Economic outlook: 2015 will likely bring jobs and clarity to Pennsylvania with steady growth

The Keystone State’s economy is poised to enjoy strong growth in 2015.
“The fundamentals show a strong foundation for growth that will begin accelerating over the coming year,” says Jim Glassman, head economist at Chase Commercial Banking.
Smart Business spoke with Glassman about Pennsylvania’s economic health and what the future will bring.
What do current indicators tell us about the Keystone State?
Recent economic data indicates steadily improving conditions for growth. Long-term gross domestic product (GDP) growth trends show momentum in Pennsylvania’s economy, with the state finally regaining its prerecession growth trajectory. Though recovering economic ground lost during the recession will take years, the state’s economy currently holds potential for expansion.
Regional business leaders are gaining confidence. The Federal Reserve Bank of Philadelphia’s Survey of Business Conditions reveals that the majority of businesses are experiencing an uptick in current activity, and expectations are widespread that favorable conditions will continue into 2015.
Rising home prices and the gradual restart of construction activity shows a strengthening real estate sector. Compared to the national average, Pennsylvania’s housing market avoided the bubble’s worst excesses, and homes held their value relatively well throughout the crisis. In 2010, the average Pennsylvania home was worth 10 percent more than the national average — but that disproportion has vanished in recent years, as the national market recovered. Housing prices have now fallen in line with national averages, indicating a stable market. In 2015, the state’s real estate and construction sectors should finally join the nationwide housing revival.
Following years of below-average growth, Pennsylvania’s labor market finally saw steady gains in 2014. The state’s official unemployment rate has fallen below 6 percent and is expected to continue to decline modestly in the coming year.
What does declining economic distress mean for Pennsylvania?
Although Pennsylvania experienced a milder recession than many states, the downturn still caused turmoil in the local economy. Key indicators of economic distress —personal bankruptcies and layoffs — soared during the recession. Today, signs of distress have returned to prerecession levels.
The housing crisis generated a wave of foreclosures and personal bankruptcy filings, but foreclosures have finally subsided. Personal and business bankruptcy rates have been falling steadily since 2010, and filings are currently at their lowest level since 2007.
Weekly reports of first-time jobless claims provide insight into the current business climate. Layoffs have fallen considerably below prerecession levels, and the economy is letting go of few jobs — a sign that businesses are retaining workers.
Which industries are driving the recovery?
The energy sector continues to be a bright spot. The pace of oil and gas exploration remains far below its 2012 peak, but the steep falloff of recent years appears to have stabilized; by historic standards, new drilling activity in Pennsylvania remains high. Meanwhile, wells drilled during the state’s boom years are yielding cheap natural gas and plentiful petrochemical feedstocks for Pennsylvania’s industries.
The state’s economy is also poised to benefit from growth in the service and health care sectors. Pennsylvania’s service-oriented workforce contributes to greater economic stability than the national average, and the relatively large footprint of the state’s health care industry also contributes to lower economic volatility.
How much will Pennsylvania grow in 2015?
Pennsylvania’s economy is building on a strong foundation, and the state has considerable potential for growth. Pennsylvania’s GDP is projected to post 2 percent growth in 2014, and the economy should continue to accelerate through next year, with the pace of expansion reaching 2.9 percent. Forecasts anticipate a steady 2.8 percent annual growth rate through 2017.

The economic outlook appears clear: In 2015, the state’s economy should broadly align with the national trends of falling unemployment rates and accelerating GDP growth.

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