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Bears Awaken

PA employers say state’s business climate getting worse

Pennsylvania employers have again turned bearish on the state’s economic climate after a brief period of optimism in the run-up to last November’s Presidential election. A combination of international, national, and state-specific factors has resulted in a return to the pessimism that characterized business attitudes in the Keystone state between 2000 and 2004.

The Lincoln Institute’s Spring 2005 Keystone Business Climate Survey found employment levels have dipped since last October’s survey, but that Pennsylvania companies report rising sales. There remains deep skepticism as to whether or not the state’s economic climate will improve over the coming six months, although employers are predicting an upturn in both employment levels and sales.

A total of 17% of the business executives participating in the Spring 2005 survey said they felt, in general, business conditions in Pennsylvania are better now than they were six months ago. That figure is significantly lower than the 29% who reported in the Fall 2004 survey that the state’s business climate had improved. It is also below the level of one year ago, in the Spring of 2004 survey, when 23% said they experienced an improving business climate.

Likewise, the number of employers saying business conditions have worsened over the past six months has increased – to 33% in the current survey from 21% last October. The number of business leaders saying business conditions have stayed “about the same” stands at 49% in the current survey, up slightly from 48% last Fall.

Looking ahead six months, 22% of those participating in the Spring 2005 survey say they expect business conditions in Pennsylvania to improve, while 26% expect conditions to get worse. That number too presents a more pessimistic picture from last October, when 37% felt the coming six months would bring about better economic conditions, and 18% felt the state’s economy would get worse.

In terms of employment, 16% of the companies responding said they have added employees over the past six months, while 18% report having fewer employees on their roster. Those numbers reflect a reversal from the Fall 2004 survey when 22% reported their company employed more people, and 15% said employment numbers had dipped.

The employment numbers may, however, be temporary. With the survey finding sales on the upswing, there appears to be a pent-up demand for a larger workforce. As a result, 27% of the companies say they expect to increase employment levels over the coming six months, while just 6% project having a smaller workforce.

Thirty-two percent reported increased sales over the past six months, while 27% said sales have dropped. The remaining 40% said sales remained relatively steady. Although the sales figures show continued progress, the number of firms reporting increased sales has dropped from 42% last Fall to the same 32% level reported by employers in the Spring 2004 survey.

Over the coming six months, 48% of the companies surveyed said they expect their sales to increase. That number reflects rising optimism from the October survey when 44% projected raising sales. Ten percent of the companies are projecting declining sales over the coming six month period, similar to the 11% which projected last October that sales would decline over the winter months.

Stablility

The number of companies moving some of their operations out of Pennsylvania to another state or nation climbed to 4% in the Spring 2005 Keystone Business Climate Survey from 2.5% last October and 1% a year ago. An additional 9% of companies said during the past six months they considered moving all or part of their operations out of Pennsylvania. Conversely, not one single company reported having moved operations into Pennsylvania over the past six months from another state.

As employers consider their business tactics over the coming six months, 10% said moving some of their operations to another state is an option under active consideration; another 5% said they may move all of their operations out of the Keystone state. Eighty-four percent said they are not considering any moves.

Job Performance

President George W. Bush’s job performance rating by Pennsylvania employers has dipped by 7% since last Fall. He received a 73% positive job performance rating in the current survey, down from 80% in the October Survey and 80% in the Spring 2004 poll. The President’s negative rating rose to 22% from 16% last Fall and Spring.

Rising interest rates appear to be doing little to harm the standing of Federal Reserve Chairman Alan Greenspan with Pennsylvania’s major employers. His positive job performance rating remained at 70%, exactly where it was in the October 2004 survey. Greenspan’s negative rating rose slightly from 7% last fall to 10% in the current poll.

As U.S. Senator Rick Santorum begins what will be the marquee national battle over a U.S. Senate seat against State Treasure Robert P. Casey, Jr., his job performance numbers among the business community have dropped by 10% from the previous survey. Sixty percent of the business leaders surveyed give Santorum a positive job performance rating, down from 70% last fall and 65% in the Spring 2004 survey. Santorum’s negative numbers rose to 20% from 13% in the October survey.

The state’s senior U.S. Senator, Arlen Specter, continues to poll poorly with Pennsylvania employers. His positive job performance rating in the current survey was 29%, down from 32% last fall. His negative rating climbed from 43% last fall to 53% in this spring’s survey.

Likewise, Governor Ed Rendell has historically not polled strongly with the state’s business leaders. The Spring 2005 Keystone Business Climate Survey found his positive job performance rating at 15%, down from 17% last fall. Meanwhile, his negative rating rose from 69% last year to 75% in the current poll.

The job performance ratings of the United States Senate remained relatively unchanged from last Fall, while opinion on the U.S. House of Representative has turned negative. The Spring 2005 survey found 29% have a positive view of the job being done by the U.S. Senate, while 56% hold a negative opinion. Last October the U.S. Senate had a 27% positive rating against a 52% negative rating.

Approval of the job being done by the U.S. House of Representatives last October was positive, with 46% approving of the job being done by the House, while 33% disapproved. In the current survey, approval has dropped to 40%, while those expressing a negative view of the House rose to 45%.

Keystone state employers also continue to register their dissatisfaction with the job being done by both houses of the Pennsylvania General Assembly. Approval of the State Senate has dropped from 32% last October to 25% in the current poll, while the State Senate’s negative numbers have climbed from 39% last Fall to 48% in the Spring of 2005. The state House of Representatives has likewise seen an erosion of support. Twenty-four percent say they approve of the job being done by the state House, down from 34% last October. Disapproval of the Pennsylvania House of Representatives has risen from 36% last fall to 50% in the current survey.

Methodology

The Lincoln Institute’s Spring 2005 Keystone Business Climate Survey was conducted during the month of March 2005 via e-mail to employers throughout the Commonwealth of Pennsylvania . By the April 4, 2005 cut-off deadline 174 business leaders had responded to the poll.