COVID-19 broke the economy. Social distancing and stay-at-home measures precluded or dampened lots of economic activity, particularly that which requires physical proximity. The list of those activities is long: heading out to eat or a movie, anything involving crowds, going to the doctor or having elective surgery, going to a classroom, etc. The following examines COVID-19’s impact on Cleveland’s regional economy, looking at trends related to employment and job postings.
COVID’s impact on economic growth is global, affecting nations, not cities. The latest quarterly figures for Gross Domestic Product show the U.S. economy contracted by 32.9% (See Figure 1). This dwarfs the contraction that occurred with the 2008 Great Recession (-8.4%), as well as second largest contraction on record (-10%) during Q1 1958 that was associated with the 1957 Pandemic.
GDP, in turn, is a function of employment. Products made and services delivered are done so via jobs, so it stands that employment would decline along with economic output. And it did, historically so. Year-over-year job losses stood at 11.371 million nationally from July 2019 to July 2020 (See Figure 2). That’s better than April 2020’s year-over-year figures (-20.189 million) but conditions remain pressing.
Job declines in Ohio have mounted as well. In April 2020, year-over-year job losses in Ohio totaled 881,000, trailing only California, New York, Texas, Pennsylvania, Michigan, and Florida (See Figure 3). By July, Ohio’s year-over-year job losses stabilized somewhat (-495,100), yet the figures remain bleak. Gauging year-over-year percent change in jobs from July 2019 to July 2020, Ohio registers an 8.8% decline—14th worst nationally. Hawaii (-16.1%), New York (-13.7%), Massachusetts (-12.2%), Vermont (-12%), and Alaska (-11.9%) lead the way in terms of largest percent declines (See Figure 4).
Figure 4: Year-over-Year Percent Employment Change for 50 States, July 2020 to July 2020. Source: Current Employment Statistics Survey.
The Cleveland metropolitan statistical area (MSA) leads within Ohio when it comes to employment declines (See Figure 5). Cleveland lost nearly 184,000 jobs from April 2019 to April 2020, with the figure 130,200 in July. Columbus had the second highest job loss figures in July at 99,700. Cincinnati had almost the number of job losses as Cleveland did in the pandemic’s early stages (-164, 000 in April), but it is rebounding quicker with 75,200 job losses in the latest figures. Conversely, Cleveland’s recovery from June to July appears stalled.
Examining Cleveland’s numbers historically, well, it puts in perspective just how much of a dent COVID-19 has been to the trajectory of the local job market. Figure 6 shows the year-over-year job losses over the last few months have been more than double that of the Great Recession’s worst monthly figures.
And while COVID-19 is an equal opportunity threat to job markets nationwide, Cleveland has been especially affected. Total jobs in the metro declined by 12% from July 2019 to July 2020. That ranks Cleveland 4th worst out of the nation’s largest 40 metros, behind only New York (-13.8%), Las Vegas (-12.8%), and Boston (-12.4%) (See Figure 7) Other metros particularly hard-hit include Detroit (-11.6%), San Francisco (-11.2%), Los Angeles (-10.1%), and San Diego (-10%). (Note: Volume 2 will unpack why certain metros are performing better or worse using an algorithmic approach to pattern industry trends.)
What industries in the Cleveland region are driving the losses? Unsurprisingly, accommodation and food services lead the way with a decline of 28,600 jobs from July 2019 to July 2020—representing 21.2% of all year-over-year job losses (See Figure 8). Cleveland’s “white-collar” and “white coat” industries are also taking a hit, with professional and business services representing 19.3% of year-over-year job losses (-24,900 jobs), while that figure for healthcare and social assistance is 11.1% (-14,300 jobs).
Looking at the three hardest hit private sector industries—food and accommodations, professional and business services, and healthcare and social assistance—it is natural to speculate when these industries will recover to pre-COVID-19 levels. Figures 9 thru 11 show their totals are increasing since the April lows. As the contagion threat diminishes, expect the recovery to hasten. But given the uncertainty around a possible Fall/Winter “second wave”, when a full recovery will occur is uncertain. Moreover, there were signs of a softening in Cleveland’s job market months before COVID-19 hit, particularly for professional and business services and healthcare. Note those industries’ peaks since the Great Recession were in August 2019 (See Figures 9 and 10). This suggests possible structural weaknesses dampening local metro job growth.
Another way to gauge recovery (or lack thereof) is by examining trends in job postings. Are firms starting to rehire? This can be done via analyzing data from the software company Burning Glass Technologies, whose job posting data “provides real-time data on job growth, skills in demand, and labor market trends.”1 Data is available for the largest 53 counties (Note: The principal city will serve as the stand-in for the county. Cuyahoga County will be referred to as Cleveland, Cook County as Chicago, etc.).
Again, Cleveland performs poorly. Total job postings declined by 55% as of August 14th, compared with the first week of January 2020. That’s the worst decline in the nation, with Houston (-52.1%) and Boston (-51.9%) 2nd and 3rd worst, respectively.
Unpacking job postings by industry can shed light on why Cleveland is performing badly compared to peer cities. Again, the leisure and hospitality industry was affected, with job postings declining by 51.4% in Cleveland. Yet while those figures are bad, the numbers in other cities—particularly costly, coastal cities—are much worse, with Washington, D.C. (-82.7%), Miami (-81.1%), Boston (-80.6%), San Francisco (-80.5%), and San Jose, CA (-76.5%) having the largest declines.
Job posting declines in Cleveland for manufacturing (-43.8%), finance (-49.2%), and professional and business services (-47.8%) were equally significant (See Figure 14). But Cleveland was no outlier. Specifically, there are 20 cities with more job posting declines in manufacturing than Cleveland, led by Houston (-52.1%), Detroit (-55%), and Tulsa, OK (-54.6%). There are 10 cities with more job posting declines in finance, with Salt Lake City (-58.2%), Detroit (-58.1%), and Boston (-55.7%) affected most. And for professional and business services, there are 28 cities performing poorer, led by San Francisco (-61.8%), Boston (-60.3%), and Houston (-59.9%).
Which brings us to education and healthcare. No region comes close to the declines in hiring Cleveland has experienced, with job postings dropping by 75.1%. Philadelphia—another proverbial “eds and meds” city like Cleveland—was second worst at -49.3%.
As to why the once-recession-proof eds and meds isn’t this time around, the recent New York Times piece “Why 1.4 Million Health Jobs Have Been Lost During a Huge Health Crisis” is enlightening2. “A sudden drop in health spending and employment amid a pandemic might seem like a paradox,” the author begins. “But it reflects how the health industry tends to make its money: Treating patients for a deadly illness is far less profitable than offering them elective surgeries.”
In Ohio, the department of health mandated hospitals to stop doing elective surgeries on March 17th, echoing federal guidelines3. While this was meant to free up capacity, it changed the revenue stream dramatically. That mandate lasted 45 days4, and while it’s been lifted, worries of contracting COVID-19 in healthcare settings is still keeping people away. “[E]ven if various governments across the nation hadn’t then ordered such a pause,” the author of the Times’ piece continues, “many patients would have probably avoided doctors’ offices and hospitals anyway, to lessen the risk of contracting the coronavirus.”
To think that the job market will return to normal once COVID-19 winds down is not to understand how global shocks upset the natural order of things, particularly job markets. The Great Recession, for instance, was associated with a permanent displacement of employment5, largely because industries and firms deal with the threats of economic contractions with cost-cutting measures. That means automation and the phenomena known as “jobless recoveries”6. Telemedicine, for instance, or the practice of seeing the doctor virtually, is here to stay7, as is tele-education. But it’s not just the eds and meds being upended, its occupations in all industries. As noted in the recent report “The Future of Growth”8:
The arrival of COVID-19 will only accelerate technology’s penetration into various industries. That means further automation of human tasks, and not simply for efficiency’s sake—i.e., robots doing more for less—but because human proximity is now a drag on productivity, not to mention a liability. It’s a scenario few saw. Worse, the endgame—how to do we work together without being together? —isn’t exactly foreseeable. There’s no playbook for this. “Everyone wants to know when this will end,” explained Devi Sridhar, a public health expert at the University of Edinburgh. “That’s not the right question. The right question is: How do we continue?”
Economically, the most pressing issue at hand is what to do about the human contact issue. A vaccine is the obvious answer…In the meantime, changes must be made, and companies hurting for cash will find the pressure to replace humans with machines intensifying. "The thing that we're hearing from customers is many of their budgets have been frozen except for budgets for automation," explained CEO Melonee Wise of Take Fetch Robotics . The question their asking: “How can robots enable us to continue…while keeping social distancing?"
The question for Cleveland, then, is how does the region prepare for what’s on the other side of the mountain? The region hasn’t ridden shotgun on an economic upswing since the Industrial Revolution. That’s the bad news. The good news is that a new economic geography is happening, and competitive positioning among cities is hardly set. Or as economist Paul Romer put it: “A crisis is a terrible thing to waste.”