‘Shrinking labor force’ in Hampton Roads is concerning, economic experts say

At 7:03 pm on a chilly November Tuesday, two cars pull into the drive-thru lane at the Dunkin Donuts on Richmond Road in Williamsburg. Both wait for several minutes, only to realize no one is actually working there, even though the lights are still on.

It’s the same story the next night.

The popular coffee and donut shop used to serve customers 24 hours a day. Now, it can hardly keep staff on-site into the early evening hours, closing its doors before 5:00 pm some days.

When the store is open, it’s not uncommon for it to be staffed by a single employee pulling a ten or twelve-hour shift.

“I don’t know why nobody wants to work anymore,” one visibly tired Dunkin Donuts worker, who wished to remain anonymous, told The Triangle. “This is too much for one person.”

A “CLOSED” sign is displayed on the menu board at the Dunkin Donuts at 1317 Richmond Road in Williamsburg.

The phenomenon is by no means limited to the local Dunkin Donuts – or just to fast food. All across the Historic Triangle – and more broadly, Hampton Roads – restaurants of all kinds are struggling, with many having to cut back their hours or close on some weekdays altogether.

Retailers are short-staffed, too. So are hotels. And schools. And medical facilities.

Economists throughout the nation have developed theories as to why the labor shortages have persisted for so long. The general consensus is that there’s no single cause.

Some workers are even leaving remote jobs, although flexibility seems to play a key role in retention. An October Gallup poll showed that 45% of U.S employees are still working from home either all or part of the time, and most want that arrangement to continue. Another Bloomberg survey released in June showed that a staggering 39% of workers would consider resigning if their job forced them to return to the office. Among millennials, that number jumped to 49%.

Still, many jobs cannot be performed from home. Leslie Stratton, Professor Chair of Economics at Virginia Commonwealth University, recently told Richmond-based WTVR News that workers across industries are quitting if:

  • They feel unsafe at work or are unhappy with the way their boss has responded to Covid-19
  • They’re receiving low wages
  • Their priorities have shifted

The mental and emotional strain of the pandemic has also prompted many workers to walk out on high-stress jobs – or even switch industries altogether – due to burnout. Research conducted by Prudential, a financial services giant, found that nearly half of all Americans are rethinking the type of job they want, and 53% “say they’d switch to an entirely new industry” if they can be retrained.

Compared to other areas, the labor situation is worse in Hampton Roads.

All those factors may help explain the mass resignations happening nationwide. But if you’ve wondered if the labor shortage is particularly bad in Hampton Roads, you’d be right.

The graph below provides a stark view of the labor force gap in the region since the onset of the pandemic. According to Robert McNab, director of the Dragas Center for Economic Analysis and Policy at Old Dominion University, the data suggests a real problem.

Image courtesy of The Dragas Center for Economic Analysis and Policy.

“A shrinking labor force is not a positive signal of the state of the economy in a region,” McNab told The Triangle. “While we have observed declines in the labor force at the state and national level when compared to February 2020, both the state and nation have observed faster recoveries in the labor force than the region.”

To get the full picture of what’s happening, McNab says, we need to examine Hampton Roads’ pre-Covid economic data rather than looking only at the past 19 months.

That pre-pandemic information reveals a few things. First, Hampton Roads was lagging behind the rest of the state – and the nation – in its labor force and employment growth prior to 2020. Additionally, when economists compared Hampton Roads to other peer metropolitan areas, they observed the same trend again: the area’s job market simply wasn’t growing as much as it should’ve been.

Then came the spring of 2020, when lockdowns forced businesses nationwide to temporarily close their doors.

The ensuing economic shock caused the labor force to stagger essentially everywhere. But once again, Hampton Roads experienced slower than average growth in comparison to similar metro areas. It also stayed grew more sluggishly than the state as a whole, as well as the nation.

The obvious question is, “Why?”

The answer is somewhat less straightforward.

The problem is multi-layered.

Economists across the U.S have presented numerous theories about the nation’s ongoing labor market woes. One consistent finding is that retirements have accelerated amid the pandemic, leading to more worker shortages.

Nonetheless, while early retirements do reduce the size of the labor force, no current data suggests that the retirement rate in Hampton Roads is any different than the rest of the nation, according to McNab.

It could be argued that retirements as a percentage of the labor force may be higher in Hampton Roads due to increased military retirement. However, local retirement data will remain elusive until 2023, when the next census is conducted.

Instead, a close analysis of the area’s demographic data may point to a clearer cause of the decline in the local labor force.

Women of color have been disproportionately impacted.

For months, national employment statistics have shown that women, and especially women of color, have been largely left behind as the economy has begun to rebound.

Black women were disproportionately affected by job losses from the start of the Covid-19 pandemic. But even more concerningly, their re-entry into the workforce has remained stagnant. By February of 2021, the rate of employment among Black women was still nearly 10% lower than it was a year earlier, in February 2020.

Women have historically fallen out of the workforce during times of economic difficulty, and often, they struggle to find a way back into the labor market.

The Covid-spurred recession seems to have hit women particularly hard. Thousands of children were required to attend school remotely, forcing many mothers to stay home. Those unable to afford childcare were especially impacted, and some are still finding it difficult to find positions that match their skills or meet their earnings requirements.

According to the U.S Department of Labor, while Black mothers have traditionally had higher labor force participation rates than other moms, they are overrepresented in many service sector industries that have been slow to rebound amid continued virus concerns.

The recent October jobs report painted another dismal picture regarding women and the workforce. While the total unemployment rate dipped to 4.6% overall, unemployment rates actually worsened among women in comparison to the previous month – increasing from 4.2% to 4.4%. Among Black workers, the total unemployment rate was still 7.9%.

McNab and his colleagues believe those figures are likely quite significant for Hampton Roads. In 2019, about 30% of the region’s population identified as Black or African American. As a result, higher rates of exits by Black women may indeed help explain the decline in the local labor force, he said.

But that’s likely not the only factor.

More good-paying, private-sector jobs are needed in Hampton Roads.

The Dragas Center’s annual “State of the Region” report, published last month, emphasizes that there are deeper economic issues in Hampton Roads that pre-date the pandemic. Addressing them will be paramount to resolving the labor shortage problem.

The region, local economists say, has become heavily dependent on federal spending. According to the 2021 report, “4 out of every 10 dollars spent in Hampton Roads can be traced back to the DOD.”

That could be detrimental for several reasons, particularly because a wide variety of political factors can significantly impact the amount of federal money pumped into the local economy, and those changes are beyond the control of local residents.

Federal debt exceeded 100% of the GDP in fiscal year 2020, and the federal government owed $28.9 trillion as of Nov. 1, according to data reported by the U.S Department of the Treasury.

“At some point, the butcher’s bill will come due, and when it does, the federal government will find itself having to raise taxes and cut expenditures. The DOD, as the largest discretionary program in the federal government, is an obvious target in such a scenario,” the 2021 report warns.

The solution is faster growth.

When asked what will turn things around, McNab had a clear answer: faster growth.

“Economic conditions induce people to join or depart the labor force,” McNab said. “Regions that are adding jobs at a faster rate are observing higher rates of labor force and individual employment growth.”

The only way forward, then, is to focus on bolstering Hampton Roads’ private sector economy. According to McNab, in order to do that, the area needs to find ways to increase the availability of skilled positions that offer higher-than-average wages. That would inevitably compel more locals to return to the labor force while also making the area more attractive to newcomers.

Failure to invest in those efforts, however, could spell real trouble for the region.

“People vote with their feet about economic conditions,” McNab said. “What we are seeing is some residents vote to leave the labor force because of the need to provide childcare, the opportunity to retire early, and, in some cases, to leave Hampton Roads entirely for better opportunities elsewhere.”

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