The first thing that jumps out at you when you arrive in Bethlehem, Pennsylvania are the five blast furnaces that tower over the city. They spat steel from the joists of the Golden Gate and part of the Empire State Building. But they have been decommissioned for more than twenty years and this monumental structure, a sort of Gaudi-like assembly of majestically rusty turrets, pipes and footbridges, has been transformed into a tourist attraction. Two steps away, OraSure is running at full speed. This SME manufactures medical equipment, including tests for AIDS, hepatitis C and, recently, Covid. Obviously, his income is exploding. “We are going to sell everything we produce in the months to come”, assures Stephen Tang, the CEO who works from his dining room, for lack of an office: in order to be able to increase its production, the company has annexed the year last the premises occupied by the management. And this year, it is inaugurating a new factory.
Antigen test makers aren’t the only ones thriving in the Lehigh Valley around Bethlehem. CF Martin, a guitar manufacturer, Sharp, a producer of packaging, and Follett, of refrigerators, have all recently expanded their production capacities. And even Social Still, a distillery housed in a former 1930s bank still adorned with huge vault doors, has found a certain buzz following surviving by making cocktails in click and collect during confinement.
Spectacular recovery
Despite Delta and Omicron, the US economy has recovered at breakneck speed. Growth reached 5.7% last year, the highest level since 1984, thanks to federal aid to businesses and households, and very low borrowing rates. “Fiscal measures are one of the reasons why the United States has experienced one of the mildest recessions and one of the strongest rebounds among developed countries,” said Gerald Cohen, economist at the Kenan Institute.
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The restart is particularly spectacular in the Lehigh Valley. After the decline of the 1980s embodied in a song by Billy Joel, mass relocations and the gradual closure of Bethlehem Steel, the second largest steel producer in the country, the region had managed to recover by attracting financial groups and some 700 light industry SMEs, including Crayola crayons. A beautiful renaissance due to generous subsidies, skilled labor, limited taxes and a strategic position ninety minutes from Manhattan and one hour from Philadelphia.
“The pandemic has proven to be good for us,” said Don Cunningham, president of the economic development body. Since the fall of 2020, his office has been full of bosses eager to set up shop. “Given the difficulties of supply and transport, companies want to be closer to their customers. However, the Lehigh Valley is an eight-hour drive from a third of American consumers,” he explains. In recent months, a brand of hygiene products for men, a producer of marshmallows, another of dog food have opened factories. Not to mention the proliferation of distribution warehouses with the explosion of online commerce.
The arms are missing and the salaries are slipping
This unbridled growth does not only have happy effects. “We had already started to experience a certain pre-Covid overheating, but today we are in full turmoil, continues Don Cunningham. I have phone calls every day from desperate people looking for labor. If someone had told me, when I was mayor in 1998, that we would be understaffed twenty years later due to an influx of companies, I would have said it was delirium. We no longer count, in Bethlehem, the signs “We are hiring” in front of restaurants and factories. Result: the hotel no longer cleans the room every day, some fast food restaurants have reduced their opening hours…
The unemployment rate fell to 3.9%, following a peak of 14.8% in April 2020. America, however, still has 3 million fewer employees than before the pandemic. The number of immigrants has fallen, retirements have accelerated and many people are choosing to stay at home to look following children… The “great resignation” has struck here too.
“It’s a big problem, we have to be creative,” observes Stephen Tang. OraSure pays well above minimum wage, awards bonuses, and recruits away from its headquarters, like its chief financial officer, who lives in Utah. In Oregon, a transport company offers a $30,000 bonus to truck drivers; the army promises 50,000 dollars to new recruits. Amazon finances the studies of its employees who want to go back to college. Some restaurants include paid sick days, health insurance… Perks that were unthinkable not long ago.
Inflation at its highest for forty years
All of this drives prices up. Inflation reached 7.5% in January, a 40-year high. The price of fuel has literally soared, emptying the wallets of Americans who are terribly dependent on their car. But it’s not just energy. Dollar Tree, a chain of $1 discount supermarkets, has just raised the price of certain products to $1.25. “25 cents doesn’t seem like much, but it’s a 25% increase,” said a retiree in the canning department of one of these stores in Bethlehem. “Everything is more expensive, so we buy less meat, less milk. It’s a bit depressing,” add Mike and Jessica, a young scrap metal couple with five children.
The overheating is especially visible in real estate. Bethlehem suffers from a lack of housing… Like its biblical counterpart. This is due to huge demand, low rates and very low supply. Last year, Realtor.com ranked it the 12th most “wanted” city in the country. “2021 will go down in history,” said Tim Tepes, one of the managers of the Greater Lehigh Valley Realtors agency. “We thought the market would slow down. But the houses left in record time at very high rates.” He sold six of them online, without even showing them around. The median price increased compared to 2020 by 13.2%. And rents are skyrocketing too.
Don, an engineer, early forties, knows something regarding it. On this snowy morning, he visits with his kid an old hut from 1890 in a small village, near Bethlehem. It obviously belongs to a gun lover. There’s a crossbow and an automatic rifle on a shelf between two stuffed deer heads. Don hesitates. It is displayed at 135,000 dollars, despite its lack of a garage. Two houses have already passed under his nose. There were 5 or 6 people involved and the winner paid some $10,000 above the asking price. “I didn’t think it would be so difficult. It takes a toll on morale,” he says Buyers go so far as to pay seller taxes and even compensate competitors for backing out! A real estate agent offers a free cruise to encourage you to sell your property.
The specter of the real estate bubble
The housing crisis, we owe it a little to people like Jason Toff, 34, who left California to come and settle in Bethlehem. He worked for Facebook and when he found himself telecommuting he and his wife decided to move back to the Lehigh Valley where they grew up to be closer to their families. “Initially, it was temporary while we were expecting our third child. And then, we bought a land of almost 4000 square meters for the price of a studio in the San Francisco area and we built a house .” Since then, he has created his own start-up. “We are good here, there is a real quality of life, I am near an airport, my teams in New York.” He’s not the only digital nomad to have (re)discovered the Lehigh Valley. According to a report, the number of New York migrants increased by 14% between 2019 and 2020.
Will this economic overheating last? “The situation is extraordinarily uncertain, but I tend to believe that the problems will resolve themselves within the year,” says David Wilcox, economist at the Peterson Institute for International Economics and Bloomberg Economics. “It remains to be seen whether the Fed, which announced a rate hike, can calm things down without triggering a recession.” In the meantime, the International Monetary Fund has revised its growth forecast down to 4% for 2022. Don continues to look for a home.
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