After a year of hunkering down, the country is about to bask in the biggest boom in nearly four decades. But the scars of the pandemic linger.
By summer, most American adults should be vaccinated, and life is expected to return to something approaching normal as people eat in restaurants, hop on a plane, or catch a game at Fenway Park. Getting out of the house for work and recreation will swell the economy, juiced by another big federal stimulus program and trillions of dollars in savings that consumers are eager to spend.
Yet that rosy outlook isn’t reflected in the sentiments of many local employers who would benefit greatly from a post-pandemic resurgence. Hammered by COVID-19 shutdowns, they remain wary after earlier forecasts about the trajectory of the disease proved too optimistic.
Instead of the rapid rebound projected by economists, these employers — from small business owners to big institutions such as hospitals and universities — expect a more gradual recovery marked by fits and starts. So they’re ramping up slowly and delaying hiring decisions until the picture is clearer.
Massachusetts is digging out of an especially big hole. We were among the first states to shutter our economy last March to contain the coronavirus. And now, as other states such as Connecticut and Texas lift most pandemic restrictions, we’re likely to be among the last to reopen. The state ended 2020 with 335,000 fewer jobs than the year before, a 9.1 percent decline that was the fourth-largest in the country.
“It is going to take time. It is not going to be flicking a switch and bringing us all back,” said Chris Crompton, general manager of Old Town Trolley Tours in Boston.
Typically, at this time of year, Crompton would be gearing up for the spring and summer tourism season, expecting to hire about 120 workers. Even with Governor Charlie Baker’s decision to move to the final phase of reopening by the end of the March, Crompton is planning to bring back just 25 to 30 people.
He doesn’t expect international tourists to return this year and domestic travelers may still be wary of getting on a plane. He forecasts his trolley fleet will carry only 150,000 passengers this year — about half what the company did in 2019.
“It is nothing like a normal year,” said Crompton.
Employment gains typically lag behind overall economic growth after a recession. In times of stress, businesses figure out ways to operate with fewer workers.
Moreover, the COVID recession took a more painful toll on employment than on the production of goods and services as those with means kept buying. While economic activity is poised to fully recover by June, most economists don’t expect jobs to return to pre-pandemic levels until 2023. Restaurants, hotels, and other travel- and entertainment-related businesses will be the last to make it all the way back.
The Labor Department’s February employment report, released on Friday, offered reasons to be optimistic, but it also underscored the continuing distress in the job market. Employers added a bigger-than-expected 379,000 jobs last month, led by the leisure and hospitality sector, which the pandemic had wrecked. The unemployment rate edged down 0.1 percentage point to 6.2 percent.
But leisure and hospitality jobs are still one-fifth below February 2020 levels, and the ranks of the long-term unemployed — people who’ve been out of work for 27 weeks or more — was mostly flat at 4.1 million. That’s 3 million more than a year ago.
“February was OK but at that pace would take 4½ years to recover,” Jason Furman, a Harvard professor and former chairman of the Council of Economic Advisers under Barack Obama, said Friday on Twitter.
It took nearly a decade after the Great Recession for payrolls to fully bounce back. The post-pandemic jobs recovery isn’t expected to take nearly that long, but there are concerns — no one is really sure how quickly people will feel comfortable sitting in a busy restaurant or on a fully booked airplane, and whether variant strains will prolong the public health crisis.
“That’s a huge question for economists to project: How confident are people that they’re safe?,” said Mark Melnik, director of economic and public policy research at the UMass Donahue Institute in Amherst. “That will naturally slow the recovery on some level for things like restaurants and live venues.”
Consumer-facing businesses — which rely on lower-wage workers — say they are being cautious about hiring, waiting to see how fast customers return before making big commitments. In contrast, businesses that continued to run remotely didn’t cut back nearly as much. Their worry is the same as it was before COVID: finding workers with the skills needed for knowledge-based jobs.
Even businesses that anticipate a fast recovery this year are moving slowly.
Jon Saphire, co-owner of Saphire Event Group, which operates three wedding venues, said his phone has been ringing off the hook since Baker announced the state is on track to increase gathering limits on March 22 to 100 people indoors and 150 outdoors.
The pandemic restrictions essentially closed Saphire’s business, which specializes in hosting big weddings. Saphire has started to staff up, but is only bringing back a dozen people over the next month, such as wedding planners and chefs. He is holding off on the bulk of his hiring — up to 200 part-timers including servers and bartenders — until there is more state guidance.
With 400 weddings already booked for 2021, Saphire said he expects his business to “come roaring back. People want to get married.”
The virus continues to create a fluid situation for two pillars of the Massachusetts economy: higher education and health care.
After going remote-only last March, the University of Massachusetts system laid off or furloughed nearly 1,000 employees tied to residential dormitories and cafeterias. UMass president Marty Meehan said he wants to bring students back to all five campuses in the fall and rehire those employees, but won’t decide until July or August when he has a better sense of whether the virus is under control.
“I don’t know if it is going to be September,” Meehan said of students’ return to campus. “We can’t count on anything. Who would have believed when we went fully remote on March 16, we would still be largely remote? I wouldn’t believe it.”
Kevin Tabb, chief executive of Beth Israel Lahey Health, said he feels “cautiously optimistic” that 2021 will be better than 2020, when revenue from patient services fell 9 percent after the pandemic forced hospitals to postpone elective surgeries to concentrate on COVID-19 cases. Still, Tabb does not anticipate hospital volume to return to normal until 2022.
Tabb said nearly all employees who were furloughed or laid off last year have been rehired. While he’s not planning to create many new positions — BI Lahey is the second-largest private employer in the state with nearly 35,000 employees across 12 hospitals — Tabb is worried about keeping talent after a traumatic year in medicine, which is causing people to retire early or leave the workforce.
“When I think about the business challenges in the coming years and recovery, it is as much about our people and the strain as much of anything else,” said Tabb. “We need to think a lot about the issue of resilience and burnout.”
The US economy is expected to expand by 5 percent or more this year, according to forecasts. That would be the fastest annual growth since 1984, when the country was roaring back from the back-to-back recessions early in Ronald Reagan’s first term.
The optimism also comes from forecasters counting on another federal rescue package, which could include stimulus checks of $1,400 for many Americans, as well as the unleashing of pent-up demand. With consumer spending sharply curtailed during isolation, Americans added more than $4 trillion to their bank accounts in the 12 months ended in January, four times the usual annual increase, according to the Federal Reserve.
“That’s a lot of financial firepower,” Mark Zandi, chief economist at Moody’s Analytics, wrote in a recent note to clients.
But the pandemic poses other challenges that could hamper the recovery. The virus, for example, continues to upend the supply chain, disrupting manufacturing and driving up costs, just as consumer spending is expected to take off.
“It’s not just Jordan’s, but the entire furniture industry has never experienced anything like this. Every day it becomes more challenging to be able to get product, and prices seem to be constantly going up,” said Eliot Tatelman, president of Jordan’s Furniture. “I am very nervous about inflation.”
Before the pandemic, Jordan’s Furniture filled most customer orders within a week because items were in stock at its Taunton warehouse. Now it can take several weeks — sometimes months — for items such as a custom sofa because the virus has delayed everything from production to shipping.
Last year furniture retailers benefited from home-bound consumers wanting to redecorate and set up home offices, using the money they saved by not eating out or traveling.
Tatelman said Jordan’s had a good year last year and 2021 is off to a strong start, but it’s hard to predict whether that pattern will continue.
“I’m not a genius. I have no idea what is going to happen,” said Tatelman. “Most people in the retail business are cautious. It’s still scary what is going on.”