Recovery in Delaware is "clearly underway, but remains a "work a progress," said Federal Reserve Bank of Philadelphia President Pat Harker, whose prediction a year ago that the state's recovery would be "uneven" and "painful" for the hospitality and tourism sectors rang true.
"This new normal was still just that, it was new. Non-essential business were shuttered; COVID cases were spiking, and vaccines seemed only a distant, distant hope. Like most first-year anniversaries, ours is a fairly happy one. That's because while last year and the early part of 2021 were really, really tough and tragic for millions of Americans," said Harker.
Harker, former president of the University of Delaware, pointed to payroll data in the First State, which shows the state has recovered more than 60% of the jobs it lost at the beginning of the pandemic. But there are still 24,500 jobs less than there were pre-pandemic.
"That's enough for the unemployment rate in the state to have fallen from 13.4% a year ago to 6.3% now," he told a virtual forum, hosted by the Delaware State Chamber of Commerce Tuesday, April 13, 2021. "Now, that's encouraging, of course. In February of 2020, if you think back, the unemployment rate in Delaware was 4.5%. Labor force participation is similarly improving, but it's still down; it's still down from its pre-pandemic highs."
Harker pointed to the finance and insurance industry, which is responsible for 30% of the state's gross domestic product (GDP), noting its remained "basically unscathed."
"It's really a remarkable development for those of us who recall the great recession of 2008 and 2009--[it's] a very different recession this time," he said.
But where that uneven recovery becomes apparent is in the hard-hit hospitality and tourism industries, which last year, Harker accurately predicted would see a more "painful" recovery. Net revenue at Delaware small businesses in that sector, he said, remains down 50% compared to before the pandemic.
But he pointed to cautious optimism.
"There are some hopeful signs. Rehoboth Beach/Dewey Beach area is reporting an uptick in demand for weekend accommodations and demand now outstrips pre-pandemic times, and that is a likely sign of that people who may have traveled further in other years are now sticking closer to home," said Harker, who added he's in that group.
He said job postings in the hospitality and leisure sectors have been on the uptick for months, showing a willingness to hire, as restrictions ease in the state.
"Manufacturing, collectively, that's responsible for about 6% of the state's economic production, is also showing an increase in hiring, though it's still just slightly below the pre-pandemic trend," he said.
While productivity numbers increase nationwide, in Delaware, the manufacturing of chemical products, food and beverage, and tobacco products are up from 2019, despite a slightly smaller workforce.
He added the agriculture sector has also remained steady with the number of operating farms relatively unchanged throughout the pandemic.
"A recovery is clearly underway, and I think with that comes a great opportunity for all of us. We can shape what's coming to build the recovery, a different recovery this time that is equitable and durable," Harker said.
A look at the national picture
Nationally, he said the turnaround is "noticeable" and outpacing expectations though he cautioned concerns about COVID variants and an alarming spike in cases in some parts of the region are worrisome.
"Increased vaccinations, falling COVID case rates, and as you know, a huge shot of fiscal stimulus should build the national economy.
He predicted unemployment will continue to fall throughout this year. As a result of current conditions, he said federal policy will hold steady.
"We will keep federal funds rate very low and continue making more than $100 billion in monthly treasury bond and MBS purchases, he said. "While the economic situation is improving...the recovery is still in its early stages, and I don't think there's any reason to withdraw our support yet."
He called the current recovery still "very fragile" with full recovery hinging on vaccinations. Harker said virus variants circulating and vaccine hesitancy amid news that the FDA and CDC has recommended a pause in usage of the single-shot Johnson & Johnson vaccine.
"If we don't get herd immunity, if we don't get everybody vaccinated, and we're probably going to have to get people vaccinated again later this year or next year--just like we're getting a flu shot--if we don't overcome that, we're not going to get the economy fully back functioning.
What does an equitable and durable recovery look like?
Harker pointed to a new tool launched by the Philadelphia Federal Reserve Bank, which came out research that centered around how to get workers in low-paying, unstable jobs into "opportunity occupations," or jobs that pay above minimum wage, don't require a four-year college degree, and can propel people into the middle class.
The Occupational Mobility Explorer, is an interactive online tool, that can help workers and employers make that transition.
"They can select their geographic location and your current occupation, and you'll find a variety of jobs that require similar skills and pay at least 10% more in wages," he said. " A receptionist here in the Philadelphia/Wilmington area will find that they possess many of the skills necessary to become a medical secretary--and that's in high demand--a job that pays about 26% more, and that's a jump in salary from around $30,000 to $38,000. A bill collectors in the Philadelphia/Wilmington area could bump their salary 45% from an average of $38,000 to nearly $55,000 by becoming a credit counselor, with the added bonus...that people will actually want to answer the phone when you call."
Lack of affordable child care is driving women out of the work force
Harker also pointed to a growing problem--the economic costs of women leaving the workforce, permanently.
"Let's be frank, mostly mothers, leave the workforce because they can't find affordable options for taking care of their kid during the work day. This is a real issue. Like quality education, affordable child care is not merely a nice to have. It is an economic necessity, and it's an expensive one."
In Delaware, he said it costs a median-earning family 20% of their income to pay for childcare for children under the age of 5.
"That is a very heavy burden, even before COVID shuttered schools and childcare centers, further straining families, so making child care more affordable--it's a very complex issue--but one that surely requires our attention," said Harker.
He said research in Minneapolis shows that at the outset of the pandemic, parents of young children left the workforce, including 3.4% of mothers and 2.9% of fathers.
"In the ensuing years, most fathers returned to the labor force, while participation rates for mothers is still down 2.8 percentage points from before the pandemic. As with all those workers with skills languishing in low opportunity jobs, I think too much human capital is lying untapped," he said.