For more than a year Governor Jay Inslee imposed a lockdown due to the pandemic, restricting business activity in a series of phases throughout Washington. Though the state fully reopened on June 30, the effects of the lockdowns continue to be felt among employers and the overall makeup of Washington’s business community. While some permanent changes seem apparent, business industry analysts and advocates say it’s going to take more time to know whether current trends are here to stay.
“It’s going to take several months to see how this plays out,” Washington Retail Association Vice President Mark Johnson said. However, he added that “we’re going to see a new normal.”
A recent report by Yelp examining data between March 1, 2020 through Aug. 31, 2020 found that Washington had the fifth-highest business closure rate in the nation, with nearly 5,000 closed and 3,062 of them permanently closed. The most affected industries were nightlife and restaurants, followed by fitness and shopping. Following the lockdowns, the state experienced the largest wave of unemployment in its history. By December, the state Employment Security Department (ESD) was paying out unemployment insurance to 434,740 individuals. Recently, ESD paid out $190 million worth of unemployment insurance for 235,804 people.
Washington Policy Center Small Business Director Mark Harmsworth told Lens that this has put a strain on small employers who now have to pay higher unemployment insurance tax rates while struggling to fill lower-wage positions that offer less money than an unemployment check.
However, he added that “some of them (businesses) had a good year last year depending on what type of service they were providing and how they adapted. I think those businesses are coming back.”
Determining the fate for many of these employers was whether they met the governor’s criteria for an “essential” business, a concept that drew controversy among industries including builders.
Patrick Connor is the Washington State Director for the National Federation of Independent Business (NFIB). He told Lens that the lockdowns disproportionately affected smaller, product-specific retail stores, whereas larger stores such as Costco were able to remain open because they also sold food.
“There was angst at not being deemed an essential business, and yet their larger competitors were allowed to sell whatever they wanted,” Connor said.
“A lot of the smaller retailers that focused on nonessential goods…really took a sharp hit,” Johnson said. “A number of them survived because if they had been in business for a while and developed clientele, the clientele wanted to show their support and try to keep them going during the tough times.”
In addition to a labor shortage, Connor said small businesses are also grappling with a supply chain shortage. “It’s a whole new set of challenges that are facing our small businesses.”
Yet, Johnson noted that in the cases of some retailers like JC Penny, the lockdowns accelerated an existing trend rather than alter it entirely. The department store chain declared bankruptcy in May 2020.
“They were struggling financially before the pandemic, but the pandemic sped up their demise and eventually bankruptcy,” Johnson said.
One clear trend to emerge is the tech sector’s growing prominence in the state economy, a shift aided further by the accelerated trend toward online shopping during the lockdowns. The industry currently employs 313,000 people in the state, with 80,000 working at Amazon alone; the state’s manufacturing industry employs 305,300 workers, with Boeing as the largest sector employer with 58,000 workers. Incidentally, manufacturing has increasingly blended with Information & Communication Technology (ICT).
“Tech is definitely a big player here,” Harmsworth said. “You’ve got a very high density of tech workers in the downtown Seattle core, predominantly younger single people. I can’t see how tech is going to decline with our talent pool here.”
One trend that’s yet to be determined is to what extent retailers shift to online shopping in lieu of a brick-and-mortar store. Although last year resulted in an increase in online purchasing, it’s unclear whether that habit will remain as in-store shopping resumes. For a while, some believed remote working would become the “new normal” for employees, yet major companies like Amazon and Facebook are expected to bring 32,000 workers to new offices in downtown Bellevue by 2023, indicating that the mass reliance on telecommuting was a temporary response to the lockdowns.
Connor believes that certain delivery services for things like groceries and take-out “are going to become a fixture like Uber and Lyft have become.”
Johnson noted that many retailers such as Target adapted to lockdowns by switching to an online sales model emphasizing same-day delivery options. “They have these huge distribution centers around the state and country – those usually feed the stores. During the pandemic the store became a mini-distribution center. You could be online, make a phone call and get same-day delivery. I think you’re going to still see a lot of that. A growing population of people that like the instant gratification.”
However, he also believes that this won’t replace physical retailers and shopping malls.
“We’ll have a better picture of if that’s the reality after the holiday season, which we’re rapidly approaching,” Johnson said. “Our initial, anecdotal suspicion is that there are still a large number of shoppers that like the experience.”