Economists describe how the pandemic magnifies trends such as remote work and movement patterns

View of Spokane, Wash. from Sunset Hill. Spokane had one of the highest rent increases of any city in the country amid the pandemic. (Wikimedia / Tfeayush Photo)

Economic shocks such as the pandemic accelerate existing societal trends. That was a recurring theme among economists and urban planners at a recent meeting hosted by the Washington State Academy of Sciences.

“Pandemics tend to magnify existing trends, rather than create altogether new ones,” said Philip Watson, an associate professor of applied economics at the University of Idaho. “These pent up forces that existed before the shock tend to get released subsequent to the shock.”

The meeting, “COVID-19: Science and Society,” examined how the pandemic may be prompting a shift in where people live, changing everything from lifestyles to voting preferences. Participants also discussed economic recovery and a decline in people participating in the workforce.

Philip Watson. (University of Idaho Photo)

Economists do not have a full picture of the pandemic’s effects as data is still being collected and crunched — and as a fifth wave of COVID-19 overwhelms hospitals across the U.S.

But it is clear that remote work options accelerated by the pandemic, for example, are here to stay. A recent survey of Seattle tech workers showed that most don’t expect to ever return to their offices full time and that many are open to moving.

And as remote work options increase, there are signs that people are moving to less urbanized areas.

Watson pointed to data on regional rental prices, showing an increase since March 2020 of 35% in Spokane, Wash., and 39% in Boise, Idaho. These two cities had the highest rent increases of any in the country. In contrast, rent in Seattle decreased and is only now close to pre-pandemic levels.

Rent in cities with the largest increases and decreases. (Phil Watson Graphs, Apartment List Data)

Similar patterns are occurring nationally, with increased movement away from core urban centers, amplifying a pre-pandemic trend.

The pandemic highlights “the interplay between attractive forces that concentrate economic activity and grow cities, and repulsive factors that spread economic activity to less-urban areas,” said Watson.

“Many urban and regional economists have predicted that the repulsive forces, like congestion and high land prices, have to kick in sometime,” he added.

Major cities will continue to have a strong pull for employers and workers, said Watson. But the evidence suggests that the pandemic “is acting as a repulsive force that is maybe starting to, at least at the margin, spread some of that economic activity.”

Lisa Brown. (Washington State Department of Commerce Photo)

Movement of people between left-leaning cities such as Seattle and more conservative regions such as Eastern Washington may also affect voting patterns and political outlooks, said Lisa Brown, director of the Washington State Department of Commerce.

The result could be softening of political divides, said Brown, who is an economist and previously represented the Spokane area in the state House and Senate.

“This rural urban divide and the political polarity is really something we have to take on,” said Brown. “And I think we take it on better if we are more intimately interacting with people in different communities.”

She added: “A long lasting positive change is that we will start to see ourselves as able to work in teams across the state, from different communities.”

Brown’s department launched the state’s economic recovery dashboard to track the effects of the pandemic.

Recovery is uneven and complex — for instance, manufacturing and the restaurant and hospitality industry have yet to fully recover, and some counties are lagging in employment. The pandemic affected women and people of color disproportionately, and high numbers of people still need access to basic food assistance.

About 900,000 people access such assistance now in the state compared to about 800,000 prior to the pandemic, noted Brown. Still, that’s down from a peak of 984,000 in February.

Some of the more than $1 billion in state and federal relief Brown’s agency handled went to the state’s Small Business Resiliency Network, pulled together from pre-existing organizations with an emphasis on marginalized communities.

Though small businesses were hit particularly hard, Washington is buffered from economic shock more than many other regions. Its cities better weathered the 2009 recession, said Watson.

Paul Inghram. (American Planning Association Photo)

As for the shock of COVID-19, “there are a few promising early indications,” she said. Technology firms overall have fared well during the pandemic, and the highly diversified economy of Washington cushioned the blow. People also stayed within the state for their vacations, adding to the local economy, said Watson.

Strong public health measures also contributed to lower rates of death from COVID-19 in the Seattle region compared to other areas of the country, though the economic impacts are hard to parse out, participants said.

“We’ve seen some recovery. It’s not complete,” said Paul Inghram, director of growth management for the Puget Sound Regional Council. “In downtown Seattle, we’ve still had a hard time recovering. But if you go out to neighborhoods, sometimes it seems like it’s all normal, because people are back to doing a lot of stuff within their neighborhoods.”

People will also continue to spend more time outside, as much of the infrastructure set up for outdoor dining will remain, said Inghram.

The central Puget Sound region, currently at 4.3 million people, is still anticipating major population growth. The council’s long-term forecasts have not shifted: the region is anticipated to add nearly 1.5 million people by 2050.

For signs of economic resilience and recovery, Watson looks at labor participation rates, the number of people of working age who are employed or looking for work. “In Washington, while the response to COVID was severe, it was not as steep or as drastic and it’s coming back faster than national rates,” he said.

Labor participation increased for decades as women entered the workforce. The 2009 recession hit hard, as did the pandemic (arrows). The data shows adults employed or actively looking for work. (Phil Watson Graph, Federal Reserve Bank of St. Louis Data)

Labor participation rates on Aug. 1 in the state were 64.1%, compared to 65.7% prior to the pandemic (corresponding to national rates of 61.7% and 63.4%, respectively).

Women have dropped out of the workforce at a higher rate than men. And not everyone is looking for work yet.

“There’s certainly people who are on the sidelines, waiting to see what’s going on, what’s safe, what’s not, what’s the word going to look like,” said Watson. “I think you have a lot of people in a holding pattern, kind of circling, waiting to re-enter the market.”

Watson added: “I think you’re seeing a reevaluation what we want our life to look like post pandemic.”

Speakers also highlighted some additional metrics of economic recovery:

  • Taxable retail sales have rebounded in the central Puget Sound region to area to levels slightly above the first quarter of 2020, though some cities, such as SeaTac, are lagging.
  • Housing prices have soared in the Seattle metro region, reaching $749,000 in July 2021, an all-time high and up from close to $600,000 in the summer of 2019. That’s driven partly by high tech salaries and low inventory, whereas construction for rentals has been more robust, said Inghram.
  • Traffic on I-5 and I-405 in the region for the first eight months of 2021 was at 90% of volumes of 2019. Traffic during much of the day is now at levels prior to the pandemic, but rush hours are less congested, at about 80% of pre-pandemic volume, said Inghram.
  • Transit ridership in the central Puget Sound area is down almost 65% for first six months of 2021, across all agencies and type of transit. Areas with more people of color show less drop-off in usage.
  • Access to urban green spaces, city parks and national parks in has increased in Washington. Data from Google show that usage from Aug. 1 to Sept. 1 was up 40% over baseline for the same time period in previous years.
Tags
Health/life sciences Covid-19 Lisa brown Paul inghram Philip watson