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Lowman S. Henry

Lowman S. Henry

Chairman & CEO
Lincoln Institute
of Public Opinion Research

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Town Hall Commentary

Recession Loses Steam, Job Losses Continue

by Lowman S. Henry
 

Pennsylvania employers say that the state's economy has somewhat stabilized over the past six months, but the progress has come at the cost of jobs as many companies have cut the size of their work force.

Backing away from historic low confidence levels, the Spring 2010 Keystone Business Climate Survey of employers found 43% saying the state's business climate has gotten worse over the past six months as opposed to the 62% who reported a deteriorating business climate six months ago. Thirteen percent said the economy in Penn's Woods has improved over the past six months, up from the 8% who saw an improvement in the Fall 2009 survey. The number of businesses saying the economy has remained about the same rose from 29% last September to 41% this spring.

Optimism about the condition of the state's economy over the coming six months is limited. Twenty-five percent say they expect the business climate to improve, 39% say it will stay about the same, while 35% are braced for conditions to worsen further.

As businesses struggle to stay afloat during the recession they are trimming their work force. Thirty-two percent reported having reduced the number of people they employ over the past six months compared to 10% who added employees. Fifty-five percent say employment levels have remained constant. Looking ahead, 74% project maintaining current employment levels while 14% plan to trim their workforce and 9% expect to add employees.

The continued cut in jobs is at least partially a product of declining sales. Fifty-two percent said their sales numbers dropped over the past six months while 21% reported an increase in sales. Sales remained stable at 25% of the companies responding to the survey. Still, that is an improvement over six months ago when 56% of companies said sales had dropped during the preceding six months and only 11% reported an increase in sales. Looking ahead, 27% say they expect their sales to increase over the coming six months while 22% project declining sales.

Job Approval Ratings

Employers participating in the Spring 2010 Keystone Business Climate Survey have an increasingly negative view of the job performance of their elected officials, especially those serving in national office.

Eighty-two percent have a negative opinion of President Barack Obama compared to just 14% who hold a positive view of his job performance. U.S. Senator Arlen Specter, never a favorite of the business community, has an 86% disapproval rating compared to an 11% approval rate. U.S. Senator Robert P. Casey, Jr. has seen his disapproval rating rise from 65% last Fall to 72% in the current survey. Just 12% gave Senator Casey a positive job approval rating. The employers also gave negative ratings to the nation's top two fiscal officials. Forty-six percent disapprove of the job performance of Federal Reserve Chairman Ben Bernanke, while 30% approve. Treasury Secretary Timothy Geithner rolled up a 67% disapproval rating compared to 11% who think he is doing a good job.

At the state level, 76% said they disapprove of the job being done by Governor Ed Rendell, while 17% approve. Attorney General Tom Corbett turned in a 47% positive job approval rating with 18% disapproving of his performance in office. Auditor General Jack Wagner scored a 16% positive/12% negative rating with 73% holding no opinion. And, newly installed state treasurer Rob McCord has a 7% positive/13% negative rating with 80% holding no opinion.

Issues

The Commonwealth of Pennsylvania is once again facing a significant budget deficit, likely in the range of $2 billion to $3 billion. Plus, a recent court ruling has removed $800 million in revenue from the current fiscal year's budget, which also is suffering from a $750 million or larger shortfall in collections.

When asked whether the state should cut spending or raise taxes, 85% of those responding to the Spring 2010 Keystone Business Climate Survey said the state should cut spending. Fourteen percent said budget-makers should employ a combination of spending cuts and tax hikes. Not a single respondent felt taxes should be increased without there also being spending cuts.

Governor Rendell has proposed expanding the state sales tax to cover more categories, for example advertising, legal fees and accounting fees, as a way of raising more General Fund revenue. Eighty-one percent disagreed with that idea, with 71% strongly in disagreement. Eighteen percent supported expanding the sales tax. Placing additional taxes or fees on companies drilling in the Marcellus shale reserve also drew a negative response with 56% opposing such taxes and 37% supporting such a levy.

In addition to General Fund deficits, the state is also facing a deficiency in the unemployment compensation fund. Sixty-nine percent opposing expanding the payroll tax to cover the first $12,000 in pay per employee rather than the current $8,000 subject to the tax. Twenty-three percent agreed with such an increase.

The combination of chaos in the General Assembly over the state budget, plus ongoing corruption probes has prompted calls for a new state constitutional convention. Sixty-four percent of the employers participating in the Lincoln Institute survey said they support the calling of a limited state constitutional convention while 21% opposed convening such a session.

Among the other issues affecting Pennsylvania's business climate; 93% said

they support enactment of a Right to Work law, whereby a worker cannot be compelled to join or pay fees to a labor union as a condition of employment, just 6% opposed Right to Work legislation. If employees were free to join or not join a labor union, and individuals were free to negotiate on their own, 65% of the employers would prefer to negotiate with each individual, while 7% said they would rather negotiate with a bargaining unit. The so-called Employee Free Choice Act, commonly referred to as "Card Check" drew opposition from 89% of the respondents, with 85% strongly opposed.

The recession continues to cause many businesses to hold off on plans to invest in equipment or property. Sixty percent said they will not make any machinery or equipment purchases over the coming six months compared to 19% who plan to buy such items. Eighty-one percent said they will not invest in capital improvements, such as expanding or building new facilities over the coming six months. Eight percent planned to invest in such infrastructure.

In dealing with the recession, 55% have had to cut employee work hours and 40% have laid off employees. Thirty percent said they have raised prices, while 26% have cut prices. Seventeen percent have reduced their product lines, while 9% have consolidated facilities. Leading the list of business concerns are lost sales (42%), followed by 26% concerned with the cost of health care coverage, and 20% who voiced worry over higher taxes.

Governor Ed Rendell is nearing the end of his eight years in office. As the governor prepares to depart Harrisburg, 42% of the employers participating in the survey said he has a "terrible" record when it comes to improving the state's business climate while 26% say he has done poorly. Twenty-percent credit the governor with doing a fair job; 6% said he has done a good job; and 2% give him an excellent rating.

Methodology

The Lincoln Institute's Spring 2010 Keystone Business Climate Survey was conducted electronically from March 15, 2010 to April 16, 2010. A total of 95 employers participated in the survey. Complete numeric results are available at www.lincolninstitute.org.