Metros that dealt with large outbreaks of COVID-19 in the early stages of the pandemic and those with tourism-dependent economies have seen the worst employment losses and have been slower to regain jobs, according to July employment data.
The numbers, released last week by the Bureau of Labor Statistics, reveal that the recovery is happening at a different pace across the country. Metros in the Sun Belt, barring those in California, have seen their labor markets contract less than other places since the beginning of the outbreak of the virus.
The labor markets that have fared worst this year broadly fall into one of two categories. Some areas experienced severe outbreaks in March and April and subsequently enacted strict lockdowns and social distancing measures, which led to a sharp decrease in employment and have since been slow to recover. Metros that fall into this category are New York-Newark-Jersey City, N.Y.-N.J.-Penn. (down 14.4 percent since the beginning of the year), Boston-Cambridge-Newton, Mass.-N.H. (-13.4 percent), and Detroit-Warren-Dearborn, Mich. (-12.2 percent). The other type of labor market that has fared the worst are cities with economies that are largely reliant on tourism. Las Vegas-Henderson-Paradise, Nev. (-13.3 percent) and Orlando-Kissimmee-Sanford, Fla. (-9.9 percent) both have outsized Leisure and Hospitality sectors.
The metros that have experienced the smallest contractions during the crisis are largely located in the Sun Belt and in states that have only recently endured their respective peaks in new cases of COVID-19. Phoenix, despite being hammered by the virus in July, has only lost 5.6 percent of its total employment since the beginning of the year. Three of the four large Texas metros have seen employment shrink by less than 6 percent. The fourth, Houston-The Woodlands-Sugar Land, Texas (-7.4 percent), is dealing with a downturn in the energy markets that drive a good portion of the local economy, and even so has only seen the ninth lowest percentage of job loss among the 30 most populous metros.
Sunshine and geography don’t explain these metros performance—rather, it is a function of social distancing and government mandates. Markets in California have experienced harsher levels of job loss despite having more strict shutdowns than other places in the Sun Belt, albeit less stringent than Northeastern states. Florida, Arizona, Texas and Georgia all resisted the rigorous measures taken in other states and rushed to reopen their economies in the late spring. Despite cases of the virus and deaths spiking in the summer, these states refrained from additional lockdowns and stay-at-home orders.
Long-Term Impact and Real Estate Outlook
This is not necessarily evidence that fewer strict government mandates during the pandemic will be better for labor markets in the long run. The potential of a resurgence of the virus in the fall could leave the Sun Belt metros much less prepared than other states that have, at least somewhat, flattened the infection curve. A third wave of the virus before the second wave has dissipated could devastate these metros. Sunbelt metros were exceedingly reliant on domestic immigration from states in the Northeast and Midwest to fuel labor market growth in the last decade. The mishandling of COVID-19 might make these metros less attractive to the young workers who had been flocking there pre-pandemic.
The impacts on commercial real estate will continue to be felt through every sector. Multifamily could witness millions of residents struggle to pay rent now that the additional unemployment assistance has expired and Congress has failed to reach an agreement on additional aid. Even with office-using jobs categories shrinking at a rate lower than most other sectors, there have still been substantial losses and many firms have workers at home indefinitely. Industrial may have been buoyed by increased demand from online spending, but the sector is not immune to the effects of a prolonged economic slump leading to a decline in consumer expenditures. Worst affected are the retail and hotel sectors, that will not realize previous levels of employment until the pandemic is in the review mirror.