As Philadelphia has emerged from the economic slump of the pandemic, job growth in the city boomed compared other large urban centers across the country, according to a new analysis of federal employment data.
The increase in jobs was bolstered by the recovery of arts and entertainment organizations, hotels, restaurants and other service industry firms over the past five years, along with the long-term growth of hospitals and other healthcare providers, per a report by the Center City District business association (CCD).
Employment has recovered much more robustly since 2020 than it did after the Great Recession of 2008-2009, suggesting “certain fundamentals” in Philly’s economy are stronger than they were before, CCD said.
The recovery is evident in Center City, which has seen substantial job growth since the historic lows of the recession and now has more people working there than at any time since the 1970s.
At the same time, the report notes that local employment in office sector fields like finance and real estate has remained nearly flat, and a shift to working from home has contributed to continued high office vacancy rates in the business district.
The employment increases have been insufficient “to meaningfully stabilize or advance Center City’s commercial office sector,” it said.
The report’s authors are calling on the city and state to take major steps to encourage companies to re-fill those buildings and redevelop underused sites. They include designating Market Street in Center City as a Keystone Opportunity Zone, which would eliminate most state and city taxes in an effort to boost investment.
“Our city has fundamentally strengthened its position as a regional employment leader and talent magnet. The challenge for our downtown is that this job and talent growth has not materially improved the office market, as that entire sector has struggled to find stability in recent years,” said Clint Randall, the organization’s vice president of economic development.
A rebound for key industries
Employment in Philadelphia grew to 721,767 jobs in March, according to the federal Bureau of Labor Statistics. That means the number of jobs in the city has grown 13.6% since 2020, according to CCD.
That puts it in second place for five-year job growth among the 25 U.S. counties with the most workers. Only New York saw a higher figure, at 17.6%. The average across all 25 counties was 11.7%.
By contrast, after the Great Recession, Philly’s job growth was just 4.1% from 2009 to 2014, far below the average of other large counties.
The industries driving the recent increase were arts, entertainment and recreation; accommodation and food services; and “other services,” including civic associations, personal services, and repair and maintenance, according to a Philadelphia Employment Report that CCD released Wednesday.
Those industries were most affected by the economic freeze of the pandemic, and have rebounded since then.
Looking back over the full 15 years since the Great Recession, much of the city’s job growth has occurred at a broad variety of companies in the health care and social assistance industry: hospitals, nursing facilities, various types of clinics, rehab programs, child care providers, and emergency food and housing programs, among others.
“Jobs in health care and related areas have grown more consistently than any other sector for the last 15 years,” the report said.
Office jobs “are largely static”
Those health-related businesses and organizations climbed from accounting for 26% of the city’s total jobs in 2009 to 32% now, the CCD reported.
They saw job growth every year except 2020, and hiring has been especially strong lately, at 4% in 2022, 5.6% in 2023, and 6.3% last year.
In sharp contrast, office sector industries — information, finance, insurance, real estate, professional services and management of companies — have seen combined job growth of just 1% since 2020. The figure surged in 2022, as the pandemic ebbed, but was just 1.2% higher in 2023. The number of office jobs dropped 1.7% last year.
“The sectors that drive occupancy in Center City’s office district are largely static,” the CCD said.
The report takes some solace from data showing that the office sector has done even worse in at least one neighboring suburban county.
“Although overall employment growth in this sector has been minimal over the past 15 years, Philadelphia’s performance has outshone neighboring Montgomery County, which dominated our region’s office economy for decades,” it said.
Philly has 6.8% more office jobs now than it did in 2009, while in Montco they’ve declined 2.3%. In 2022, the city surpassed Montgomery County in the number of such positions.
Looking at job growth overall, the city has generally outperformed the nearby Pennsylvania counties. Since 2020, for example, employment has increased 13.6% in Philly, 13% in Bucks County, 7.4% in Montgomery, 6.6% in Chester County, and 5.8% in Delaware County.
Overcoming downtown’s drawbacks
The report painted a mixed picture of the city’s office real estate sector. While Philly’s office vacancy rate is high at 20.4%, that’s in line with other major northeast cities, while in places like Denver, Austin, San Francisco and Chicago, the rate approaches or exceeds 35%.
In northeast business districts, “the structural advantages preventing vacancy from rising to Denver or Austin levels — their walkability, accessibility via transit, and large residential populations living in close proximity — must be capitalized upon to drive up occupancy and stabilize office buildings experiencing financial hardship,” the report said.
In surveys conducted by CCD, commercial real estate firms said that before the pandemic, companies wanted to be in Center City primarily to have better access to a larger, younger and more diverse talent pool. They also liked having a central location in the region and proximity to clients.
But more recently, prospective tenants have been repelled by “perceptions of quality-of-life issues and
diminished safety” and the city’s “overly complex or burdensome tax structure.”
To boost investment, the whole of Market Street between the two rivers should be designated as a Keystone Opportunity/Innovation Zone, and the city should explore other government incentive programs such as Qualified Opportunity Zones and Transit Revitalization Investment Districts, CCD argued.
Those subsidies could help finance redevelopment and construction in the economically stagnant Market East corridor and ease the path for more leasing in Market West, the report said.
Market East has been in limbo since the 76ers canceled their plan for a new basketball arena there in January. The city’s Planning Department has for months been promising a comprehensive planning process for the area, but has yet to say when it will launch.
CCD said improving the pedestrian environment in Center City would also make the area more welcoming for businesses considering locating their offices or stores there.
Owners of underused office buildings in the district’s western section should get help renovating their first-floor spaces, so the Rittenhouse Row retail and restaurant area can expand northwards, the report said.
CCD also advocates making the streetscape more inviting through public events and park improvements, and doing more to address an increase in unhoused people, which it said discourages visitors and business from coming to Center City.