Pandemic may cause some permanent job loss in Pennsylvania

Pandemic may cause some permanent job loss in Pennsylvania

Fiscal analysts projected Thursday that Pennsylvania’s economic damage from the pandemic will last years, and some jobs may never return.

The Independent Fiscal Office released its five-year outlook that concluded lost economic growth in 2020 will lead to a $2 billion structural deficit – doubling the gap measured before the pandemic hit.

“The pandemic has brought really significant and abrupt economic changes,” said IFO Director Matthew Knittel during a presentation of the results on Thursday. “We think some of these changes will be permanent.”

The IFO estimates real GDP shrank 4.1 percent overall in 2020, though Knittel cautioned the number could fluctuate by as much as two percentage points in either direction when the final results of the fourth quarter are made available. Wage and salaries also declined 1.2 percent and the state lost 450,000 jobs. While the IFO estimates GDP could recover in just two years, some of those jobs will still be lost in 2026.

The labor force also contracted about 8 percent, losing 260,000 workers while small business revenue plummeted 28 percent. Retailers, restaurants, airlines and hotels suffered the greatest job losses, ranging from from 25 percent to 49 percent across the industries.

“We do think a lot of the job loss will not be made up because businesses have become more productive in response to the changes they made because of COVID-19,” Knittel said.

But it’s not all bad news. Other economic indicators – from cash income to home values to sales tax revenues – increased between 6.9 percent and 8.3 percent. Credit card debt also decreased 8.6 percent. The conflicting results appear to be another side effect of the “unprecedented” impact of the pandemic, Knittel said.

“If we look back at history, we don’t have a model to use where we lose 1.1 million jobs in a month,” he said. “For middle and high income homeowners, they are faring quite well. It’s a very different story for low income renters.”

Unemployment skyrocketed in March when Gov. Tom Wolf enacted some of the nation’s toughest restrictions on travel and economic activity as the first cases of COVID-19 emerged on opposite ends of the state. More than 1.3 million residents sought jobless benefits that month alone.

As restrictions lifted, the job market recovered slowly, and to date more than 2.6 million residents have applied for unemployment compensation since the pandemic hit.

Knittel said COVID-19 stimulus aid drove the increase in cash income, though the metric will decline again until it evens out in 2022 or later.

“There’s just a lot of uncertainty about how this plays out,” he said.

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