Are Philadelphia’s Businesses Moving Toward Recovery and Growth?

After an up-and-down year of late payments and layoffs, Philadelphia’s businesses are seeing their financial condition improve slightly as they borrow, spend, try to rehire, and carefully navigate a risky new phase of the recovery.

These insights were gleaned from the new Philadelphia business and jobs dashboard, created by The Pew Charitable Trusts to provide an ongoing, up-to-date picture of the health of the city’s private sector employers and economy. Updated quarterly, it tracks upward of 20,000 establishments on indicators such as credit and delinquency status, employment and wages trends, bankruptcies, and other metrics using data from federal statistical agencies and private sources, including the credit-tracking firm Experian. Nearly all of the individual establishments in Philadelphia, and those measured in this dashboard, have fewer than 100 employees.

The dashboard was developed with input from local business, academic, and government specialists, including Philadelphia Industrial Development Corp., the Greater Philadelphia Chamber of Commerce, Drexel University, and the city Department of Commerce. The goal of the interactive tool is to help inform the public, policymakers, and stakeholders who shape the city’s strategies for recovery and growth.

Here are several other takeaways from the latest data as of June 2021:

• The financial stability of companies with credit records—based on delinquency, credit history, and other factors that affect their risk of default, as scored by Experian—is marginally improved over last year. The average stability score for micro (one to nine employees) and small (10 to 99) establishments is also just marginally better. But it’s up a lot for midsize (100 to 499) and large businesses (500+), suggesting that conditions are improving more slowly for smaller businesses.
• Health care and social assistance establishments, the city’s biggest job sector, are showing the top improvement in average financial stability after a rough 2020. At the other end, the average stability score for hospitality establishments—restaurants, bars, and hotels—remains low, with particularly high risk of default in ZIP codes 19138 (West Kensington), 19141 (Logan/Ogontz), and 19143 (Kingsessing).
• Total number of jobs is 8% below June 2019 levels, although a few sectors are above, including information (such as internet service providers) and professional, technical, and scientific services (such as law firms and biotech labs). Both had slow job growth before the pandemic relative to other sectors.
• Philadelphians are shopping more now than before the pandemic for food, recreation, clothing, and other consumer goods. Their credit- and debit-card spending at small businesses in those sectors—online and in person, in Philadelphia and elsewhere—is up 43% over January 2020 levels, according to the dashboard’s consumer spending chart. Part of the increase likely is from online shopping, which has risen since the COVID-19 outbreak, according to government reports.  
• As Experian data has shown for several years, women-led and -owned businesses have lower financial stability scores than those led or owned by men, on average. The disparity has narrowed very slightly since the beginning of the pandemic.

Exploring the dashboard

The interactive charts can compare businesses across the city’s ZIP codes. For example, health care and social assistance establishments with the highest financial stability tend to be located on the edges of Center City and in Far Northeast Philadelphia, as shown by darker-shaded areas in Figure 1. Figure 2 shows that financial stability in all sectors, not just health care, is highest in Center City, the Navy Yard, Northwest, and Far Northeast Philadelphia. (It should be noted that no ZIP code has extremely low stability and high risk of defaults, on average.) 

Among the dashboard metrics, delinquency is closely watched by economists and analysts as an indicator of businesses’ odds of failure or survival. Experian collects data on businesses’ delinquency in paying their suppliers, lenders, and other creditors (except landlords; late rent is not included).

As of the end of June 2021, the share of trackable business establishments severely or moderately behind on their bills (31 or more days late) was holding steady at more than 6%, after rising from a pre-pandemic level below 5% to a high of nearly 7% at the end of 2020. See Figure 3.

The city’s modest increase in delinquency in 2020, in the face of an unprecedented economic shutdown, mirrors national trends found by other researchers using comparable data. Many analysts have attributed it partly, though not exclusively, to the massive early rounds of pandemic relief grants and loans from federal, state, and local governments, including the federal Payroll Protection Program (PPP) forgivable loans, the Economic Injury Disaster Loan program, and the Federal Reserve’s Main Street Lending Program.

In Philadelphia, infusions also came from the commonwealth of Pennsylvania’s COVID-19 Relief Small Business Assistance program and the city of Philadelphia’s COVID-19 Small Business Relief Fund. An analysis of public data by Pew in August 2021 found that the major federal, state, and local government programs reported distributing at least $2.9 billion to Philadelphia-based businesses through 2020, roughly equivalent to the total wages paid that year by all hospitality and retail businesses. That amount does not include leniency from lenders and creditors, support from personal sources, and government stimulus checks for individuals who may have buoyed many sole-proprietor businesses.

The confluence of public financial support, along with businesses’ own layoffs and slowdowns in spending, likely helped thousands of establishments stay on top of their bills, even if their doors were closed. “It does show that government support is working to keep down delinquencies” at many businesses, said Derrek Grunfelder-McCrank, an economist with Moody’s Analytics who regularly works with Experian data, speaking in an interview.

Another useful dashboard indicator is balance on credit accounts, which reflects business borrowing in all forms and potential spending for supply purchases and general operations. It shows that Philadelphia businesses had tamped down borrowing in the first half of 2020, as reflected in the median credit balance, which dipped to a low of $2,500 in mid-2020. The median then bounced back and was $3,600 in June 2021. According to Grunfelder-McCrank, PPP-type loans are associated with much of the increase. Lately, there also has been a slight increase in non-PPP commercial borrowing, according to national data.

These findings are just a few that can be found in the current data in Pew’s dashboard, and new data will be added each quarter. As Philadelphia businesses and workers navigate a complicated path through COVID-19, including shifting worker priorities and rising costs as well as new infusions of public financial support, this tool can provide a clearer picture of what’s working, what’s not, and how far along Philadelphia has moved toward economic recovery and growth.

Elinor Haider is the director and Thomas Ginsberg is a senior officer of The Pew Charitable Trusts’ Philadelphia research and policy initiative.