This article was originally published in the Richmond Times Dispatch on March 8, 2021.
One Year Ago...
A year ago in late February and early March, there was some concern about the coronavirus and the impact it could have on the economy. What a year it has been.
As the virus began to spread, businesses were making decisions to allow workers who could work from home to do so. Then came the state declarations.
In Virginia, Gov. Ralph Northam declared a state of emergency to address the COVID-19 pandemic and then issued an executive order closing all non-essential businesses. Then he issued a statewide stay-at-home order.
Virginia entered phased reopening in mid-May that allowed certain businesses to start opening with social distancing and other regulations.
Employment, retail sales and production plummeted.
Employment Plummeted
The drop was so dramatic that the National Bureau of Economic Research, the arbiter of recessions, which often doesn’t declare a recession started until after one has ended, provided a quick declaration that the recession started in February 2020.
Economic activity in the Richmond area and Virginia fared somewhat better than the nation but mirrored the nosedive.
Between January and April 2020, employment fell by 21.9 million jobs or 14.4% nationally, wiping out almost all the jobs created over the prior expansion.
Employment in Virginia dropped by 433,000 and by 74,000 in the Richmond region. Both the state and the region showed a smaller decline of 10.6% that put a dent in the jobs created over the prior expansion, but did not wipe out all jobs as it did in the country.
56% of Jobs Lost to Pandemic Recovered by December 2020
Unlike prior recoveries that took more than two years to restore half the jobs lost, that wasn't the case this time.
About 56% of the jobs lost at the beginning of the pandemic across the country have been recovered through December.
Virginia has recovered about 55.8% of the jobs lost by the end of last year, while the Richmond region has seen roughly 50.7% of jobs come back. This is all despite the limited reopening of some businesses, notably those in the restaurant industries.
The employment losses translated into a peak jobless rate of 14.8% in the nation in April 2020. Virginia had a peak unemployment rate of 11.2% while the Richmond region's jobless rate peaked at 12.1%.
The jobless rate is still high, but not anywhere near where it was last spring. The latest data for December show an unemployment rate of 6.3% for the nation, 4.9% for the state and 5.4% in the Richmond area.
Resilience of Consumers
The resilience of consumers is another unusual trend of this recession that has occurred, in part, because of the unusually quick work of Congress to approve pandemic relief funding.
The six-month moving average of retail sales in Virginia was growing at a strong year-over-year pace of 8.3% in February 2020 before the pandemic hit. But it stalled to 1.3% in August. By December, it had rebounded to 5.5%.
Similarly, retail sales in the Richmond region were growing at a strong 7.7% pace in a year ago February, fell to 2.9% in August but are now back to 5.9%, based on the latest data.
Home Sales and Residential Building Permits Are Up
Home sales typically plummet during recessions because people who are laid off can’t afford to purchase a house and others who worry they might lose their jobs are reluctant to make such a large investment.
But that hasn't been the case this time.
Recessions typically accelerate trends that were occurring in the economy. The forced working-from-home policy turbocharged residential home sales and construction as some workers left expensive cities when they were told they would be working remotely on a permanent basis while others moved to the suburbs to purchase larger homes that would accommodate home office space.
That caused applications for building permits, which typically signal activity ahead, to increase sharply.
The six-month moving average of residential permits jumped to 1,900 permits in the state in December from 1,600 in February 2020 before the pandemic started.
The number of building permits issued in the Richmond region jumped to 525 in December from 396 a year ago in February - a 33% increase.
Building permits have not been this high for Virginia since November 2007 and for the Richmond area since September 2006 - prior to the Great Recession that was partly caused by a collapse in home prices.
Christine Chmura is CEO and chief economist at Chmura Economics & Analytics. She can be reached at (804) 649-3640 or receive e-mail at chris@chmuraecon.com.