17 Aug. 2020 | Comments (0)
The COVID-19 pandemic hit the United States hard just in time for spring – a time where many Americans would normally make their way to the warm weather beaches and prepare for their upcoming summer travels. Social distancing initiatives, coupled with the fear of traveling and contracting the virus, brought these activities to a grinding halt.
Planes began operating at a fraction of their capacity while many hotels and venues for in-person entertainment completely shut down. Springtime is critical for these industries and the cities that rely on seasonal consumption.
As we will show, the economic impact of COVID-19 across the country is dependent on industry composition, the spread of the virus and government restrictions related to social distancing.
Shown in Figure 1, entertainment and recreation industries were among the hardest hit nationally, along with accommodation (e.g. hotels and lodging) and air travel. Sporting venues are still not open to spectators and many people continue to avoid traveling and enclosed spaces like museums and casinos. Consumption has dropped considerably in these industries, as did employment.
To measure which cities were most impacted, groups of metro areas were created by ranking employment shares by industry from the American Community Survey (ACS). The top metro areas with the largest share of employment in the relevant industries defined the groups. To limit the influence of large cities on the group totals, the top 20 metro areas by population were placed in a group of their own and excluded from the others. Shown in Figure 2, vacation destinations, defined by those with the largest share of employment in entertainment and hotels, experienced the largest decline in employment relative to other metro areas.
Cities like Atlantic City and Ocean City in New Jersey, along with Las Vegas, NV and Kahului, HI are heavily reliant on tourism and experienced the greatest job losses (Figure 3). Large metro areas also experienced significant job losses relative to the rest of the country (Figure 2). New York City is among the most impacted with a 16 percent drop in employment (Figure 3).
New York City is more economically diverse than other vacation destinations, but it still benefits a great deal from tourism. As the epicenter of the COVID outbreak and an international tourist attraction, the city was forced to close its doors to both visitors and locals. As the confirmed number of coronavirus cases surged, strict government restrictions were enforced, greatly impacting consumption and job losses. The entertainment and hotel industry certainly suffered, but as did retail trade and food services in a city known for its shopping, dining, art, and nightlife.
Many other large metro areas also experienced significant job losses. Cities like Detroit, New Orleans, Los Angeles, Philadelphia, and Chicago all experienced a larger drop in employment compared to the US as a whole (Figure 3).
The map (Figure 4) shows that through June, job losses were larger than average in metro areas in the North East and the Pacific regions, where the spread of the virus occurred earlier, and states governments were more restrictive. The impact of the second wave of COVID is likely not visible here. States like Texas and Florida have been making headlines for their rise in the number of cases over the summer, so we may begin to see weaker employment growth for these areas when the numbers are published for July.
Not all cities are created equally and therefore were not impacted equally. Industry composition and the severity of coronavirus cases resulted in some parts of the country suffering more economically than others. Even once restrictions are lifted, consumer fear is likely to linger and negatively affect local economies.