Tuesday, April 13, 2021
April 13, 2021

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A tale of two recessions: COVID’s economic toll in Washington fell unevenly, may take years to heal

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To understand how deeply COVID-19 has damaged the Seattle-area economy, consider what happened at the Rainier Valley Food Bank.

Before COVID-19, the South Seattle food bank budgeted $94,000 for food purchases in 2020, says Executive Director Gloria Hatcher-Mays. But as the pandemic obliterated jobs in a community already beset by low incomes, food insecurity skyrocketed and by November food expenses hit $407,000. “The food bank hasn’t experienced anything like this before,” says Hatcher-Mays, adding that the food bank had to find extra funding from government and community sources.

Even after vaccines are widely available, however, Hatcher-Mays expects demand to remain elevated into 2022. Rainier Valley residents rely disproportionately on the kinds of jobs, such as food service, housekeeping and ride-share driving, that saw some of the heaviest layoffs in the pandemic, says Hatcher-Mays. And it’s not clear when, or whether, all those jobs will come back. COVID-19’s “economic effects will remain longer after the health effects have started to fade,” says Hatcher-Mays.

Hatcher-Mays could be describing much of the COVID recession — an economic crisis that has been almost unprecedented in its severity, especially among communities that were already struggling.

Over the last 10 months, the pandemic has dealt the economy a staggering blow. In the 90 days after Gov. Jay Inslee’s first stay-at-home order in March, Washington shed 332,300 jobs, or roughly one-tenth of its workforce, according to the state Employment Security Department (ESD). Since March, more than 1 million people have collected $13.1 billion in unemployment benefits; as of Dec. 19, benefits were still going to nearly 290,000 people, which is roughly twice the usual number this time of year.

Business incomes fell by $4.6 billion, or 8%, over the last 12 months, according to the state Department of Commerce, as companies faced public health restrictions, anxious consumers, supply chain restrictions and other challenges. Exports plunged 21%, much of that due to a cratering aerospace industry.

Granted, Washington’s economy has regained much of what it lost. Between April and November, the state unemployment rate fell from 16.3% to 6%, which is lower than the national rate of 6.7%.

But the rebound has been uneven, with much of it driven by a tech sector that suffered a much smaller downturn. Some tech firms, including Amazon and Microsoft, actually saw a pandemic boom as demand soared for online commerce, cloud computing and other digital services.

The tech sector also saw relatively few layoffs. Of all new unemployment claims filed in Washington since March 7, only about 1.4% came from workers in the information sector, which includes tech firms, according to ESD data.

“It was a really good year for Amazon,” says Jake Vigdor, an economist at the University of Washington Evans School of Public Policy and Governance. “The programmers and engineers … transitioned to work-from-home [and] their paychecks continued to be direct-deposited.”

By contrast, many sectors that depend on face-to-face, location-based activity saw huge losses in revenue and jobs that could take years to regain.

That included manufacturers like Boeing, whose airline customers were hit hard by COVID-related travel restrictions. As a share of all initial unemployment claims filed since March, manufacturing made up 8.5%, or around one in 12.

Chris Zepnick, 51, a contract engineer at Boeing’s Everett plant who was laid off in May, thinks he’s unlikely to be rehired until 2022 at the soonest. And prospects are even bleaker for most of the machinists who worked on the 787 line, he says: “That’s not coming back.”

But, importantly, most of the hardest-hit sectors were also those with lower-wage jobs. Retail workers made up one in 11 of all jobless claims since March as “nonessential” stores faced restrictions and skittish consumers.

Losses were even larger in the hospitality sector, which saw almost one in eight of jobless claims since March. During the surge in layoffs, the state’s restaurants, bars and hotels lost around 191,000 jobs, and were still down by around 90,000 as of November, according to the Washington Hospitality Association. And that was before Gov. Jay Inslee ordered new business restrictions Nov. 15.

Many economists now regard the COVID recession as two very different recessions. For many people in higher-wage, office-based jobs, the economic fallout from the pandemic was often about “the inconvenience of adjusting to [work-from-home] arrangements,” says Anneliese Vance-Sherman, an ESD regional economist who covers the Seattle area.

By contrast, Vance-Sherman says, for many lower-wage workers, the pandemic more often meant either layoffs or reduced hours or, in “essential” sectors such as grocery and health care, a greater risk of COVID-19 exposure.

Those risks tended to cluster not only by sector, but also geographically. Because layoffs fell disproportionately on lower-wage sectors, they also tended to fall in communities with higher numbers of lower-income residents. In some rural parts of the state, employment over the last 12 months shrunk more than twice as much as it did in the Puget Sound region, ESD data shows.

But the pattern also showed up in lower-income urban areas. In the Seattle area, the ZIP codes with the most weekly unemployment claims per capita during the pandemic were all either in South Seattle or in or near south King County communities — among them, Rainier Valley, Federal Way, Tukwila, Burien, White Center, SeaTac, Des Moines and Kent, ESD data show.

Further, because many lower-income communities also have suffered higher concentrations of COVID-19 cases and worse medical outcomes for COVID patients, the pandemic has meant “a double whammy,” says Dr. Ahmed Ali, executive director of the Tukwila-based Somali Health Board, which focuses on reducing health disparities among King County’s immigrant community.

Since March, Ali and his colleagues have seen not only a surge in food insecurity among community members, but also a higher incidence of depression and anxiety.

Another indication of the pandemic’s socioeconomic divide: While as many as 170,000 Washingtonians have fallen behind on rent, those with jobs and savings are buying homes at a near-record clip.

Most recessions deepen existing economic disparities. But the effects during the pandemic have been “more extreme,” says economist Debra Glassman, a professor of finance and business economics at the UW’s Foster School.

Indeed, an analysis of weekly jobless claims by Washington STEM, a Seattle-based nonprofit, shows that layoffs since March have been disproportionately high among demographic groups that were economically behind before the pandemic. For example, Black residents make up 6.2% of the population in King County, but filed 13% of weekly claims.

The pandemic has accentuated other economic disparities as well. Layoffs since March also have been extra heavy among younger workers and lower-wage workers with less education, the Washington STEM data show. And as Glassman and other experts have noted, the pandemic has been especially hard on working moms, who tended to be the parent who quit working or worked less to take care of kids when the pandemic closed in-person schooling and child-care centers.

The result has been a rise in demand for unemployment insurance and other safety net services. Applications for government food assistance between March 2 and Dec. 20 were 27.6% higher than in the same period in 2019, according to the Washington State Department of Social and Health Services.

And many of those now using such services are doing so for the first time in their lives. “We’re still seeing a lot of new faces,” says Sue Potter, CEO of Nourish Pierce County, a food bank network that is distributing about 20% more meals a month this year than it was in 2019.

These complexities suggest that recovery from the pandemic could be protracted and uneven. Early on, some economists hoped for a relatively quick V-shaped recovery. But the consensus now is for a recovery that is K-shaped, with some sectors rebounding quickly, while others coming back much more slowly.

A rebounding tech sector helped pull the rest of the Puget Sound region out of the Great Recession a decade ago, says UW’s Vigdor. And that could happen again, especially if the well-paid tech employees who’ve been saving a larger share of their wages this year start spending more locally again.

But that engine of recovery will strain against sectors with more ground to make up.

The hospitality sector likely faces a long road back. As recently as October, hotels in downtown Seattle were generating less than 15% of their 2019 revenue, according to the Downtown Seattle Association.

And even when indoor dining is allowed, the state has already lost so many restaurants and bars this year — nearly 2,400 permanent closures statewide, including 1,023 in King County, according to a Washington Hospitality Association survey — that it might be many months before employment fully recovers.

Adding to the uncertainty, many of these sectors remain vulnerable to government policy, whether that’s public health restrictions or stimulus funding.

This summer, for example, after business restrictions were lifted and federal stimulus money poured in, the state quickly regained about half of the roughly 332,000 jobs lost in the spring. But by late autumn, as stimulus ran dry and restrictions returned, the recovery slowed. In November, preliminary ESD data shows the state added just 100 jobs.

For many workers and employers, the recovery is now on hold.

Pamela Morales, owner of the Simple Life boutique near Seattle’s Pike Place Market, says she has survived the near-absence of tourists this year thanks to a federal pandemic loan, loyal locals and an understanding landlord — but her losses are mounting. Although she will launch online sales early next year, her main hope is that vaccines allow a normal tourist season to start this spring. “But we don’t know if that will happen,” she admits.

Economists warn that some sectors may never get back to their pre-pandemic employment levels. Boeing, for example, likely will recover as air travel resumes. But the company’s decision, hastened by the pandemic, to move 787 production from Everett to South Carolina means the local aerospace industry comeback will be limited.

Likewise in the retail sector, some consumers who shifted to online shopping during the pandemic may not frequent bricks-and-mortar stores as often as they did before COVID. “The root story here is that shopping has morphed,” says economist James McCafferty, a co-director of the Center for Economic and Business Research at Western Washington University. “These changes are likely to last beyond the pandemic and will change what labor is needed.”

Those shifts point to a deeper worry for workers in those hard-hit sectors: namely, that it takes so long to find another job that they stop looking, says Thomas Gilbert, an associate professor of finance at the UW’s Foster School of Business. After a certain amount of down time, Gilbert says, workers’ “skills atrophy … and the return [to work] never happens.”

To be sure, the pandemic also has produced plenty of examples of resilience and adaptation. Many businesses have pivoted to new strategies over the last 10 months. Laid-off workers have retrained for careers in more promising sectors.

But even the most resourceful workers and employers may not know for months or longer if those strategies will pay off.

Kathryn Gonzalves of Edmonds, who lost her retail job after the stay-at-home order this spring, has since retrained though Edmonds College to be a medical administrative assistant. She says she’s seen plenty of job openings — a welcome sight, given that her unemployment benefits have been held up for weeks due to a dispute with the ESD.

But at 61 with underlying health conditions, Gonzalves says she’s under doctor’s orders not to look for a new job “until I can get a vaccine and be safe.”

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