What does 2021 hold for SC’s economy? More layoffs — but many good signs, experts say
From restored jobs to rebounds in manufacturing and trade, much of South Carolina’s economy has recovered strongly during the second half of this year — save for one important sector, which could get worse before it gets better.
The state’s hospitality and leisure industry, which includes restaurants, bars and a wide range of other service-oriented businesses, continues to see the highest rate of unemployment and is likely to see more jobs lost and more businesses close as coronavirus cases rise this winter, according to University of South Carolina economists, who joined the head of the Federal Reserve Bank of Richmond in delivering economic predictions for the coming year on Monday.
The hospitality industry appears to be the main dark spot in an otherwise optimistic outlook for the start of 2021 in South Carolina.
“South Carolina’s economy is almost back,” said Joseph Von Nessen, a USC research economist who spoke at the university’s Economic Outlook Conference on Monday. “The recovery as we move into 2021 in South Carolina really centers on when we see this recovery in the service sector in leisure and hospitality, and that’s going to be driven by when we see the development of the vaccine.”
South Carolina’s economy has fared better than the nation as a whole amid the global coronavirus pandemic.
While unemployment soared from late March through May, jobs saw a sharp rebound during the summer, and employment has continued to improve at what economists consider a slow but sustainable pace. As of October, South Carolina’s unemployment rate sat at about 4.2%, according to the state’s Department of Employment and Workforce, compared to the national 6.9% unemployment rate.
Employment across the state remains about 4% below what it was in February, before the pandemic took hold. But when the hard-hit hospitality industry is removed from those calculations, all other employment is down only about 2%, according to Von Nessen.
The Greenville area has recovered better than any other region of the state, Von Nessen said. It’s the only major metro area in South Carolina to have returned to its pre-pandemic employment levels, he said.
That’s thanks, in large part, to the Upstate region’s heavy manufacturing presence, which is prospering as South Carolinians and Americans have not been reluctant to spend money on tangible goods — as opposed to in-person services — throughout the pandemic.
Meanwhile, hospitality businesses that rely on in-person interactions — and parts of the state whose economies lean heavily on those businesses — continue to struggle.
Some iconic Columbia-area businesses, including Yesterdays restaurant and City Yoga studio in Five Points, have closed under the pressure of the pandemic, while others, including LaBrasca’s pizza restaurant and The War Mouth barbecue restaurant, have cried out for help to stay alive.
Von Nessen expects those won’t be the last to face dire straits.
The service industry won’t bounce back until consumers feel safe in those environments, he said. With COVID-19 infections and hospitalizations on the rise heading into the winter, that level of safety won’t return quickly.
That’ll probably mean more layoffs and closures for more businesses like restaurants and bars, Von Nessen predicts.
“Leisure and hospitality ... simply can’t recover until we see a vaccine available,” Von Nessen said. “The increases in the COVID cases over the holidays and the winter months will put further strain on hospitality, so we anticipate some setbacks in the short run and additional business closings.”
Overall, the state’s economy will face early challenges in 2021 as COVID-19 cases increase, federal emergency unemployment benefits run out, and a moratorium on housing foreclosures ends, Von Nessen said.
The most optimistic scenario for South Carolina’s economy making a full recovery to pre-pandemic levels depends on the coronavirus vaccine being widely available by mid-2021, with employment levels fully recovered by the third quarter of the year at the earliest, Von Nessen predicted.
Beyond 2021, some long-term trends sparked by the pandemic are likely to bode well for South Carolina’s economy, another USC economist, Douglas Woodward, predicted:
- A widespread migration of people from major urban centers to less-dense geographies — like South Carolina — and the likely continuation of remote working scenarios means the state could see an influx of new residents from out-of-state, continuing a years-long trend.
- Global trade has not suffered as expected during the pandemic, which is good news for the Charleston port and for manufacturers and goods exporters across the state. This trend could also lead to an increase in employment in the distribution sector.
- While some state governments are suffering financial deficits, South Carolina will continue to collect a surplus to the tune of $800 million for the current fiscal year. The state’s tax structure will likely keep it trending in that direction, Woodward said.
