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Spring 2008
Keystone Business Climate Survey
Analysis

In the Tank - Business leaders say state's economy has gotten worse
 

Pennsylvania business leaders report a gloomy assessment of the state's economy in the recent Spring 2008 Keystone Business Climate Survey conducted by the Lincoln Institute of Public Opinion Research, Inc. In the most pessimistic result of the survey's 14-year history, 59% of the employers surveyed said the state's business climate has gotten worse over the last six months; just 6% say the Pennsylvania economy has improved.

14 Year Business Climate Survey Trend
14 Year Business Climate Survey Trend

(click for full size)

Business perceptions of the state's economy have trended negative for the past two years. However, the current survey shows a deepening of that trend. One year ago the Keystone Business Climate Survey found 49% of business leaders felt the state's economy was getting worse. The September 2007 survey was a bit more optimistic, as 42% said the economy had gotten worse in the preceding six months. But, over the past six months views again turned sharply negative resulting in 59% saying the state's economy is deteriorating.

Looking ahead the business leaders responding to the survey expect things to get worse before they get better. Thirty-six percent say they anticipate worsening business conditions over the coming six months, 17% expect the state's economy to improve, and 45% think it will stay about the same.

Despite the worsening of the overall economy employment levels appear to be holding relatively steady. Sixty-three percent of the firms say employment levels at their business are the same as they were six months ago. Twenty-two percent report employing fewer workers; while 13% say they are employing more people. And, looking ahead there is a rare glimmer of optimism: 22% say they expect to increase the number of people they employ over the coming six months, 9% plan to employ fewer. Employment levels are expected to remain constant at 67% of the businesses.

Over the past six months sales have dropped at 46% of the businesses surveyed, while sales increased at 22% and remained relatively the same at 31%. Looking ahead there is again some optimism as 31% forecast rising sales during the coming six months, 22% anticipate sales will decrease, and 44% expect sales to remain relatively the same.

Driving the business leaders' negative view on the direction of Pennsylvania's business climate is the fact 47% of them think the U.S. economy is already in a recession, and another 33% say the national economy is headed toward a recession. A key factor in that view is the rising cost of gasoline and diesel fuel, something 92% of the businesses responding say has adversely affected their operations.

State Issues

In addition to the problems being experienced by the national economy, Pennsylvania business chieftains say state level policies are adding to their burdens. In particular, the mandated increase in the state minimum wage has had an impact on employment levels. Seventeen percent of the companies surveyed said they have not hired new employees because of the minimum wage hike, while 6% have actually had to lay off employees because they could not afford to pay the higher minimum wage. The employment cut-back has strongly impacted teenagers and inexperienced workers as 20% of the businesses surveyed said the higher minimum wage makes it unprofitable to hire such workers. Twenty-three percent of the businesses have responded to the higher minimum wage requirement by raising prices, 10% have cancelled expansion plans, and 3% have been forced to cut their hours of operations.

And matters could get worse. The possibility of an automatic cost of living adjustment (COLA) being applied to the state's minimum wage would result in 27% of the businesses raising prices, 15% implementing a hiring freeze, 10% reducing hours, 5% laying off employees, and 33% utilizing a combination of those actions.

Another storm cloud on the horizon is proposed legislation before the Pennsylvania General Assembly that would mandate giving workers specifically-timed breaks plus a specifically-timed meal break in each eight hour period. Sixty-six percent of the businesses responding to the Keystone Business Climate Survey said such a new law would have a negative impact on their business – 31% said the impact would be strongly negative.

Many of the Rendell Administration's economic policies are getting negative reviews from the state's business community. Three-quarters (75%) say the amount of borrowing for non-building programs by state government over the past five years has been excessive, 47% labeled the increased debt "very excessive."

Transportation issues have a big impact on business, and a solid majority disagree with Governor Ed Rendell's proposals in that area as well. Fifty-eight percent oppose the governor's plan to privatize the Pennsylvania Turnpike, while 31% support the idea. An even bigger majority, 67%, oppose placing tolls on interstate 80.

And there is concern over the advent of legalized slot machine gambling in the state. Only 13% think the current law provides for adequate oversight of the gambling industry. Fifty-four percent say the law should be changed to give the state Attorney General jurisdiction over the industry. Fifty-one percent of the business leaders surveyed feel the problems created by the onset of legalized slot machine gambling will outweigh the benefits, while 23% think the benefits will outweigh the problems.

Job Approval Ratings

The overall dismal view of the national economy and the state's business climate has resulted in low job approval ratings for both national and state officials. To illustrate how unhappy respondents are, President George W. Bush has the highest positive job approval rating at 45%. Federal Reserve Chairman Ben Bernanke has seen his negative rating increase from 12% last September to 28% in the current survey, although 40% give him positive marks for his job performance.

Respondents to the Spring 2007 Keystone Business Climate Survey reserved their harshest judgment for Governor Ed Rendell. Seventy-seven percent said they have a negative view of the governor's job performance while just 15% say he is doing a good job. The state's two United States Senators fared better, although that is condemning with faint praise. Senator Arlen Specter received a 30% positive rating against a 52% negative rating; Senator Robert P. Casey, Jr. received a 12% positive rating and a 53% negative rating.

In terms of legislative bodies, the U.S. Congress fared particularly poorly as the business leaders gave a 74% negative rating to the job being done by the U.S. House of Representatives and a 73% negative rating to the U.S. Senate. They were somewhat less unhappy with the state legislature: 61% disapprove of the job being done by the Pennsylvania House of Representatives and 57% have a negative view of the Pennsylvania Senate's job performance.

Methodology

The Lincoln Institute's Spring 2008 Keystone Business Climate Survey was conducted electronically from March 12, 2008 thru March 28, 2008. During that period 203 business leaders responded to the poll. Seventy percent of the respondents were the owner of the business, 17% the CEO/COO/CFO, 3% a state manager, and 4% a local manager. Complete numeric results of the survey are posted on-line at www.lincolninstitute.org and www.patownhall.com.


Taking the Pulse of Pennsylvania