#42 Pennsylvania: Lagging the Nation
PENNSYLVANIA’S ECONOMIC RECOVERY continues to lag the national pace. Jim Glassman, head economist at Chase Commercial Banking, sees the Keystone State’s economy as “on the mend” and forecasts a moderate expansion pace for the rest of this year. The Federal Reserve Bank, in regard to Philadelphia’s Survey of Business Conditions, showed most businesses are seeing “an uptick” of activity, leading the Fed to anticipate continuing strengthening throughout 2015. The state’s soft employment market recovered significantly last year, falling below 6 percent for the first time since the Recession.
Fall-off in global energy prices continues to hold back the pace of new drilling, but Pennsylvania benefits from past natural gas exploration, and local industries enjoy access to cheap natural gas. Glassman forecasts a 2.8 percent annual growth rate through 2017. Economic development efforts have cut back in recent years; the popular Pennsylvania First program is now unfunded, and replacement programs have not impressed many. Says Dennis Donovan: “People aren’t thinking about Pennsylvania as much, perhaps, as they should.”
The Tax Foundation ranks Pennsylvania’s state and local tax burden 10th highest out of 50 states, and ranks it 24th in business tax climate. Pennsylvania spends more than $4.8 billion a year on incentive programs.
WHY WE’RE HERE / PENNSYLVANIA
WHAT Internet payment transfer company
WHERE Pittsburgh, Pennsylvania
SITE HISTORY While newly homeless, Wolfe launched an early Internet coupon business in 1995, working at desk space offered by a friend in an apartment used as an informal incubator. Tapping GiftCards.com cash flow, he rented an apartment. Then, in 1999, he moved into a shared office suite in Foster Plaza in Green Tree, a Pittsburgh suburb. In 2000, he expanded into a 5,000 square-foot private office in the same building.
After the dot-com bubble burst, Wolfe accepted a North Dakota state economic development incentive offer and relocated to Beulah, North Dakota, setting up inside a converted warehouse. In
2006, he returned to Pittsburgh and purchased his current headquarters, a 5,000-square-foot building inside a former union hall.
WHY PENNSYLVANIA “Western Pennsylvania has a lot going for it. I see great opportunity with the Marcellus shale being a big part of the economy. Pittsburgh has a thriving technology sector. Operating costs are low. There is a great work force and people will relocate here.”
BOTTOM LINE “My son is here in Pittsburgh. I am divorced and my ex-wife is here. I am going to stay in my son’s life.”
#44 Connecticut: Financial Sector Faltering
CONNECTICUT IS DOING OKAY, but it could be doing much better. The Constitution State’s major cluster, the financial sector, was hammered by the Great Recession. It continues to recover fitfully. A soft housing market has deleveraged many thousands of households and businesses. Forecasters look for the weather to break in 2015, calling for 35,000 new jobs (Moody’s) or a more
tempered 25,000 (New England Economic Partnership). Economic stimuli include financial hiring, construction starts and increased orders for the F-35 jet fighter program.
However, Wall Street restructuring, Dodd-Frank regulatory restrictions, casino retrenching and a well-educated but chronically tight job market are hampering the state. “Connecticut is seen as having a surplus of workers juxtaposed with a shortage of worker skills,” says Edward Deak, the partnership’s Connecticut forecast manager. “Restraints on the financial-services industry will likely be a challenge for Connecticut,” says Chase forecaster Jim Glassman. “The slow mend in the state’s commercial real estate market is a reflection of the slowly recovering economy.”
The state’s generous but complex incentive programs can intimidate; Connecticut “has good programs, but there are so many incentives [that they are] complicated to figure out,” says site selector Donovan. The Tax Foundation ranks Connecticut’s state and local tax burden 7th highest out of 50 states and 41st in business tax climate. Connecticut spends more than $860 million a year on incentive programs.