Employers are laying off thousands of workers or reducing hours across the region with breathtaking speed due to the coronavirus outbreak. The hardest burden, experts say, is falling on lower-income hourly workers with scarce household savings and threadbare safety nets.
“It’s crazy how your life just changes,” said Katherine Payne, a housekeeper who on Wednesday was told by the Marriott Philadelphia Downtown that her labor would not be needed until at least June. Marriott told her she would receive a full 40-hour paycheck next week, even though she wasn’t on the schedule and her hours were already cut.
“Just like that, everything is just over," said Payne, who lives in West Oak Lane with her daughter, a home health-care worker, and her son, who is disabled.
Jobless claims surged nationwide following the widespread shutdown of nonessential businesses to curb the spread of COVID-19. About 120,000 people sought unemployment benefits in Pennsylvania in the first two days of this week, 10 times the total for the previous week, according to the Pennsylvania Department of Labor and Industry.
“We’ve been flooded with calls from people that are trying to figure out if they can qualify for unemployment," said John Dodds, director of the Philadelphia Unemployment Project, a nonprofit that assists the jobless.
Payne, the housekeeper who has worked at the Marriott for 10 years, is hardly alone.
Philadelphia’s hospitality industry — lodging, food and drink service, travel and theme parks — was shuttered quickly by government edicts aimed at reducing the spread of coronavirus.
About 700 employees of restaurants owned by the Dave Magrogan Group were laid off last weekend. So were 1,000 Aramark food service workers and cleaners at the Wells Fargo Center, who are effectively jobless until at least the end of the month as all events at the Philadelphia sports complex have been put on hiatus. And 600 to 1,000 workers employed by subcontractors at the Philadelphia International Airport were being laid off starting Wednesday.
While the immediate impact fell hardest on hospitality industry and nonessential retail businesses, economists say the wave of furloughs and layoffs sweeping across the region will have a snowball effect on the regional economy, as unemployed workers scramble to obtain vital resources in a system where offices, public transport and support systems have shut down simultaneously.
“There are a lot of the city businesses and jobs that are going to be hit in ways that you don’t even normally think about it because all the workers are just not there,” said Joel Naroff, president and founder of Naroff Economic Advisors, a strategic economic consulting firm in Bucks County.
For some businesses that are normally immune to economic downturns, “this is just a very potentially dangerous situation,” he said. The more prolonged the downturn, the greater the economic damage.
While many office workers can do their jobs at home on a laptop and a cell phone, low-wage workers who do hands-on tasks will feel the impact, Sri Thanabalasingam, a senior economist with TD Bank, said in paper posted Wednesday.
“Shutdowns in these industries will mean that low-income households will bear the brunt of the impact created by COVID-19,” he said. Many of those households have little savings and the reduction of income will make it difficult to meet core expenses. Households with incomes of $50,000 and below spend more than half their income on food and shelter, and about 15% of people making less than $50,000 a year did not have health insurance in 2018.
“We’re living check to check,” said Elijah Wingate, 53, who lost his job this week as a cook for Bon Appetit Management Co., a contractor that provides food services at the University of Pennsylvania, which sent students home for the rest of the semester. “I’m just thinking about how we’re going to pay our bills.”
Wingate, one of about 140 employees of Bon Appetit who make about $14 an hour, does not have the same protection as Penn’s staff dining employees, who work predominantly in residential dining halls. The Bon Appetit workers are scheduled to lose their pay on March 31, though many are already working reduced hours, said John Preston, secretary-treasurer of Teamsters Local 929, which represents the workers.
Contract employees such as Wingate would typically work until May, the end of the spring semester, when they would be laid off. But they now face an unexpected two-month shortfall in income.
It’s not a ton of money, but to them it is,” Preston said. Preston’s local, based in the city’s Frankford section, also represents 110 Pennsylvania Liquor Control Board employees who work warehouses and distribution in Southeastern Pennsylvania. They have to go on unemployment, he said.
Calling a recession
Government data on employment and economic activity will take months to reveal the impact of the shock — the National Bureau of Economic Research must record six months of negative growth to officially declare a recession. The March numbers may be artificially inflated by the recent surge in panic buying as Americans empty store shelves of commodities.
Economic forecasters are uncertain of how deep or long the downturn will last because of the absence of reliable testing data on how far coronavirus has spread in the population.
“You don’t know if you don’t know the extent of the problem,” said Naroff. “You don’t know how bad it’s going to get. It could take two to four more weeks before we really get the testing situation under control. That’s assuming that the government actually gets its act together.”
The coronavirus outbreak has exposed some weaknesses in the Philadelphia economy heavily dependent on the hospitality industry, and the medical and educational industries, said Naroff.
While the medical industry might be expected to withstand the economic downturn, due to the increased demand for health-care services, education has been devastated with the closure of universities, Naroff said.
The impact is worst in the city, he said, which has a relatively high percentage of a lower-skilled labor force. “Those are the jobs that disappear quickly in a crisis situation, where you can’t work at home. It’s all the people that clean those offices — what are the cleaning services going to do when nobody’s using the office?”
A check from the government
A system of direct federal payments to people that is under consideration in Congress as part of a $1 trillion stimulus bill would infuse a significant jolt into the economy, Naroff said. But only if the subsidies were primarily directed at households in need.
“What matters with a stimulus bill is how quickly it gets out and how well it’s designed so that the money gets spent," he said. "Would $1,000 an adult help those families of low-skilled workers who need the money? Absolutely, and they will spend every penny of it.”
But households that are better off will likely stash any government payment for a rainy day. “An average worker who’s worried about their job, they take the check and they put it in the bank account and they hide it," said Naroff.
Payne, who makes nearly $19 an hour as a Marriott housekeeper, would welcome the assistance. She was struggling to keep up with the mortgage last fall and took out a $23,000 loan on her 401(k). The $120 weekly loan payments come out of her paycheck. Now, she’s not sure how she’ll pay them. Her supervisor suggested cashing out any paid time off she had remaining and using it to pay her loan and health insurance payments.
Carrie Schweitzer, 46, a waitress at a restaurant in Northeast Philadelphia, is now reduced to working four hours a week at $9 an hour because the restaurant was forced to stop sit-down service. She is banking on getting a few hundred dollars from the Philly Restaurant Worker Relief Fund, a local crowdfunding project that was launched on Friday.
“Without this fund, I’m not even sure I’d be able to make it.," said Schweitzer, the main provider for her 25-year-old autistic son, who also just got his hours cut at Taco Bell. He’s working one day a week now.
Inquirer staff writers Joseph N. DiStefano and Katie Park contributed to this article
The Philadelphia Inquirer is one of more than 20 news organizations producing Broke in Philly, a collaborative reporting project on solutions to poverty and the city’s push toward economic justice. See all of our reporting at brokeinphilly.org.