The road to recovery and equity in an already-challenged economy

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As cities begin to reopen, factory workers return to work. (Source: AP Photos)

By Gordon Innes, Lauren Racusin, and Todd Rufo, Bloomberg Associates

If you were to rewind the clock four months, to pre-COVID February when unemployment sat at just 3.5 percent, you’d find many city economies nevertheless facing big challenges: shrinking numbers of middle-income jobs, skills gaps in the workforce that left many jobs unfilled, the constant threat of automation wiping out ever more professions.

Today, those challenges are still here — and compounded many times over by the economic damage triggered by the pandemic. Even city leaders who were around during the Great Recession or dot-com bust before it are dumbfounded by the scale, impact, and uncertainty of the current economic crisis.

We have been advising 15 U.S. cities as part of the Bloomberg Philanthropies COVID-19 Local Response Initiative as they navigate the situation. They’re a mix of medium and large cities from every region, some of which were humming economically before the pandemic, and others that were struggling. We’ve given all of them detailed economic and jobs forecasts, prepared by McKinsey & Company, Oxford Economics, and Burning Glass. And we’re in regular discussion with their economic development leaders about how to leverage these insights so they can prioritize their limited resources and budgets for the recovery ahead.

Here are some key insights on the future of the economy that we’ve gathered in our work with these cities, as well as some reflections on what they mean for city leaders as they make choices about how to rebuild.

Economic outlook

The coronavirus pandemic is tipping the global economy into recession, with economic output worldwide expected to decline by almost 5 percent in 2020.

Rather than the much hoped-for ‘V-shaped” quick recovery, the most likely outcome is what McKinsey calls a “muted recovery.” Under this scenario, the U.S. economy would shrink in the second quarter of this year at an annualized rate of 35–40 percent, economic policy would fail to prevent a huge spike in unemployment and business closures, and the country would take more than two years to recover to pre-virus levels of economic output.

The hardest-hit industries would be accommodation and food services, retail, manufacturing, transportation. Sectors such as education, information, and healthcare would recover more rapidly. Low-income workers and workers from minority communities would be at the greatest risk of losing their jobs during the downturn.

While many of the jobs would return to a post-pandemic economy, employment recovery would lag behind GDP growth. The labor market would not reach pre-pandemic levels until 2024.

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Iyonna Clay of ResCare Workforce Services hands out career fair packets to Lincoln, Neb., residents during a drive-through job fair.

Implications for city leaders

Although the recession will impact each city differently, and each city’s response will need to be tailored to its needs, there are some important common themes and strategies for city leaders to consider:

  • A greater focus on demand-side policies such as accelerating construction programs, and fast-tracking permitting to get building projects going.

Critically, each element of a city’s plan will build on and be connected to the other. For example, while one city agency is creating new job opportunities, another (or, ideally, the same agency) must also be preparing its residents to be able to access those jobs.

In times like these, it’s worth remembering what happened in Milan after the “great plague”, when farmers pivoted from growing grain to mulberry silk, leading to the city’s rise as a hub for weaving and, later, fashion. Or what happened in New York after the September 11, 2001 terrorist attacks, when some said the city could never recover (it came back stronger than ever). Or what happened in London after the financial crisis of 2008, which forced a successful rethink on how to diversify the city’s economy, based on entrepreneurship and digital technology.

These transitions are by no means inevitable, but with a response based on data, city-wide partnerships, and armed with emerging and best practices, cities can emerge from this crisis more equitable and resilient than they were before.

Celebrating public sector progress and innovation in cities around the world. Run by @BloombergDotOrg’s Government Innovation program. bloombergcities.org

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