From Philly and the Pa. suburbs to South Jersey and Delaware, what would you like WHYY News to cover? Let us know!
As shoppers perused the stalls of art and craft-makers inside the Philadelphia Christmas Village at City Hall just a few days before the holiday, about 300 business professionals gathered inside the Kimmel Center for Performing Arts several blocks away to discuss the regional economy.
Attendees reviewed the results of the annual State of the Economy report, commissioned by The Chamber of Commerce for Greater Philadelphia and conducted by researchers with the Federal Reserve Bank of Philadelphia.
Eighty-seven businesses, all members of the regional chamber of commerce, responded to the survey between Nov. 3 and Nov. 7. The report’s results were shared publicly for the first time Wednesday.
Regional surveys are conducted by the Federal Reserve Bank of Philadelphia on a regular basis. Responses were shared in aggregate and no individual business was identified. The questions included general economic sentiment, business growth outlook, plans for employment, capital investment, challenges, sales, and price data.
Chellie Cameron, CEO of The Chamber of Commerce for Greater Philadelphia, said the past year has been nothing short of a whirlwind.
“I feel like I’m sprinting to the end of the year, there’s so much happening,” Cameron told the crowd.
Some sectors are overrepresented compared to the Philadelphia metro area employment snapshot.
For example, professional and business services companies account for roughly 16% of the jobs in the metro area. In the annual economic outlook survey, about 40% of the businesses that responded were in the professional and business services field.
Likewise, less than 5% of the respondents were businesses in education and health services — which does not include public schools but rather private schools and hospital workers. Meanwhile, that sector accounts for roughly 22% of jobs in the Philadelphia metro area. That means education and hospitals were underrepresented in the survey.
Another improvement is that almost half of the businesses, or 48.3%, said they expect higher economic activity next year, compared to just 36.8% in 2022.
“I see quite a bit of optimism, quite a bit of growth,” said Roc Armenter, executive vice president, economist, and director of research and the Consumer Finance Institute at the Federal Reserve Bank of Philadelphia.
Several other economic indicators showed renewed optimism, including a roughly 10% increase in optimism for new orders and sales. Businesses also projected lower costs, higher prices when goods and services are sold, slightly more hiring of full- and part-time workers, and somewhat lower wage and benefit costs in 2024 compared to 2023.
On the flip side, businesses expect to spend less on capital expenditures, such as equipment and software.
“Fewer people talk about supply chain disruptions. That was a big issue in 2021 and 2022. That seems to be fading out of view,” Armenter said.
Businesses were less optimistic about the region as a whole rather than their own prospects, which is not unusual, he said.
“People are a little more pessimistic when it comes to the region compared to their own companies,” he said.
As such, about a quarter of businesses told researchers they expect the Philadelphia region’s economy to grow in 2024. That’s also an improvement compared to last year, 27.6% in 2023 compared to 35.6% in 2022.
On WHYY’s “Studio 2” Wednesday, Federal Reserve Bank of Philadelphia President Patrick Harker said the challenge is that the hard data about the economy lags behind what businesses say is the reality on the ground.
For example, during some interviews between researchers and businesses, the general consensus was that inflation was higher than the available hard data could prove. That’s because data always lags, he said.
“What we’re hearing now is the opposite. Things are starting to soften in the economy. Maybe faster than the data says,” Harker said. “I don’t want to make that same mistake twice. Relying more on the soft data as opposed to the hard data. And that’s why I’ve been in the camp of let’s hold [interest] rates where they are for a while. Let’s see how this plays out.”
Harker added the regional economy is starting to slow down, but it’s not the recession that was previously widely forecast.
“We’re starting to see that things are slowing,” he said. “We saw some slowing in 2023 and we’re predicting that we’re seeing some more slowing in 2024.”
Now, economists forecast that the region will have what’s known as a “soft landing” instead of an abrupt halt to business in the new year.
In Philadelphia, one major driver of the local economy is tourism. In 2024, it’s projected that it will continue to rebound.
“We did see significant travel increases in . We have every indication to believe that’ll continue through ,” said Kathryn Ott Lovell, president and CEO of the Philadelphia Visitor Center Corporation. “Leisure travel especially has strongly recovered. We’re also seeing great increases in business travel which helps fuel group travel. Companies are getting back into that pre-pandemic routine of going to conventions and conferences, hosting meetings and events.”
But it’s not “all puppies and rainbows,” Ott Lovell said, referring to negative experiences and perceptions about Philadelphia.
Ott Lovell challenged the audience to change the narrative about the city. She said she was optimistic with new city leadership taking the helm next month.
Mayor-elect Cherelle Parker will formally take office in January 2024.
“We have an incredible new female mayor who is an incredible ambassador and champion for this city and has already I think begun to tremendously shift that perception about what’s possible here,” Ott Lovell said.
Get daily updates from WHYY News!