Analysis: Six months in, no end in sight to the Covid-19 recession

With the region still down almost 46,000 jobs from the beginning of the pandemic, hiring has cooled to its slowest pace since the early spring lockdown began to lift, according to State Labor Department data released Thursday.

And with the reopening process now moving in baby steps, the summer slowdown in hiring is a strong sign that it will be well into next year before the job market is anything close to healthy again. 

The new job data shows that the pace of the recovery has become concerningly slow. During each of the last two months, we’ve added about 5,500 jobs, compared with the previous month.

At that pace, it would take eight months – until April 2021 – before all of the jobs lost during the sudden Covid-19-related plunge are recovered. And there’s no guarantee that will happen.

“We definitely have a slower rate of job growth, and I think that slower rate will continue,” said Julie Anna Golebiewski, a Canisius College economist. “That won’t have us recovering (the lost) jobs for at least a year.”

That’s because we still have a long road back, even after recovering about 55% of the jobs that disappeared during the initial pandemic shutdown.

Many of those regained jobs came back quickly as the economy reopened. But now the pace of the recovery has slowed as the reopening process has largely plateaued, with capacity limits still in place at many businesses, such as restaurants and gyms, and others that involve large gatherings continuing to be shut down entirely.

The reopening of schools is restoring thousands of jobs this month, but there continue to be cross-currents that are counteracting those gains. It’s become a recovery that takes three steps forward, then two steps back.

That’s because there still is plenty of turbulence in the job market, with continuing struggles in broad swaths of the economy, especially in travel, tourism and hospitality.

We saw that this week, with Delaware North cutting 139 jobs locally as its hospitality and concessions businesses are ravaged by the dramatic drop in travel and the lack of fans at the professional sports stadiums where it provides concessions. The Buffalo Niagara Marriott, which is being sold at an auction next month, permanently cut 87 jobs at the Amherst hotel as travel remains constrained.

We see it in the persistently elevated number of people who are filing for unemployment benefits for the first time. Over the last four weeks, a period that roughly covers the time since the August job data was compiled, the region has averaged nearly 2,650 new claims every week, according to Labor Department data released Thursday. One potentially hopeful sign: Just under 2,500 people filed for unemployment benefits last week – the second-lowest since the pandemic began.

Even so, that’s more than three times higher than a year ago, and an indication that workers are continuing to lose their jobs at an accelerated pace as so much uncertainty swirls around the pandemic and how long it will last.

There are some bright spots. The reopening of schools will be a positive during September. Local manufacturers – usually the hardest hit during a recession – have weathered the pandemic surprisingly well and actually have about 1,000 more jobs than they did a year ago. Construction – another highly sensitive sector – is only down about 6% from a year ago.

But other parts of the local economy are sicker. Hotels are reeling from the loss of business travelers and a plunge in leisure travel. Bars and restaurants are operating at half capacity and facing the end of outdoor dining without tents and heaters in weeks. Those businesses account for about three of every 10 jobs that have disappeared over the past year. 

That's about twice as severe as the drops in other hard hit sectors, from retail and professional and business services to government and health services. 

The trouble is that the recovery is starting to plateau. Retailers added just 500 jobs from July to August. Professional and business services were flat. There were only modest gains in health care and social services.

A survey of service industry executives across the state released this week by the Federal Reserve Bank of New York showed that only a little more than 1 of every 3 business leaders think activity will have picked up six months from now.

“Firms do not expect much improvement in the months ahead,” Fed economists wrote in their analysis of the survey. “Employment levels are expected to hold steady, while wages are expected to increase. Firms anticipate lower capital spending in the coming months.”

Manufacturers, however, have a much rosier view. A survey of New York manufacturers by the New York Fed found that business at the state’s factories remains on the upswing, and that executives think it will keep getting better.

That’s a good sign, because a rebound in manufacturing traditionally is a strong signal that a recession is moving into its final months, although this virus-fueled downturn is hardly typical.

“New orders increased modestly, and shipments grew significantly. Unfilled orders continued to decline,” the Fed economists said in their report.

There even were signs that the state’s manufacturers plan to start spending more on equipment and other costly upgrades in the coming months – an indication that they think the manufacturing recovery is here to stay.

That’s a step forward, but there also are bound to be more steps back. Unemployed workers now are in their second month without supplemental benefits, and their bills are getting harder to pay.

Consumer spending in Erie County was down 5% through August and off by 10% in Niagara County, according to economy tracker Opportunity Insights. That’s bad news for local stores and businesses, since consumer spending accounts for about two-thirds of all economic activity. With less tax money coming in, state and local governments are facing big budget deficits that could lead to steep job cuts in the coming months.

“It will continue to cascade through different industries,” Golebiewski said. “If that continues, then all it’s going to do is prolong our recovery.”