Philly’s economy is ‘a rolling uncertainty’ as delta variant leads firms to delay office openings

So close, it seemed. Labor Day would reboot Center City’s economy as 100,000 remote workers would return to offices and towers and do what they do — amid taking SEPTA, eating lunch out, and shopping here and there.

But firms, in the Philadelphia region and across the country, are pushing back return-to-office dates this month as the delta variant digs in and infections surge. National economists also have trimmed their forecasts for growth.

The back-to-the-office delay is the latest choppiness in Philadelphia’s pandemic recovery. The city has suffered 40% of the region’s COVID-19 job losses with a 9.4% unemployment rate in June, significantly higher than its pre-pandemic levels. Roughly a third of city employees have returned to their offices.

“It’s a rolling uncertainty at this point,” said Paul Levy, president and CEO of the Center City District. “The first emotional reaction is depression. A month ago, we could see the recovery right ahead of us. The optimism was palpable.”

The Center City District estimates there are 100,000 missing employees in Center City, a number that could occupy the cubicles and offices of 22 Comcast Centers These folks are still working remotely, based on cellphone usage, pedestrian-watching cameras, federal jobs data, and building owner surveys.

Meanwhile, COVID-19 infections are spiking again, on the rise in Philadelphia, Delaware, and 43 other Pennsylvania counties, according to government data. (Bucks, Chester, and Montgomery Counties are unclear.) Among the three states Pennsylvania, Delaware, and New Jersey, Delaware had the highest rate of infection over a seven-day average at 34 per 100,000 people, compared with 22 for New Jersey and 20 for Pennsylvania. Philadelphia’s average was 24 per 100,000.

James Cuorato, president of the nonprofit that runs the Independence Visitors Center, said last week that visitors were off about 20% in July and so far in August from what he projected after a tourism rebound earlier in the year, a fallback coinciding with the spread of the delta variant.

A flood of European travelers to Philadelphia every fall -- consistent like clockwork -- will be a bust this year, Cuorato believes, even though visitors to the Liberty Bell, a proxy for out-of-towners overall, had rebounded in July.

The delta variant is also causing some of the softness in retail sales over the summer, said Ben Herzon, executive director of U.S. economics at IHSMarkit. But he added, “Unless things get a whole lot worse than they are now, I don’t expect it to lead to some broad retraction.”

Overall, Philadelphia-area firms are looking at reopening delays of two weeks or longer even as the Food and Drug Administration formally approved the Pfizer COVID-19 vaccine Monday and more people line up to get vaccinated.

» READ MORE: Facing new vaccine mandates, more Philly-area residents are agreeing to COVID-19 shots

More companies and government agencies are requiring vaccinations to save lives and spur the recovery. Last week, the Philadelphia law firm Fox Rothschild pushed back its nationwide office opening to Sept. 27 from Sept. 13. The firm also mandated that employees be vaccinated by Aug. 30.

A Fox Rothschild survey over the summer showed that 88% of its staffers were fully vaccinated across the firm’s 27 offices. By Sept. 27, proof of full vaccination status must be presented to the firm’s human resources department, which will also review any requests for exemptions.

Aramark and Comcast, both based in Philadelphia, have set Oct. 18 for reopenings. In a late July internal email, Comcast told employees that the company expected a reopening after Labor Day on Sept. 6 for some employees. But the media giant later opted for a delay.

The Inquirer offices and newsroom near Market East have been closed since March 2020. Inquirer leaders will select a redesign of the company space by late October. And a reopening decision won’t be made until after late November, according to Lauren Kauffman, a senior vice president. The company has 450 employees assigned to its offices and newsroom at Eighth and Market Streets.

Independence Blue Cross, the region’s largest insurer, is planning for “a phased reentry” beginning in mid-September when company officers will be asked to return. “Later this fall, all other associates will be invited to voluntarily participate in the early phases of the return to our workplace locations,” a spokesperson said. “We will take new information into consideration as it develops... Anyone entering our facilities is required to be fully vaccinated.”

In Camden, Campbell Soup has delayed the reopening of its operations for 1,200 employees and contractors to mid-October from mid-September, a spokesperson said. Campbell allows employees on a voluntary basis to work at four of its locations around the nation, including Camden, but they must wear masks. “Office capacity is capped at 25% occupancy to enable social distancing,” the spokesperson said.

Amid the drumbeat of delays, the citywide marketing group Ready. Set. Philly! circulated an email Friday saying it would pause media buys due to evolving health recommendations and the significant number of companies delaying their reopenings.

» READ MORE: Real estate agents warily watch COVID-19 cases rise, hoping another industry shutdown doesn’t follow

Angela Val, executive director of Ready. Set. Philly!, said on Tuesday that “we are now working with businesses, the city and other partners to determine the timing of return to office and plans for a hybrid approach.”

The city’s economy was recovering in the late spring and early summer, various measures indicated. But it still has a ways to go.

The city’s 9.4% unemployment rate in June was down significantly from 18.4% in the teeth of the pandemic in June 2020. But it was markedly higher than the pre-pandemic unemployment rate of 5.8% in June 2019.

About 58,000 jobs in Philadelphia have disappeared — or not returned — over the course of the pandemic, according to data from the U.S. Bureau of Labor Statistics.

Hotels, entertainment venues, tourism businesses, and restaurants shed 25,000 jobs, with restaurants becoming the most affected hospitality sector — 20,700 of those 25,000 job losses were in restaurants.

» READ MORE: Philly businesses take Mayor Kenney’s mask mandate mostly in stride

OpenTable, which tracks diners through online and phone-in reservations, as well as walk-ins, shows that seated diners in Philadelphia were down 22% to 49% in the last seven days as compared with the same period in 2019.

Odi Obilo, owner of the 250-seat Victorian Banquet Hall in Germantown, said that the delta variant has slowed business because people are apprehensive. “It’s very confusing, the same as the first time,” he said. “It’s not clear what the protocols are.”

The metropolitan region — the suburbs in Pennsylvania and South Jersey, the Jersey Shore, Wilmington as well as Philadelphia — lost 142,000 jobs because of COVID-19, leaving the city with 40% of the region’s job losses. Philadelphia accounts for about one-quarter of the region’s employment base.

“The city of Philadelphia is more vulnerable than the rest of the region to delta as it is more reliant on office workers, business travelers and tourists, which are now more likely to stay away from the city for longer,” said Mark Zandi, chief economist with Moody’s Analytics.

» READ MORE: Can bosses insist you get a COVID vaccine? Yes, but with caveats.

On Monday, Pennsylvania Convention Center Authority mandated that its workers -- including contractors, security guards, and unionized laborers -- be vaccinated, or show proof of a negative COVID test, by Sept. 10. The testing option goes away -- and the entire workforce must be vaccinated -- by Oct. 1. The policy does not pertain to convention attendees.

The Convention Center has gradually reopened, hosting sporting events -- volleyball and fencing -- and smaller non-sports conferences such as the Shriners in mid-August, with 3,500 attendees. The new vaccination policy for staff kicks in for the Philadelphia Tattoo Arts Convention, scheduled for Sept. 10 to 12.

As for the attendees, they must follow city requirements. At the moment, the city requires people to wear masks indoors in public places.

Another scheduled event is the Natural Products East Expo on Sept. 20 to 25, with a registration of 10,000 last week. Organizers have announced enhanced safety measures for attendees that include proof of vaccination or a negative test result taken within 72 hours and masks.

Lacey Gautier, the group show director, said they also expect about 1,000 exhibitors for the show, which is returning to Philadelphia after being held in other East Coast cities. “It has been such a fluid situation,” she said. The show will encompass a hybrid of virtual streaming and in-person networking.

Ed Grose, executive director of the Greater Philadelphia Hotel Association, which represents the city’s largest hotels with a total of 30,000 rooms, said that tourists and leisure travelers have led the hotel sector’s recovery this year and “we are glad to see conventions coming back and now the last piece of the puzzle is business travelers.”

Those people are unlikely to resume traveling until office workers return to their offices and towers, bringing out-of-town visitors to Center City for corporate training and meetings. The latest hotel report for Philadelphia shows a 62% occupancy compared with a pre-pandemic occupancy of 80% to 90%, Grose said.

Samuel Rosen, assistant professor at Fox School of Business at Temple University, said the uncertainty of COVID infections may be the new normal for the economy at least over the short term and this may lead businesses to be more cautious than they otherwise would be. “You are less confident in what the future will be,” he said.

Staff writers Harold Brubaker and Christian Hetrick contributed to this article.