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Life in the Christmas City

Pennsylvania’s Bethlehem tells the tale of two economies in the pandemic era.

Bethlehem graveyard and steel mill Pennsylvania, 1935. From the New York Public Library. (Photo by Smith Collection/Gado/Getty Images).

There was a time, last century, when one small Pennsylvania city helped build and defend America. Through its namesake steel company, Bethlehem—in the Lehigh Valley, about 90 minutes west of New York City—built wartime ships and bequeathed a nation of landmark bridges and skyscrapers. In Manhattan alone, Bethlehem Steel’s beams constructed the Woolworth Building, Rockefeller Center, and the George Washington Bridge. It’s hard to imagine today’s urban landscape without the company’s legacy.

But Bethlehem Steel, like so many iconic companies in America, couldn’t survive the global economy. Through a passage of incarnations and reinventions, the city of Bethlehem moved on—and eventually prospered. Over time, the city has even benefitted from its proximity to New York. Tourists from the metro region, for instance, annually visit Bethlehem’s historic downtown. Meantime, a booming logistics industry, which replaced the steel mills, supplies Gotham and the East Coast. And an urban exodus, hastened by the pandemic, drives the Lehigh Valley’s bullish real estate market and population growth. In many ways, the region is experiencing a renaissance despite this period. As Becky Bradley, executive director of the Lehigh Valley Planning Commission, remarked: “We aren’t the Rust Belt, U.S.A.” 

Still, the Covid-19 crisis presents challenges in Bethlehem, known as the Christmas City. This holiday season, the downtown’s small business owners face state-level restrictions that discourage in-person commerce and hit the bottom line. This economic uncertainty, though, contrasts with the region’s overall industrial growth. In the city’s South Side and throughout the Interstate 78 corridor, the logistics and warehousing industry thrives—especially as consumers rely on e-commerce amid the pandemic.

Indeed, the city displays the inescapable tension between small businesses—struggling to survive Covid-19—and mammoth companies, which can withstand the virus and even enjoy accelerated growth. As this tumultuous year draws to a close, Bethlehem tells the tale of two economies in the pandemic era. 

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Bethlehem was born on Christmas Eve, 1741, when a group of Moravians—an old Germanic Protestant sect—christened the community in a stable. Through the 18th century, they built an idyllic and quaint industrial hub, centered around crafts and trades. The Moravians’ industrial quarter, dating to that period, remarkably still stands along the Monocacy Creek in downtown Bethlehem. The quarter “can be considered America’s earliest industrial park,” noted Charlene Donchez Mowers, president of Historic Bethlehem Museums and Sites. “It was the largest concentration of pre-Industrial Revolution trades in the American colonies.”

By the early 19th century, America’s Industrial Age was fueled by Pennsylvania’s bountiful natural resources—including in Bethlehem, home to the state’s first iron furnace in the 1820s. By the Civil War era, the growing borough—which had opened to non-Moravian residents in the mid-1840s—was a center for iron making. Anthracite coal—crucial to the smelting of iron and transported on the Lehigh Canal—played a significant role in Bethlehem’s development. In 1863, the Bethlehem Iron Company—a precursor to Bethlehem Steel—was operating its first blast furnace

Through the 19th century, Bethlehem’s South Side transitioned from Moravian-owned farms to a dense enclave of European immigrants who worked in the city’s mills and factories. Then, in 1904, the Bethlehem Steel Corporation was incorporated. By World War II, the company—America’s second-largest steel producer—employed 31,000 and even featured its own police and fire departments. Bethlehem Steel, according to one historical account, had “its own hierarchy and its own societal rules.” The company’s massive, noisy operations—including its famous blast furnaces—“so dominated its landscape that it even gave the children of south Bethlehem, the working people’s side of town, their lullaby each night.”

The Depression era, however, didn’t spare Bethlehem. For perspective, in 1933, the city’s steel employment hit a low of 6,500. And so, on December 7th, 1937, the city’s civic leadership responded by launching a campaign to promote Bethlehem as “Christmas City, U.S.A.” That evening, a crowd of 400 packed into the Hotel Bethlehem—a commanding, ’20s-era, Beaux-Arts structure—to celebrate the city’s Christmas heritage. It was an appropriate venue. After all, 196 years before, the Moravian community had formally established Bethlehem where the hotel now stood. In the corner of the ballroom, upon flipping a switch, an electric “Star of Bethlehem” illuminated the sky in the nearby South Mountain.

“It is unfortunate that we are experiencing a minor depression,” said one Bethlehem leader. “It is hoped that these decorations will encourage our businessmen.” This decision to “capitalize on heritage tourism represented an early attempt at diversification into other revenue sources . . . and served as a touchstone in efforts to unite the city’s North and South Sides,” wrote Chloe Taft in the Journal of Planning History

The star—later replaced with a steel version—has continued to sit atop that mountain. For decades, it has overlooked Bethlehem as it experienced the trends—ill-advised redevelopment, economic decline, demographic change—that occurred in most post-industrial cities. By 1995, when Bethlehem Steel closed after 130 years, the local mood was somber. But the city—thanks to an early appreciation for historic preservation—managed to adapt in the 1990s through today as it once again renewed itself as a Christmastime destination. The pandemic, though, has complicated downtown’s upward trajectory. “It’s a bleak Christmas in Bethlehem,” said Bruce Haines, managing partner of the Hotel Bethlehem.

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The Hotel Bethlehem, where the “Christmas City” campaign began over 80 years before, is the architectural crown jewel of the downtown. But this wasn’t the case in 1998, when the historic hotel went bankrupt and Main Street was just beginning its next comeback. Haines, a former U.S. Steel executive, pulled together a group of investors and bought the landmark. Today, the hotel, which includes a restaurant, shops, and banquet facilities, is an annual tourist destination for its Christmas displays. But now, Haines, along with other business owners downtown, face Bethlehem’s busiest season amid Covid-driven disruptions.

For most of 2020, the downtown managed to endure Democratic Governor Tom Wolf’s controversial lockdowns and restrictions. In fact, by October, the future looked encouraging on Main Street; none of the downtown’s 80 shops and restaurants had gone out of business. Expanded dining on sidewalks and closed streets helped. “Our restaurant business in October was almost equal to last year’s October on the restaurant side even though we were at limited capacity—thanks to outdoor dining,” Haines noted. 

“We’ve worked with our merchants firsthand on ways to encourage people to ‘shop small all season long,’” said Tammy Wendling, Manager of the Downtown Bethlehem Association. The downtown even started Christmas earlier to drive tourism and commerce. According to Haines, on Thanksgiving weekend, the downtown enjoyed healthy street traffic and business volume. “People wanted to be out and about and return to normalcy,” said Haines. “We were seeing that dramatically and we were doing well.”

But on December 10th, Wolf, in response to rising Covid cases, announced new restrictions, including a three-week ban on in-person dining and a rule that “all in-person businesses serving the public may only operate at up to 50 percent of the maximum capacity.” Wolf essentially gave businesses one day to prepare for the restrictions. “He has used the restaurants as a vehicle to keep people at home,” said Haines. “In effect, we’re the fall guys . . . he has targeted our industry as the problem industry.”

Indeed, it was a devastating development for downtowns like Bethlehem—especially before Christmas. In many Pennsylvania communities, a restaurant rebellion ensued, including in Bethlehem’s South Side, where the Seven Sirens Brewing Co. has remained open. “It took us three years to open and 28 days to close down,” the brewery’s head of operations told Fox News. “A lot of our employees haven’t received their unemployment benefits and all those things and we’ve been reaching out to our bank, the SBA, to anyone that would possibly have any relief for us. It just doesn’t exist.”

Meantime, at the Hotel Bethlehem, Haines watched weekend reservations drop in half following Wolf’s announcement. He decided to close the hotel to the general public, limiting entry to registered overnight guests. It was another blow to the storied hotel, which, this fall, had invested nearly $100,000 in an air purification system. “Wolf is using the hospitality industry to make it unappealing for people to come out,” said Haines.

On the Sunday after the restrictions commenced, when visiting downtown, I passed Moravian College, the Colonial Industrial Quarter—now a World Heritage Site candidate—and the outdoor huts modeled after a German Christmas market. Most of Bethlehem’s downtown and North Side are beautiful, from the stately homes around Nisky Hill Cemetery to the colonial-era buildings on Main Street. Modest crowds, all wearing masks, dined at outside restaurants or shopped at retail establishments like Donegal Square, an Irish specialty store, and the Moravian Book Shop—the oldest bookstore in America.

For now, though, these businesses must survive the holidays—critical to annual income in normal times—and then somehow pull through the traditionally slow winter. Last week’s major snowstorm was undoubtedly another setback—especially for outdoor dining. “We are all worried about the fate of our businesses these next three weeks,” said Wendling. “They need relief and support.” 

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Across the Lehigh River, on the South Side, the former site of Bethlehem Steel presents its own remarkable story. Today, before old blast furnaces, is SteelStacks—America’s largest revitalized brownfield—and Wind Creek, a casino that temporarily suspended operations after Wolf’s latest mandates. And then, eastward—near the last heavy forging plant in operation—a seemingly endless landscape of warehouses emerges. These massive box structures—including two Walmart fulfillment centers—symbolize Bethlehem’s new economy.

Over the past decade, the Lehigh Valley—boasting a $43.3 billion GDP—has transformed into the nation’s fastest growing corridor for warehousing and logistics. Bradley, the planning commission director, summarized the enormity of this growth: “The Lehigh Valley has the largest new industrial facility growth in the U.S. and the second largest in the world behind China.”

In the case of Bethlehem, along with neighboring Allentown and Easton, geography is destiny. After all, the region’s Interstate 78—beginning outside Harrisburg—ends at Manhattan’s Holland Tunnel. In the past, Bethlehem’s famous steel beams had built New York’s skyscrapers, but today, the warehousing around this region directly supports the demands of city residents. As Bradley noted, this trend particularly accelerated in 2012, when Hurricane Sandy disrupted New York’s supply chains following the storm’s devastation. Today, the Lehigh Valley’s central location allows freight delivery—intensified by e-commerce—to supply a population of 100 million on the East Coast within one truck shift. 

Indeed, freight has made steel a distant memory. XPO, a third-party logistics provider, has operations throughout the valley, and FedEx Ground—opened in 2018 just north of Bethlehem—is the company’s largest facility in the nation (it opened a second regional sortation facility this year). Meantime, northeast of the city, UPS opened a 1-million-square-foot warehouse. And, in addition to Walmart, Amazon operates two fulfillment centers in the Lehigh Valley, with a third one—another 1-million-square-foot warehouse—slated to open near Allentown in early 2021. This fall, many of these employers haveincreasedemployment to meet the pandemic era’s explosive demands for online shopping—especially this holiday season. Overall, in the Lehigh Valley, the warehouse and distribution industry employ about 32,000 people—nearly equal to the number employed by Bethlehem Steel during World War II.

As this economic activity indicates, “projects continue despite the pandemic,” said Bradley. According to the planning commission, between January and October, the land development square footage growth for warehousing and logistics was approximately 4.9 million—exceeding the entire years of 2015, 2017, and 2019, respectively. As it stands, the Lehigh Valley currently features over 90 million square feet of physical inventory in this realm. 

And, in the near future, such industrial projects will grow even more dramatic with the rise of high cube warehousing. These automated structures, which can reach 140 feet, are already proposed in the region. If anything, all this growth is leading to congested highways and overdevelopment—a looming inconvenience for the New York transplants buying suburban houses. In some townships near Bethlehem, it’s erasing agricultural remnants of the region’s Pennsylvania Dutch and colonial past. 

But it’s also affecting Bethlehem’s small business owners, and their employees, who, earlier this year, were deemed “non-life-sustaining” during Covid-19 lockdowns. As the Lehigh Valley’s warehousing deploys goods throughout the East Coast, many of Bethlehem’s downtown businesses rely on old-fashioned commerce—and the hope that customers will purchase gifts rather than order online. Amid these latest restrictions, they could face a perilous, if not tragic, future. 

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And so, Bethlehem, this small city that once supplied America with steel beams, tells the story of our present economy. As the pandemic continues, small businesses—the backbone of any community—navigate an uncertain future. In the meantime, e-commerce fills what could become a permanent void in Bethlehem and elsewhere. But, this week, perhaps the sky offers a sign of hope. The real Star of Bethlehem, not the steel-framed version on the South Mountain, appeared when Jupiter and Saturn cross paths—a celestial phenomenon unseen in 800 years. Perhaps one can stand in front of the Hotel Bethlehem, where the Christmas City began, and wish for a peaceful holiday season—and better days ahead for our nation.

Charles F. McElwee is managing editor of the Commonwealth Foundation. He is the 2020–21 John Farley Memorial Fellow, part of The Fund for American Studies’ Robert Novak Journalism Program. He edits RealClear’s Public Affairs page on Pennsylvania. Follow him on Twitter at @CFMcElwee. This New Urbanism series is supported by the Richard H. Driehaus Foundation. Follow New Urbs on Twitter for a feed dedicated to TAC’s coverage of cities, urbanism, and place. 

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