Leading Indicators

The Road to Recovery: Greater Philadelphia’s Accommodation and Food Services Sector

In past data briefs, we detailed the direct and long-lasting impact of the COVID-19 pandemic on various sectors of Greater Philadelphia’s economy. For our first Leading Indicator of 2021, we continue our analysis of the metropolitan region’s various industries but with an eye towards recovery. In this installment, we project how long recovery may be for the region’s hardest hit sector: accommodations and food services.

 

Key Takeaways 

  • The accommodations and food services sector saw a 55 percent drop in employment between March and April 2020, a rate of decline 3.7 times greater than the metropolitan region as a whole. 

  • With a loss of 59.3 percent of its pre-pandemic (February 2020) employment between March and October 2020 and a gain of just 33.3 percent, the employment recovery deficit for Greater Philadelphia’s accommodation and food services sector is 26 percent – 4.6 times greater than the metropolitan region’s total employment recovery deficit of 5.7 percent. 

  • Assuming the rate of recovery seen between August and October 2020—a period of stabilization after the initial employment gains of the early spring—Greater Philadelphia's accommodation and food services industry is not projected to recover to pre-pandemic levels until January 2022 

 

The Hardest Hit 

Overall unemployment plummeted in Greater Philadelphia during the first few months of the pandemic as social gathering restrictions were instituted for public health and safety. These restrictions had a devastating effect on businesses that relied on the daily interactions of “nonessential” workers who were suddenly required to work from home. Thus, many restaurants, retail businesses, transportation services, and hotels—to name a few—were forced to furlough or layoff their employees as customers and revenue significantly diminished. 

 

One of the hardest hit industry sectors was the accommodations and food services sector. As figure 1 shows, this sector—comprised of hotels, restaurants, bars, cafes, and caterers, among other businesses—saw a 55 percent decrease in employment between March and April 2020. In the past, we have written extensively on the size and economic contribution of the local food-based economy. This sector has long been a significant contributor to low-barrier employment opportunities that require minimal educational credentials and training and hosts a wide range of small businesses. These closures devasted small businesses and forced many workers—who were already working paycheck to paycheck—into unemployment. 

 

FIGURE 1

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

 

By the late spring, however, easements in social gathering restrictions and warmer weather allowed some businesses to innovate, re-open, and hire back some staff. Restaurants could take advantage of online ordering, curbside pickup, and—when possible—outdoor dining. Thus, as figure 1 shows, overall employment in Greater Philadelphia began to bounce back in May and June 2020 with significant gains. Yet the substantial employment gains began to taper off by the mid-summer and stabilize into the autumn months. By October 2020, Greater Philadelphia’s accommodation and food services sector stood at 74 percent of its pre-pandemic (February 2020) level.

 

Recovery Deficits 

Employment recovery has varied widely across Greater Philadelphia’s industries. Figure 2 shows the total monthly employment losses and gains of the top five largest private 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 

 

As Figure 2 demonstrates, the accommodation and food services sector eclipsed all other major industry sectors in both employment losses and recovery during the pandemic. With a loss of 59.3 percent of its pre-pandemic (February 2020) employment between March and October 2020 and a gain of just 33.3 percent, the employment recovery deficit for Greater Philadelphia’s accommodation and food services sector is 26 percent – 4.6 times greater than the metropolitan region’s total employment recovery deficit of 5.7 percent. 

 

A Trajectory of Recovery 

Considering the accommodation and food services sector’s significant role in providing relatively low-barrier employment and business opportunities within the region, a slow recovery could burden Greater Philadelphia with substantially high unemployment and poverty rates for years to come. 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 August and October 2020—a period of stabilization after the initial gains of the early spring. By our calculations, Greater Philadelphia's accommodation and food services industry is not projected to recover to pre-pandemic employment levels until January 2022. 

 

FIGURE 3

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

 

To be clear: our projected trajectory of recovery is based on just three months of progress. Not factored into these projections are the ongoing dissemination of COVID-19 vaccines, the suspension of indoor dining from Dec 1 to January 15, or recent efforts that have created programs to assist businesses and employees within this sector. Only time (and more data) will let us know how these events and initiatives will affect the recovery trajectory of Greater Philadelphia’s critical accommodation and food services sector.