Economic Sector Analysis

Leisure and Hospitality Arts, Entertainment, and Recreation Industries

To serve the District of Columbia’s Federal City Council

December 8, 2020 Table of Contents

Page

Executive summary [3]

Economic highlights prior to COVID-19 [4]

COVID-19 impact highlights [8]

Analysis of the leisure and hospitality sector and the art and entertainment sector [12]

Considerations for DC [19]

Appendices [25]

© 2019 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 2 Executive summary

Highlight of Findings • COVID-19 has impacted every sector of the economy, but the leisure and hospitality industry was hit especially hard. Between February 2020 and April 2020, more than 60% of that sector’s jobs disappeared. Since April, leisure and hospitality jobs have begun a comeback as the District works to reopen. While many people in these industries are still out of work, almost 10,000 leisure and hospitality jobs have returned, accounting for 25% of the total jobs lost since February. Unfortunately, it may also be the slowest sector to recover, with limits on crowd sizes expected for months to come. • The art and entertainment sector in DC was also devastated by the pandemic. Since March, this sector has lost 55% of its workforce and continues to shrink. The structural change of this industry may have a long-term negative impact on the art community. It will also be very costly to rebuild this industry. • Low level of economic activities is expected for both sectors in the short-term due to low foot traffic in the District. We summarized observations from the field to help businesses and displaced workers survive through this economic downturn.

D.C. Employment Distribution (2019)

Federal Government 24.6% Prof, Scientific & Tech Svces 15.2% Arts and Other Services 9.7% 1.2% Health Care & Social Assistance 8.9% Entertainment Educational Services 7.5% Food Svces & Drinking Places 7.0% Adm/Waste Mgmt/Remediation Svcs 5.9% State & Local Government 5.4% The total employment in Retail Trade 2.9% the District was about Information 2.5% 800,000 in 2019, among Finance & Insurance 2.1% which 240,000 individuals Accommodation 2.1% were government Logging/Mining/Construct 1.9% employees and 560,000 Real Estate/Rental & Leasing 1.6% were private industry Accommodation and Arts, Entertainment/Recreation 1.2% employees. 9.1% Wholesale Trade 0.6% Food Services Transportation, Warehousing & Utilities 0.6% Manufacturing 0.2% 0% 5% 10% 15% 20% 25% 30%

Source: Bureau of Economics Analysis

5.5% DC’s Metro Area is 131 hotels with 31,000+ rooms home to corporate headquarters of $5.3B 2,000+ restaurants hospitality giants including Marriott, Hilton, and Host 72,000 individuals employed Hotels. Contribution to DC’s Private Sector $780M tax revenue generated GDP in 2019 $35,902 Average annual pay of DC workers is significantly higher than the national Significant Economic Impact of DC’s Accommodations Industry: $22,491 average: DC accommodations and food DC In 2019, the American Hotel & Lodging Association (AHLA) estimates the lodging service sector employees earned, on average, industry in DC directly contributed US $35,902 in 2019, compared to a $22,491 national average for accommodations and food • $3B in economic output service sector employees. • $4B in business sales AVERAGE ANNUAL PAY • $2B in wages and salaries Notes: • $780M in total taxes paid, including federal, state and local taxes [1] Washington DC Economic Partnership Source: State Facts: District of Columbia’s Hotel Industry by the Numbers, AHLA. [2] Bureau of Economic Analysis [3] [4] Quarterly Census of Employment and Wages (QCEW), Bureau of Labor Statistics [5] Accommodation and Food Services: Summary Statistics for District of Columbia: 2017, US Census Bureau.

© 2020 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 6 NAICSEconomic 72: Accommodation Highlights & Food Services Sector DC’s Pre-COVID-19 arts & entertainment industry

1.4% 500+ arts and entertainment establishments $1.4B 45 performance venues with 27,000+ seats1 10,000 individuals employed

Contribution to DC’s Private Sector $1.7B in sales & revenue in 2017 GDP in 2019 $84,000 Average annual pay of DC workers is significantly higher than the national “One of the hallmarks of DC’s culture DC average: DC arts and entertainment industry $40,000 employees earned, on average, $84,000 in economy is the quality and number of 2019, compared to a $40,000 national average US theatres, galleries, artists, and museums for arts and entertainment industry workers. AVERAGE ANNUAL PAY that support the critical tourism industry.” Source: [1] Washington DC Economic Partnership [2] Bureau of Economic Analysis – DC.GOV [3] [4] Quarterly Census of Employment and Wages (QCEW), Bureau of Labor Statistics [5] Arts, Entertainment, and Recreation: Summary Statistics for District of Columbia: 2017, US Census Bureau.

© 2020 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 7 COVID-19 impact highlights Impact Highlights High-contact industries are the worst hit for D.C. D.C’.s Leisure and Hospitality Sector Cut in Half Year Over Year % Change in Employment

20% 20% • High-contact industries are those that involve a high level of physical, 0% 0% person-to-person contact • From March to May, leisure and hospitality lost more than 70% of its -20% -20% workforce in the District. In June, the employment Total Employment level of this industry -40% Leisure and Hospitality -40% started to rise due to DC’s Phase II reopening Health Care (6/22/2020), when some temporarily laid off -60% Accommodation -60% individuals returned to work. Arts & Entertainment • Art and entertainment -80% Full-Service Restaurants -80% lost about 60% of its workforce in March – May. Its current employment level has -100% -100% remained low.

Source: KPMG Economics, Bureau of Labor Statistics, New York Department of Labor (October 2020), Haver Analytics

Financial Crisis • The timeframe of the Percent change in DC Employment by Industry COVID-19 recession may seem shorter than Leisure & Hospitality the GFC, but the damage of the Administrative & Waste Services pandemic to the labor market has been Transportation, Warehousing, & Utilities bigger. Real Estate • The impacts of the these two recessions Retail Trade differ. o In GFC, most job loss Health Care & Social Assistance happened in the Manufacturing manufacturing and finance. Professional & Technical Services The Great Recession worse o In this COVID-19 than Pandemic recession, most job Finance & Insurance Services losses come from the Construction, Mining, & Logging leisure and hospitality sector and other lower- pay industries. -50% -40% -30% -20% -10% 0% 10% COVID-19 Pandemic (February to October 2020) Global Financial Crisis (December 2007 to June 2009) Source: KPMG Economics, Bureau of Labor Statistics, New York Department of Labor (October 2020), Haver Analytics © 2020 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 10 Mobility Trend Mobility of DC workers and visitors dropped sharply Share of households with a transition to telework Labor inflow and outflow (Census) households with at least one adult substituting some or all in-person work Region DC NYC

Washington D.C. 57% Percentage of work force in the 33% 72% San Francisco 55% region reside in the region Boston 52% Seattle 49% July Airline Traffic: Percentage change Philadelphia 45% from a year ago

New York 44% DC Area NY/NJ Region US

Dallas 43% -65.0% Los Angeles 43% Chicago 43% -70.0% Phoenix 41% -72.6% Atlanta 39% -75.0% Detroit 39% Houston 39% -80.0% -80.7% United States 37% Miami 37% -85.0% Source: 0% 25% 50% 75% 100% -86.8% [1] Air Traffic Statistics: July 2020. Metropolitan Washington Airports Authority. -90.0% [2] July 2020 Monthly Traffic Report. The Port Authority of New York & New Kersey [3] July 2020 U.S. Airline Traffic Data. Bureau of Transportation Statistics [5] Census Bureau © 2020 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 11 Analysis of the Leisure and Hospitality Sector and the Art and Entertainment Sector Sector Analysis Job openings for the two sectors decreased by 70%, indicating a slow recovery Job openings is an important economic indicator for labor market growth/contraction. According to data for job openings advertised online, job openings for the art and entertainment sector and the food and accommodation sector have both decreased significantly since March.

Art, Entertainment, and Rec Job Openings Advertised Online Food and Accomodation Job Openings Advertised online 350 2,500

300 2,000 250

200 1,500

150 1,000 100

50 500

0 -

Source: Online advertised jobs data

© 2020 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 13 NAICS 72: Accommodation & Food Services Sector NAICS 72: Accommodation & Food Services Sector Foot traffic, safety concerns, and restricted capacity determine restaurant recovery — OpenTable’s statistics for seated diners at restaurants provide a valuable barometer of people’s willingness to engage in activities in close proximity to others. — On April 27th, the first U.S. cities began allowing some restaurants to reopen, albeit under strict controls that limit capacity. — Many restaurants may struggle to remain open without continued government assistance and additional financial support.

OpenTable Seated Diners – % Change from Last Year DC OpenTable Seated Diners: As of December 6, 2020

20 United States Washington D.C. 0

-20

-40

-60

-80

-100 18-Feb 18-Mar 18-Apr 18-May 18-Jun 18-Jul 18-Aug 18-Sep 18-Oct 18-Nov

Source: KPMG Economics, OpenTable (December 6, 2020) © 2020 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 14 Sector Analysis Benchmarking Metro DC’s recovery lags behind NYC and Boston

Consumer Spending: Economic Consumer Spending: Consumer Spending: Entertainment and Indicator Restaurants and Hotel All Washington D.C. has seen a larger Recreation decline in consumer spending and small business revenue than NYC, Metro (MSA) 7/1/2020 10/11/2020 7/1/2020 10/11/2020 7/1/2020 10/11/2020 Philadelphia, or Boston.

Washington -60.2% -54.9% -69.7% -55.1% -33.9% -27.6% • Between July and October 2020, DC consumer spending--on DC restaurants, hotels, entertainment, and recreation— increased, but is still down compared to 2019. New York -55.1% -38.7% -74.4% -48.7% -21.8% -9.5% • Small business revenue, particularly in City the leisure and hospitality industry, remained nearly as low in October 2020 as it was in July 2020. Note that recovery statistics encompass each Boston -46.2% -33% -48.4% -30.2% -14.1% -6.1% metro area, not city proper.

Source: https://tracktherecovery.org/. Accessed 10/12/2020

Occupancy rate Hotel room sales 110 restaurants have already closed  71.8%  88.4% According to Restaurant Association metro Washington.3 2020 Q2 GDP GROWTH FROM Q1 DC’s 2020 Q2 GDP for the food and hospitality sector dropped by a higher US percent than the national GDP for the sector. DC -40.70% 2020 Q2 GDP1 • DC: $2.7B  46.5% from Q1 Notes: [1] DC Economic and Revenue Trends: July/August 2020 Report • US: $378.1B  40.7% from Q1 [2] BLS [3] BLS -46.50%

© 2020 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 16 NAICS 71: Arts & Entertainment Sector COVID-19 wiped out half of DC’s art & entertainment economy The art and entertainment industry has been damaged significantly by the pandemic, both nationally and in the District. Research by the Small Business Administration shows that the Arts & Entertainment sector has the highest percentage of temporary closings (i.e. 53% of businesses surveyed) in the US. In DC, both GDP and employment of this sector have been reduced by more than 50% According to the Americans for the Arts organization, nationally the total economic impact associated with organizational and audience-spending losses is SEPT EMPLOYMENT (% CHANGE FROM 2019) $4.9B in lost government revenue and 845,000 jobs no longer being supported. DC’s employment recovery Impact on Nonprofit Arts & Cultural Impact on Artist/Creative US in the arts & entertainment DC Sector Workers industry lags behind the -31.30% Sales & rest of the U.S. financial losses to date expected loss in Revenue $14.0B $50.6B -56.00% creativity-based income $15.1B loss in audience spending at local businesses 95% report loss of income 2020 Q2 GDP GROWTH FROM Q1 478,000,000 admissions lost 62% reported drastic decrease in creative work that generated income DC DC’s 2020 Q2 GDP for the arts US Business and entertainment industry of businesses in the sector have no post-pandemic Closure 59% 78% dropped by a slightly lower remain closed, among which: financial recovery plan -56.80% -52.70% percent than the national 39% have no target re-opening GDP for the sector. date Footnote: are “not confident” they’ll (According to a national survey conducted 10% by Americans for the Arts) [1] Bureau of Economic Analysis survive the pandemic [2] As measured by 3-month moving average. DC Economic and Revenue Trends: July/August 2020 Report [3] Bureau of Labor Statistics. [4] COVID-19’s Impact on The Arts Research & Tracking Update: October 19, 2020. AmericanfortheArts.org

Jobs in these two sectors are vital to the District’s economy. Losses in this sector show a significant impact on the overall unemployment rate and have a ripple effect on other sectors. With an increase in unemployment, remote work and self-quarantine across the DMV region, many industries are beginning to feel the effects of social shifts and job losses. While the full economic impact of the coronavirus is yet to be realized, many businesses and individuals have already experienced losses. As businesses shutter because of the coronavirus, job losses compound across multiple industries.

For every 100 jobs lost or created in the food and For every 100 jobs lost or created in the art and accommodation sector, 161 additional jobs will be entertainment sector, 378 additional jobs will be lost lost or created. or created.

Another 107 The effect then jobs will be ripples and has created or lost an impact on the There will be 54 jobs as restaurant Another 123 jobs businesses that created or lost that and hotel will be created or these former job supply the industry. workers tighten lost. This can be holders spend Suppliers to this their belts and suppliers to the their money on industry are far- slash their own industry, such as (car dealerships, reaching, including spending, which building material grocery stores For every 100 laundry services for has a further For every 100 art, manufacturers, and more). This jobs created or fresh linens, health ripple in entertainment, and museum induced effect recreation industry lost in the food inspectors, beer and consumer goods employees, and will result in 255 jobs created or lost and liquor distributors — industries. construction jobs created or accommodation even paper goods workers. lost. industry factory workers due to lower demand for napkins.

Source: https://www.epi.org/publication/updated-employment-multipliers-for-the-u-s-economy/

© 2020 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 18 Considerations for DC Industry challenges, structural changes, and outlook Low-cost ways to support restaurants and bars

The following options are relative low-cost to DC. They do not require great funding or investment from the DC government.

Raise awareness for DMV residents and customers by setting up a social media platform to inform how consumers can support local hotels and restaurants • Targeted ad, social media, and news outlet campaign to raise awareness of the extent to which these sectors are struggling, activate individuals to support D.C. restaurants and bars • Restaurant weeks to highlight a different cuisine each week, make information of participating restaurants publicly available. This would encourage individuals to dine out or order take-out and support a wide variety of establishments

Boost demand and traffic (physically or virtually) • Create a centralized website where individuals can purchase gift card from their favorite restaurants • Gift cards would work like bonds that appreciate in the future (e.g., purchase gift card for $75, when it reaches “maturity” in two months, it’s worth $100 of food). FL, GA, and other states have already rolled this out • Through customer loyalty programs, restaurants could offer discounts to customers who visit or order multiple times per month, refer their friends, or post about their meal on social media • For example, NYC restaurant Sveta gives customers a second drink free if they share a picture of their first full-price drink on social media

© 2020 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 20 Industry challenges, structural changes, and outlook Low-cost ways to support restaurants and bars (continue)

DC Delivers • Launch a D.C.-Specific 3rd party takeout and delivery platform, in which local restaurants can enroll for free and individuals can place orders for pickup or delivery from their favorite restaurants. • All proceeds go directly to restaurants - sales on the platform would be commission free, unlike Seamless, Postmates, .Uber Eats, etc. Laid-off restaurant workers could serve as delivery couriers for the program

Increase flexibility and open new channels for revenue • Allow restaurants and bars to sell alcohol for curbside pickup/delivery (already permitted in places like CA, NY, MA, AZ) • Offer private or group cooking or mixology classes via Zoom, where individuals could learn to make signature restaurant dishes & cocktails. Restaurants could even deliver (or offer pickup) of necessary ingredients for the class prior to the lesson • Offer “party packages” for virtual gatherings (e.g., birthday or holiday parties, either for friend groups or companies and their employees). Arrange to have drinks, cocktail mixes, gourmet snacks, and even hors d’oeuvres or full meals delivered to everyone’s home • “Blue Apron” but for D.C. restaurants – subscription-based service where meal ingredients for favorite restaurant entrees can be delivered to households on a weekly basis

Leverage federal programs to help those in need • Recipients of SNAP and DSNAP can use their benefits to purchase “hot" or prepared food. A waiver needs to be approved by the U.S. Department of Agriculture Food and Nutrition Service (FNS). Oregon has implemented this program.

Promote collaboration between art and other sectors, such as healthcare and education • Education can benefit from advances in cultural and creative sectors, particularly in the use of new digital tools that build on gaming technologies and new forms of cultural content • Health care and social services can benefit from greater linkages with cultural and creative sectors to improve well-being, prevent illness or delay its onset, favor the adoption of healthy habits, and prevent social isolation, among others [1]

Increase flexibility and open new channels for revenue • DC can help coordinate and provide parking or other outdoor space for performance and/or other entertainment events • Staycation Program – hotels could offer discounts to locals who come for a “staycation” • Theater/Music Subscription – theaters or entertainment venues could offer a monthly subscription that allows individuals access to every virtual event and performance they organize • Takeout & Theater – theater venues could team up with local restaurants to have a virtual theater performance with a pre-fixe menu

Raise awareness for DC residents and customers • Targeted ad, social media, and news outlet campaign to raise awareness of the extent to which arts and entertainment sectors are struggling, activate individuals to support local D.C. business

Source: https://www.oecd.org/coronavirus/policy-responses/culture-shock-covid-19-and-the-cultural-and-creative-sectors-08da9e0e/

© 2020 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 22 Industry challenges, structural changes, and outlook Community support program – equity in recovery

Connect food surpluses to community members in need • Food Connect, an online platform (initially rolled out in PA) where restaurants, food retailers, grocery stores, and caterers with surplus food can schedule a pickup to have food donated to those in need (Source: http://www.foodconnectgroup.com/covid19.html )

Enlist restaurants to cook meals for those in need • Establish a fund individuals and companies can donate to that pays restaurants to make meals for homeless people and other people unable to afford food • Helps keep restaurants and their employees afloat while also addressing needs of the community

Fundraise within the community and donation to non-profit organizations • Create a fund individuals and companies can donate to that would “gift” a restaurant-prepared holiday meal to a local family in need

There are other considerations for DC to support and sustain these sectors. However, these options may require funding/investment from the DC government. Food and accommodation • Implement Isolation Hotel Program for those with COVID-19 • Continue to provide payroll assistance, heath care, rent relief, or even food and provisions • District needs to grow low-barrier-to-entry job for displaced workers • Expand displaced workers skills through online training and certifications • Revisit tax policies and regulations to reduce the administrative burden of business owners • Extend tax filing and payment deadlines, waive late penalties and fees • The District can also consider voucher programs or subsidizing restaurants to cook meals for low income households

Art and entertainment • Grants and benefits should be provided to this population so they don't fall through the cracks. Due to the unique structure of this sector, some independently employed artists and those who perform art as their second job are not financially stable. They might be ineligible for government benefits. • Provide technology training to workers and help accelerate digitalization • Ease access to capital for small business owners or individuals to help them endure this economic recession • The District can have artists perform art for the communities with fair compensations

© 2020 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 24 Appendix Analysis and Assumptions Economic Highlights Weekly Unemployment Insurance Initial Claims Since March 2020 in DC The weekly UI claims filed since March 2020 is unprecedented. The following charts show the weekly UI initial claims from 2006 – present. During the great recession, the highest weekly UI claims filed was around 1,500, while the highest count of weekly UI claims filed was approximately 15,000 in April 2020.

Since March 2020, approximately $540 million of regular UI benefits have been paid

UI claims filed between March and April 2020 exceeded 16,000. UI claims filed has decreased since May and has stabilized, but still remains high compared to the previous economic downturn

Net moves (move-ins minus move-outs) Graph shows the top ten inbound and Katy, TX outbound migration cities, according to the 4.4 thous. Richmond, TX total number of address change requests 3.0 Frisco, TX filed with the U.S. Postal Service from 2.6 East Hampton, NY February 1, 2020 to July 31, 2020. 2.5 Georgetown, TX 2.3 Leander, TX 2.3 Cypress, TX 2.1 Cumming, GA 2.1 Riverview, FL 2.1 Meridian, ID 2.1 Fort Myers, FL -11. 9 Philadelphia, PA -12.8 Houston, TX -14.9 Washington, DC -15.5 Naples, FL -22.1 Los Angeles, CA -26.4 San Francisco, CA -2 7. 2 Chicago, IL -3 1. 3 Brooklyn, NY -43.0 New York, NY -111.0 -120 -100 -80 -60 -40 -20 0 20

Source: KPMG Economics, MYMOVE Thousands

© 2020 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 27 Impact Highlights COVID Strikes! Daily D.C. COVID-19 New Confirmed Cases DC has had a relatively low and consistent number of new daily COVID-19 cases since May, with cases remaining steady following Phase II reopening. andThis sharply Deaths contrasts the rapid upward trend in COVID-19 cases that has been observed across the U.S. in recent months.

DC: Daily COVID-19 New Confirmed US: Daily COVID-19 New Confirmed Cases and Deaths Cases (LHS) Cases and Deaths 7-Day Moving Average Deaths (RHS) 7-Day Moving Average Stay at Self-quarantine 200,000 8,000 250 Stay at home home order requirement from 25 Cases (LHS) order on 4/1 lifted 5/29 high risk states 7/27 Deaths (RHS) 7,000 200 20 Phase II reopen 150,000 6,000 started 6/22 150 15 5,000 100,000 4,000 100 10 3,000 50,000 2,000 50 5 1,000 0 0 0 0 3/16 4/16 5/16 6/16 7/16 8/16 9/16 10/16 11/16 3/16 4/16 5/16 6/16 7/16 8/16 9/16 10/16 11/16

Source: KPMG Economics, Johns Hopkins University (October 27, 2020), Haver Analytics

© 2020 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 28 Impact Highlights National Trend of Unemployment February – September 2020 These charts show the national trends of unemployment by industry from Feb 2020 – Jul 2020 and change in payrolls by sectors from Feb 2020 – Sep 2020. Some temporarily laid off workers in the service sectors went back to work in June and July after states reopened, contributing to the reduction of temporarily unemployed compared to April. However, unemployment from permanently lost jobs has been increasing. This trend is consistent with the 08 – 09 recession, where unemployment remained high through 2010 – 2012.

Source: [1] Wall Street Journal. https://www.wsj.com/articles/covid-19-pandemic-triggers-wave-of-long-term-unemployment-11596817137 [2] Wall Street Journal. https://www.wsj.com/articles/september-jobs-report-unemployment-rate-2020-11601593020 © 2020 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 29 Impact Highlights Trend of Employment of Private Sectors (Seasonally Adjusted) of the District, March 2020 – Aug 2020

Trade, Professional and Mining, Logging, Transportation, Financial Business Education and Leisure and Period and Construction Manufacturing and Utilities Information Activities Services Health Services Hospitality Other Services Total Private

March 14.7 1.3 34.4 21 29.9 174.4 128.2 78.6 79 561.5

April 13.5 1.2 29.9 20.4 29.4 170 120.8 36.1 77.5 498.8

May 13.8 1.2 29.5 19.1 29.6 165.7 121.3 33.6 77.1 490.9

June 14.8 1.2 30.1 18.7 28.8 163.1 122.2 43.1 76.2 498.2

July 14.9 1.2 32 18.6 28.4 165.5 122.5 47.2 76.1 506.4

August 15.0 1.2 31.7 18.8 28.2 164.9 123.1 43.7 76.4 503.3

Source: KPMG Economics, Bureau of Labor Statistics, Haver Analytics

© 2020 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 30 Economic Highlights PRELUDE: GDP Contribution and Employment by Industry

DC GDP by Industry: 2019 D.C. Employment Distribution (2019)

Federal Government 10.7% 24.6% Financial Prof, Scientific & Tech Svces 15.2% Activities Other Services Government 9.7% Health Care & Social… 8.9% 32.5% 12.5% Educational Services 7.5% Economic Trends in DC Food Svces & Drinking… 7.0% • Strong economy Adm/Waste… 5.9% Professional & State & Local Government 5.4% • Population growth over 2005 – Business Services 2015 decade Retail Trade 2.9% 24.2% Information 2.5% • Urbanization trend benefitted the District 7.3% Finance & Insurance 2.1% Accommodation 2.1% • Foodie hotspot 8.1% Logging/Mining/Construct • Significant new development 3.7% 1.9% 1.0% Real Estate/Rental &… 1.6% • Convention destination All other services Financial activities Arts,… 1.2% Professional and business services Education and health services Wholesale Trade 0.6% Arts & Entertainment Accomodation & Food Services Transportation,… 0.6% Other services Government Manufacturing 0.2% 0% 10% 20% 30% Source: Bureau of Economics Analysis

© 2020 KPMG LLLLP,P, a a Delaware Delaware limilimitedted liabili liabilityty pa partnershiprtnership and and t hethe U U.S..S. member memberf irmfirmo off t hethe KPMG KPMG ne networktwork o off independen independentt member memberf irmsfirmsa affiliatedffiliated wi withth KPMG KPMG In Internationalternational Coopera Cooperativetive (“KPMG (“KPMG In International”),ternational”), a aSwiss Swissen entity.tity. All All rights reserved. rights reserved. Proprietary. Do Not Distribute/ 31 Economic Highlights Trend of Employment and Weekly Earnings Feb 2020 – July • From March to May, Leisure and Hospitality lost about 65% of its 2020 work force in the District. In June, the employment level of this Phase I industry started to clime up due to Phase II Phase II DC’s Phase II reopening Phase I (6/22/2020), when some temporarily laid off individuals went back to their jobs. • The employment level of almost all other industries kept falling in June. In July, employment in some industries slightly picked up, such as trade/transportation/utility, professional and business services, and leisure/hospitality. This trend is consistent with the national trend. • Average weekly earnings data were collected from CES for selected industries. In total private and total private service providing, Phase II Phase I the average earnings steadily increased in June and July, while the earnings in professional and business services slightly decreased. Data source: CES

— Jobs in the leisure and hospitality sector are vital to the District’s economy. Losses in this sector show a significant impact on the overall unemployment rate and have a ripple effect on other sectors. The District is heavy reliant on tourists, and travel was among the hardest hit cities by COVID-19. Please add the table or info from the below link on the ripple effect.

— When layoffs in one industry occur, they have a ripple effect on other industries when former employees no longer have wages to spend and employers no longer need to purchase as many supplies or invest in their businesses. As wages drop, spending slows; corporate profits dwindle and tax dollars drop, hurting public services and public service jobs.

— Different sectors of the economy have different multiplier effects based on how these jobs create wealth in the economy and how they link together with other industries.

Source: https://www.epi.org/publication/updated-employment-multipliers-for-the-u-s-economy/

Outlook Art and Entertainment Sector Considerations for DC

Major challenge — Industry structure of the creative sectors are characterized by high shares — Ease access to capital, such as grants and loans of non-standard forms of work. Professionals in these sectors are largely self- — Provide outdoor space for seasonal festivals and employed or employed by micro-companies. Due to this unique structure, performance workers in this sector may not be eligible for government benefits (such as — DC can provide customized financial support to UI or grants) and innovation incentives. artists and business owners who are not eligible for the — Workers in this sector heavily rely on in-person events and live common government benefits. performance. These events have been restricted by social distancing guidelines. — Access to capital has been a challenge for this sector. Structure — Ramping up technology — Provide technology training to workers in this sector changes since - Digitalization of events and content to keep audience engaged and help them adopt technology COVID-19 - Ramping up e-Sports to recover some revenue - Developed e-markets for artists to sell their production Industry outlook — Anticipation of “the first to be gone and the last to come back”: Business — A comprehensive economic impact study may help owners and artists are pessimistic about the outlook in the short-term. the District understand better the true impact of this — In the longer run, there is a fear of losing this important sector in DC. sector and quantify the costs and benefits of different Businesses and artists may move out DC, which will have a negative impact financial programs. on the communities in DC. Other creative — A study conducted by the Organisation for Economic Co-operation and — DC can help facilitate collaboration programs between ways to help Development (OECD) suggested collaboration between this sector and other culture and education or health sectors, which can recovery industries, such as health care and education would help expand the impact drive future innovation of the art sector.

© 2020 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 34 Industry challenges, structural changes, and outlook Observation from the field: food and accommodation Accommodation & Food Services Sector Considerations for DC

Major — Licensing and administrative burden and tax burden may be higher than neighboring — Revisit licensing requirement and tax policies to potentially challenge states. reduce burden of business owners. — Lack of foot traffic results in smaller demand The demand for delivery has significantly — DC can provide supports to families and workers in the increased for restaurant dining and hospitality. following way: — The sector observed a loss of talents. This can due to safety concerns of the staff, child - Provide health care aids to children to help parents go care needs, and other family related reasons. back to work - Provide training to staff to reduce safety concerns Structure — Dining outdoor has become the new trend as customers feel more safer this way. — Offer consistent support to restaurants and offer outdoor changes since — Demand for food delivery has significantly increased seating areas COVID-19 — Use of various technologies to minimize human-to-human contacts — Allow more catering companies or restaurants for delivery - Service robots, contactless bank cards, digital menus, and no-contact curbside pickup businesses — Means to increasing capacity, such as installed plexiglass between booths may increase — Provide training to employees or subsidies to improve to about 65% with this relatively simple change. restaurants’ technology — Provide supports to increase restaurant capacities Industry — The great uncertainty of the sector makes it very challenging for business owners to make — Consistent support (infrastructure, financial support) will help outlook short-term planning. business owners plan and survive. — In the long run, business owners are worried about no-growth due to people moving out — More favorable policies to reduce financial burden and the District. administrative burden would increase the competitiveness of — Business owners are considering moving new projects outside DC to northern Virginia or doing business in DC. Maryland, which may offer more favorable tax rates and lower costs of operations. This will have a long-term impact on the economy of this sector. Other creative — Eat Out to Help Out in UK awarded 50% discount on food and non-alcoholic beverages (up — DC can consider subsidizing eating out and build up ways to help to £10) to diners who ate at registered establishments Monday through Wednesday in consumer confidence and demand. recovery August. — Subsidizing restaurants to prepare meals to those in need — Paying restaurants to cook meals for those in need may help restaurants stay open & pay may help businesses survive. employees, also helps feed hungry members of the community.