Six years ago, “Black Monday” entered history books when stock markets around the world crashed.
Since that time and at the end of the Great Recession, the U.S. economy has added 8.3 million jobs, and the unemployment rate has fallen from 10 to 5.7 percent.
That number isn’t as low as the pre-recession rate of 4.6 percent in 2007, but it is lower than the double digit unemployment figures in Western Europe. Since the federal government includes part-time workers in its employment figures, and excludes workers who have given up looking for full-time work, economists warn that full-time unemployment in the U.S. is probably higher than stated.
Over the past 58 straight months, the U.S. has added 11.2 million private sector jobs. The U.S. economy has been growing at a pace of 3 to 5 percent, the fastest pace in 11 years, making it one of the fastest growing economies in the world — a boost for corporate earnings and stock prices.
Business activity has experienced widespread improvement. Industrial production has increased in 51 of the past 65 months to hit a record high, and durable goods orders have increased every year in 51 of the last 59 months. The Small Business Optimism Index soared to an eight-year high after rallying for the 11th time in the past 14 months.
Inflation in the U.S. remains low. The relative strength of the U.S. recovery has created a strong dollar in international trade.
In Pennsylvania, the Shale gas boom helped ease the blow of the recession by creating jobs and preventing housing prices from falling in most areas. In 2010, the average Pennsylvania home was worth 10 percent more than the national average, although home prices have since come in line with national averages.
However, the Shale industry alone could not keep the entire state economy afloat. By December 2013, Pennsylvania had fallen to 48t out of 50 states in job creation.
Jim Glassman, head economist at Chase Commercial Banking, forecasts that Pennsylvania’s economy will follow national trends and experience strong growth in 2015. Glassman is a long-standing participant in the widely-followed Federal Reserve Bank of Philadelphia Survey of Professional Forecasters and the National Association of Business Economists’ panel of macro-economic forecasters.
“The fundamentals show a strong foundation for growth that will begin accelerating this year,” said Glassman. “In my 2015 Pennsylvania Economic Outlook report, I have a graph that compares employment trends for the U.S., Pennsylvania, Pittsburgh and Philadelphia, and while Pittsburgh, the state and nation are trending at similar levels, Philly is lagging way behind.
“Take Philly out of the picture, and the job growth ranking for the state significantly improves.”
Pittsburgh has been doing particularly well in part due to Shale gas development.
“Every time I’m in Pittsburgh, I’m impressed with how a creaky old steel town could re-energize itself by replacing a dominant industry with a broad-based economy that runs the gamut from shale gas to biotech, from healthcare to a world-class university system,” said Glassman. “It’s certainly not the place that I knew when I was a kid.”
According to Glassman, Pennsylvania’s businesses have recovered or replaced 75 percent of the jobs lost in the recent recession. The state’s recovery has slightly lagged behind the national recovery pace so far, but Glassman thinks that could change this year.
In 2015, the state’s real estate and construction sectors are expected to finally join the nationwide housing revival. Health and human services industries have a larger footprint in the state, compared with the national economy. Bankruptcy filings are back down to normal levels. Gas drilling activity slowed down but now appears to be stabilizing.
While Pittsburgh and Canonsburg have become the regional headquarters of many shale gas companies and support businesses, drilling was banned from the southeastern part of the state near Philadelphia.
The state legislature placed a moratorium on gas drilling until 2018 in the South Newark Basin, which lies underneath the southeastern part of the state. The United States Geological Survey estimates that shale in the South Newark Basin contains 876 billion cubic feet of gas.
Would gas drilling in this basin have helped Philadelphia recover faster?
“It probably would have been a big help,” said Glassman. “I sometimes refer to Pennsylvania as two states – the dynamic and revitalized western Pennsylvania and the older and sluggish eastern part of the state.”
Sharon Ward, the director of the Pennsylvania Budget and Policy Center in Harrisburg, agrees with much of Glassman’s forecast, but attributes the overall sluggish job growth in the state — Philadelphia in particular — with public policies.
“Most of the big drags on Pennsylvania’s economy had to do with the policy decisions that were made in Harrisburg, such as the significant retrenchment of educators,” said Ward. “We lost 27,000 educators, 5,000 of which were from the Philadelphia area, and due to federal sequestration cuts, there were also reductions in Title 1 funding. And since Philadelphia has a very large school district, that also contributed to the loss of additional education staff.
“I think these education cuts by the state and federal government at least partly explains why Philadelphia has continued to do worse than the rest of the state in terms of job growth.”
Manufacturing in the state has also lagged behind the nation. Employment by manufacturers declined over the past year, according to the 2015 Pennsylvania Manufacturers Register. Pennsylvania lost 6,330 manufacturing jobs, or about 1 percent from July 2013 to July 2014, compared to the 1.4 percent national average gain reported by the Labor Department during the same period.
“The manufacturing sector is finally showing some signs of recovery, but this comes after a decline,” said Ward.
When manufacturers in the state start hiring, and if energy-intensive manufacturers that left the U.S. decide to reshore to Pa. be close to cheaper natural gas, they might have a hard finding a skilled labor force to operate and maintain the machines in their semi-automated factories.
“A lot of our manufacturing clients complain they have good-paying positions open, but they aren’t able to fill them because today’s manufacturing requires more sophisticated technical skills, and there are not enough workers in Pennsylvania who have those skills, and those few who do have been drawn to other states such as North Dakota and Texas where there’s a lot of growth in building infrastructure and shale development,” said Glassman.
“The lack of a skilled workforce for the manufacturing sector is a major stumbling block that both the federal and state government need to address if we’re ever going to see the much talked about manufacturing renaissance in this country,” said Ward.
“Without that workforce, it won’t be only Philadelphia lagging behind, but the entire state lagging behind China and emerging industrial nations.”
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Source Article from http://www.pabusinesscentral.com/new-year-economic-outlook-for-2015/
