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Tuesday, June 28, 2011

Wells Fargo: PA exports weak; Marcellus impact 'not major': Updates

Economists at Wells Fargo Securities, the investment arm of the dominant bank in the Philadelphia area, say Pennsylvania, with its vast dependence on hospitals for old people, schools for young people, and other recession-resistant industries, continues to suffer less from the slow national economy than other states.

But as the economy slowly recovers, Pennsylvania will go back to trailing the nation, as it did for the past half-century, unless something major changes soon, warn global economist Jay Bryson and colleages Tim Quinlan and Joe Seydl, in a report to clients.

Pennsylvania housing prices didn't "bubble," so they're down 12% on average, vs US median of minus 30%, since their mid-2000s peak, Bryson writes, quoting CoreLogic data. Pennsylvania foreclosures are one-third below the national rate. Construction employment here is down 16% since before the recession - bad, but still just half the national decline.

Pennsylvania is still a relatively heavy manufacturing state. Factory jobs rose nearly 3% in the past year, and overall unemployment here is just 7.4%, vs 9.1% for the U.S. But that's mostly thanks to hiring at hospitals and schools, "the most important single driver" by far in the state's job recovery, Bryson adds. (And both school and hospital spending are threatened by Harrisburg's planned budget cuts.)

So "in the long run, Pennsylvania likely will revert to its accustomed role" of growing more slowly than most of the rest of America. "Unless a transformative industry were to locate in Pennsylvania, thereby attracting hordes of workers, (Gross State Product) growth in the Keystone State likely will lag behind the overall rate" of U.S. growth.

"Could Marcellus Shale be a transformative industry for the Keystone State?" There's a hopeful sign: Unemployment is down in the upstate gas counties. "However, it is far from clear that Marcellus Shale has had a transformative effecto n the overall Pennsyvlania ecnonomy," Bryson adds. Running the numbers, he finds, so far, "the economic effects on the overall Commonwealth have not been major."

So, back to exports: PA sent more than $30 billion in Boeing helicopters, GE locomotives and other manufactured products out of state in the past 12 months. But that's only about the same as in 2008, before the recession hit.

Pennsylvania has "the right mix" of exports: metal products, chemicals, plastics, electrical and electronics equipment, aircraft and rail gear, just the things a recovering world economy buys.

But most of the goods PA is exporting are going to Canada and other Western countries -- while demand is rising fastest in "developing countries" like China and India, where Pennsylvania companies still sell relatively little. 

"It is surprising that Pennsylvania does not do a better job exporting goods," Bryson and his colleagues concluded. Pennsylvania's weak export sector is "a cause for concern," and the state "would do well to increase its trade ties with developing economies." 

UPDATE: The state-funded Pennsylvania Center for Trade Development, which pays 22 people to drum up business for PA companies abroad, says its data (from the World Institute for Strategic Economic Research) shows PA exports are rising, from 4% of state production in mid-2000s, to more than 6% last year, with exports topping $34 billion last year for the first time.  Sure, almost a third of that is to Canada. But the state is also working on "China, India, Brazil and South Africa, to name a few," spokesman Steve Kratz says. 

ALSO: This from a report last week by a separate group of Wells Fargo economists, via Guy Ciarrocchi spokesman for Lt. Gov. Jim Cawley: "Pennsylvanians hope that the Marcellus Shale... will be a major driver of employment growth in the years ahead," with growth accelerating as more wells are dug and royalties paid and workers hired, though so far "only about 20 percent" of the resulting jobs have been filled by Pennsylvanians. More here, see p. 12.
Posted by Joseph N. DiStefano @ 11:10 AM  Permalink | 4 comments
Comments   
  • 0 like this / 0 don't   •   Posted 4:24 PM, 06/28/2011
    blah blah bah blah. How were these guys at poredicting the housing bubble? How about the stock market collapse in 2008/09? How about the financial meltdown of 2008-09 caused by all those junk mortage securities? More blather from the "experts"......
    — Owatagoofiam
  • Comment removed.
  • 0 like this / 0 don't   •   Posted 5:12 PM, 06/28/2011
    So, in the end Wells Fargo recants that the Marcellus effect will "not be major" and PA exports have in fact been rising, not falling. Wow, what expertise...can't imagine how the financial crisis ensued with Einsteins like these on watch. Good call, Joe.
    — Fred Berry
  • 0 like this / 0 don't   •   Posted 10:47 AM, 06/29/2011
    No, Fred, Wells Fargo hasn't recanted. Consistent between the 2 reports is that Marcellus hasn't yet delivered big statewide economic boost, and that exports from PA to China and other growing countries, though recover/ing from the 08-10 slump, still aren't what they should be.
    — Joe D


4 comments
About Joseph N. DiStefano
Joseph N. DiStefano writes this blog to feed his PhillyDeals column in the Philadelphia Inquirer. Joe has been a member of Bloomberg LP’s New York Finance Team, wrote the book “Comcasted,” taught writing at St. Joseph’s University, and studied economics and history at Penn. Reach Joe at 215-854-5194 and JoeD@phillynews.com
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