Like the equity markets business confidence in the direction of the U.S. and Pennsylvania economies has had its ups and downs since the election of President Donald Trump. At the moment, confidence is up - significantly - from last September when tax reform and other critical reforms were bogged down in the legislative process.
A year ago the owners and chief executive officers participating in the Keystone Business Climate Survey expressed growing confidence in the economy with 27% saying economic conditions had improved in the preceding six months and 20% saying conditions had gotten worse. By last September that burst of optimism had faded as the barometer turned negative with 18% saying conditions had improved and 25% saying they had gotten worse.
As tax cuts and regulatory relief begin to perk through the economy confidence is once again on the upswing. The Spring 2018 Keystone Business Climate Survey found 38% of the business leaders saying business conditions have improved over the past six months, while 15% say they have gotten worse, and 47% said conditions were about the same. Putting that into context, at the depth of the Great Recession in 2008-2009 less than five percent reported improving business conditions. The all-time record high was posted back in the spring of 1998 when 46% said the state's economy had improved.
Going forward there is economic optimism for the balance of 2018. Thirty-eight percent say they expect business conditions will get better over the coming six months, 18% expect the state's economic climate to worsen. Another 41% expect business conditions to remain about the same for the remainder of the year.
Another sign of an improving economy is that the owners/CEOs report higher levels of employment. Twenty-six percent say they have added employees over the past six months while 11% have reduced their workforce; 62% say employment has remained steady. The number of companies reporting increased hiring has risen from 15% last Fall and 17% last Spring. Looking ahead six months, 34% expect to increase their work force; just 4% expect to reduce the number of individuals they employ.
Sales are also on the rise. Forty percent of responding companies say sales have increased over the past six months - that's up from 32% last September, 18% report decreases sales, and 40% said sales have remained steady. Looking ahead 54% expect sales to increase over the coming six months, 6% project declining sales while 38% expect sales levels to remain about the same.
As the above numbers indicated the owners and chief executive offices who run businesses in Penn's Woods view the nation's economy to be headed in a positive direction. Seventy-four percent said the Trump Administration has the economy on the right track, 15% said we are on the wrong track, and 10% are not sure.
Some credit for that rosy outlook goes to the federal Tax Cuts and Jobs Act of 2017. Sixteen percent of the businesses responding to the Spring 2018 Keystone Business Climate Survey said they have benefitted from "substantial tax savings” as a result of the act. Another 27% report "moderate tax savings,” while 52% say it is too soon to know. Three percent said their taxes have increased since passage of the act.
Employees are also benefitting from the tax cuts. Twenty-nine percent of the businesses responding said they have increased employee compensation, 20% have hired new employees, 5% have expanded employee hours. The cuts have also helped businesses to grow: 17% report the cuts have helped them to expand their business, 6% have started new product lines.
Likewise Pennsylvania businesses are benefitting from regulatory relief. Twelve percent say the Trump Administrations has provided their business with significant regulatory relief, 46% say they have experienced some regulatory relief. Thirty-one percent said they have had no regulatory relief and 11% did not answer the question.
International trade continues to be of interest to many Pennsylvania companies. Current efforts by the Trump Administration to renegotiate the North American Free Trade Agreement (NAFTA) drew support from Keystone state business leaders. Seventy-seven percent said the President should negotiate more favorable terms. Twelve percent said America should keep NAFTA the way it is with no changes, while 4% would like to see the agreement terminated.
Recent moves by the Trump Administration to place tariffs on steel and aluminum imports, however, appear to have negatively impacted Pennsylvania businesses. Thirty percent said the tariffs have had a negative impact on their business, ten percent said the impact has been positive. A majority -54% said the tariffs have had no impact on their business.
The role of the judiciary has become a major issue in Pennsylvania over the past few months resulting from the state Supreme Court's unprecedented ruling imposing new congressional district maps. Sixty-one percent of respondents to the Spring 2018 Keystone Business Climate Survey said the court overstepped its authority by making that ruling, 23% said the court righted a wrong.
Efforts by some lawmakers to impeach the justices who rendered that decision drew a mixed reaction from the business leaders with 46% saying the jurists should be removed from office, 32% said they should not be impeached. Another 22% offered no opinion.
Due to ten year terms voters will not get a say on the Supreme Court Justices' actions for another five years at the earliest. That has ignited a debate over the length of judicial terms. Thirty-six percent of the business owners/CEOs thing their terms should be reduced to six years, 32% think four year terms are sufficient. Twenty-five percent support keeping judicial terms at ten years.
However, there is strong support for ending the practice of judicial retention. Retention is a simple yes or no vote of giving judges and justices a new ten year term. Seventy-two percent think judges and justices should stand for re-election rather than retention. Twenty-two percent support keeping the current retention system.
Currently Pennsylvania's appellate court judges and justices are elected in statewide elections. Fifty-eight percent of the respondents think that should be changed and we should elect appellate court jurists by region or district like we do congressmen and state legislators. Twenty-three percent support continued statewide election. Another 12% say we should go to a so-called "merit selection” or appointment process.
Democratic Governor Tom Wolf and the Republican-controlled General Assembly have engaged in annual budget battles which have resulted in missing the state's June 30th deadline for having a new budget in place each year during the governor's term. Business leaders support a proposal that would suspend the pay of lawmakers and top staff if they do not adopt a budget on time. Ninety-one percent supports such a suspension of pay - 70% strongly support the move.
Pennsylvania's business owners and chief executive officers continue to strongly disapprove of Governor Wolf's job performance. Seventy-nine percent have a negative view of his performance in office, 14% approve. The legislative branch does not fare much better. Twenty-one percent have a positive view of the job being done by the state Senate, 63% view it negatively. Twenty-six percent approve of the job being done by the state House of Representatives, 59% have a negative view.
Among the statewide constitutional or "row officers,” second term Auditor General Eugene Depasquale has a 25% positive - 15% negative job performance rating. Nineteen percent approve of the job being done by Attorney General Josh Shapiro, 24% disapprove. State Treasurer Joe Torsella has a 12% approval ratings verses a 15% disapproval.
At the national level President Donald Trump is riding high. Seventy-four percent say they approve of the job the president is doing, 23% hold a negative view. U.S. Senator Pat Toomey also gets an overall positive rating: 53% approve of his job performance, 31% disapprove. But, U.S. Senator Robert P. Casey, Jr. trails with 64% saying they disapprove of his job performance, 18% approve.
Eighty-four percent of the respondents have a negative view of the job being done by the U.S. Senate, 9% approve. The U.S. House of Representatives posted a 17% positive rating while 76% view the job being done by the lower chamber negatively.
Incumbent Governor Tom Wolf is unchallenged for re-nomination to a second term. But Republicans are engaged in a spirited contest between state Senator Scott Wagner, retired Pittsburgh businessman Paul Mango, and attorney Laura Ellsworth for the change to take on Wolf in the November General Election.
Seventy-one percent of the respondents to the Spring 2018 Keystone Business Climate Survey are registered Republicans. Among them 43% support Wagner, 12% are backing Mango, and 4% indicated a preference for Ellsworth. Still, just weeks before the primary, 43% remain undecided.
The Spring 2018 Keystone Business Climate Survey of 242 business leaders was conducted electronically by the Lincoln Institute of Public Opinion Research, Inc. from March 14 - April 13, 2018. Of those responding, 77% are the owner of their business, 17% serve as the CEO/COO/CFO, the remainder work as state or local managers.
Twenty-two percent of the participating businesses are located or headquartered in southwestern Pennsylvania, 21% in southeastern Pennsylvania, 16% southcentral Pennsylvania, 15% northwest Pennsylvania, 9% in Northcentral Pennsylvania, 8% in northeastern Pennsylvania, 6% in the Lehigh Valley and 3% in the Altoona/Johnstown area.
Complete numeric results are available on-line at www.lincolninstitute.org.