An up and down 2013 could mean better 2014 for Delaware economy

Doug Rainey is editor the Delaware Business Bulletin.  Here are his thoughts on the 2013 Delaware economy.

Delaware has seen better years than 2013, at least when it came to the economy. An uneven performance in employment and income growth left many with an uneasy feeling throughout the year.

After all, the unemployment needle seemed to be stuck at around seven percent, even though job growth was finally matching the national average after a couple of years of falling below unimpressive numbers.

Better employment numbers

Then came fall and the jobless rate fell steadily, with the November figure at 6.5%.

But the good news on the employment front was tempered by evidence of a two-tier economy and a growing gap in income and employment levels between individuals with college degrees and high school diplomas.

Another minus, according to Newark economic consulting firm DECON First, was a smaller workforce in the state, perhaps a reflection of a growing number of individuals no longer looking for work or taking early retirement. DECON First has not been bullish about the Delaware economy, pointing to many troubling indicators in its reports.

Punctuating moments of optimism were announcements of 1,200 job cuts at pharmaceutical giant AstraZeneca and the loss of 375 jobs from the idling of the Evraz Claymont Steel mill.

Granted, a number of states would not mind changing places with Delaware. The state’s 26th place finish was far better than Rhode Island and Nevada. Both were tied for last place with a nine percent rate.

But remember, Delaware once kept company with low unemployment states like No. 2 South Dakota (3.6 %). In first place was North Dakota with its ridiculously low 2.6 % jobless figure.

Struggling sectors

One key sector feeling the pain is the Delaware construction industry, which has seen only occasional spurts of activity. Much of the work has come from governmental units, with an uptick in home construction providing a modest boost. Further clouding prospects are sizable increases in workers compensation costs that are a sizable expense in the construction sector.

The state’s three casinos also struggled during the year as a state panel looks for any relief that could be offered the state’s higher take from gaming proceeds that was used to plug a budget hole that arose during the recession. Options may be limited as financial forecasts see sluggish growth in state taxes and fees.

More bad news came this year with a Moody’s Analytics report indicating that Delaware was the lone state among the 50 in danger of sliding into a recession. The report rekindled what seemed to be a lack of interest in some quarters when it came to the performance of the economy.

The report was quickly questioned by the Markell administration and other analyses saw little evidence of any looming downturn. Still, the findings caught the attention of New Castle County Executive Tom Gordon, who had made unhappiness over a proposed mixed use project at the DuPont Barley Mill site a cornerstone of his successful election campaign.

Gordon ordered work on a 2025 economic development plan, citing what he saw as increasing evidence of a troubled economy.

Development debates

As shown by the Barley Mill opposition, environmental and neighborhood activists were active in 2013. Groups called into question an environmental permit for the Delaware City Refinery, a proposed data center/power plant on the University of Delaware STAR campus and the conversion of the former Vlasic pickle plant in Sussex County into a 700-employee Allen Harim poultry plant.

The opposition led to concerns that companies seeking to expand or move operations to the state might look elsewhere.

Outlook for 2014

Despite the above listed problems, the Delaware economy has some real strength that could become more evident in 2014. Financial services, a sector that some doom and gloom types predicted would move elsewhere continued to add jobs.

The broad category of business services also seemed to be turning around, although that segment is so large and varied that it is hard to detect any trends.

A forecast last fall from PNC Chief Economist Stuart Hoffman predicted a modest recovery continuing in 2014 for Delaware. While Hoffman saw the jobless rate staying around seven percent, he did leave the door open to a lower figure if the economy picks up steam and the nation does not face another threat of a government shutdown.

Indeed, Congress did hammer out a deal that avoids a shutdown for a couple of years and avoids a potential election issue.

Add up some of those positive indicators and the Delaware economy could see a better year in 2014.

Then again, it would not take much to top the uneven performance of 2013.

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Doug Rainey is the editor of the Delaware Business Daily.  Email Doug at drainey@delawarebusinessdaily.com  or follow him on twitter: https://twitter.com/DougRaineyDe