November,” CNBC. https://www.cnbc.com/2022/01/04/jolts-november-2021-record-4point5-mill… (accessed Oct. 19, 2022).