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Slow Jobs Recovery in Major US Metros Drags on Long-Term Tax Growth

Fitch Ratings-New York-28 October 2020: The majority of major metropolitan areas with the most severe peak-to-trough employment losses during February–April have struggled to recover jobs, says Fitch Ratings. None of the 54 major metros – those with a population of around one million or more – have recovered more than 70% of jobs lost during the height of the pandemic. With a rise in coronavirus cases and a slower economic recovery expected in 4Q20, employment rates in these metros are unlikely to return to pre-pandemic levels in the medium term.

Job losses may affect the long-term tax revenue growth prospects and squeeze budgets, although most municipalities have headroom to manage budget gaps at current rating levels. However, the risk of a return to economic contraction consistent with Fitch’s coronavirus downside scenario could compound revenue declines and pressure local governments’ financial resilience. Lagging employment growth or fresh declines could challenge the ability of cities and municipalities to manage through the crisis.

The New York and Las Vegas metro areas saw significant peak-to-trough jobs declines of 20.3% and 23.7% and recoveries of 37% and 48%, respectively, resulting in the largest difference between major metros jobs levels in February compared with August. The other major metros with the largest jobs gaps, meaning less than 90% of February levels, are Rochester, NY; New Orleans; San Francisco; Boston; Detroit; Cleveland; Los Angeles; and Raleigh, NC. Read more via FitchRatings

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