Report: Lancaster County workforce not bouncing back to pre-pandemic levels

The Lancaster County economy is healthy overall, though there are signs of weakness as rising interest rates may dampen business activity, according to the latest report from the Center for Regional Analysis.

Established by the Economic Development Company of Lancaster County in 2018, the center provides insight into local market conditions and consumer sentiment.

Rae Ann Miller, the center’s data analyst, said a few trends stood out in the report, which was released early this month.

One involves the size of the labor force, which seems to be settling into numbers that are below pre-pandemic levels, she said.

COVID-19 severely disrupted Lancaster County’s labor market, and the “new equilibrium” appears to be normalizing at a lower level when compared with 2019, the report noted.

That year, Lancaster County had 288,400 people in the labor force. In 2021, the number averaged 284,900.

Rather than returning to 2019 (pre-pandemic) numbers, this year’s labor market is comparable to 2021. Through the first eight months of 2022, Lancaster County’s labor force is again averaging 284,900 people, around 1.2% lower than in 2019.

The report concluded that COVID-19 “likely accelerated demographic forces already in play,” with economists having previously pointed to the aging population as a factor in the shrinking size of the labor force. The decline in labor supply only accelerated with the pandemic as “waves” of people left the labor force simultaneously.

Though it affects all sectors, the tightness in the labor market is most severe in leisure and hospitality. In September, there were 3,300 fewer workers in that sector in Lancaster County than in 2019, even with businesses reporting strong demand.

“Expect labor markets to remain tight given the labor supply, especially as businesses try to hire for the coming holiday season,” the report said.

The county’s unemployment rate was 3.3% in September.

Across all industries in Lancaster County, the average yearly pay is $53,803. The top two employment industries – health care/social services and manufacturing – have average pay above that, along with construction and professional business services.

On average, professional business services pays the most at $68,322 a year, while trade, transportation, utilities, and leisure and hospitality pay the least, with leisure and hospitality coming in at 60% under the county average.

“Notably, this data is influenced by part-time workers, thus sectors with a significant number of part-time workers will have their average pulled down,” the report explained. “Sectors that pay lower average wages and historically have more part-time workers are having more difficulty returning to pre-pandemic levels of employment.”

Miller also noted what emerged in interviews with local business owners, which was that managing costs and the shadow of economic uncertainty may overtake labor issues as their biggest challenges.

Escalating interest rates are a concern for business pipelines, the report said, with construction one of the key sectors experiencing a softening of demand. This is being interpreted “as a potential early warning for where the economy is headed in the coming year.”

Consumer sentiment up significantly

The report also included encouraging news, as consumer sentiment in Lancaster County is on the rise. The measurement of that metric climbed to 72.86 in September, an 11-point improvement from July.

“The recent gains signal that the local sentiment is beginning to move away from scores reflective of recessionary periods,” the report explained; the local reading is also much higher than national consumer sentiment, which is still at recessionary levels despite gaining over the summer months.

The local poll showed improved attitudes toward current conditions and the future. County households were more positive about the strength of the local economy and their household’s financial situation.

The number of households that reported being better off than a year ago doubled, from 7% in July to 14% in September. Still, 44% of households said they were worse off, as inflation remains a persistent problem.

Paula Wolf is a freelance writer