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At the topThink you know which economic sectors are biggest in Pennsylvania? Think again.

By , - Last modified: March 15, 2011 at 12:11 PM

Quick, take a guess: How big is Pennsylvania’s economy?

The Business Journal asked a few people that question this week. Answers ranged from $3 billion to $90 billion.

In fact, Pennsylvania produced a robust $547.9 billion worth of goods and services in 2009, the most recent year available from the U.S. Bureau of Economic Analysis.

That places it sixth among U.S. states, between Illinois ($630 billion) and Ohio ($471 billion). California is No. 1, with $1.9 trillion.

If Pennsylvania were a country, it would have the world’s 18th largest economy, ranking near Indonesia and Switzerland, said Wilfred Muskens, deputy secretary for international business development at the state Department of Community and Economic Development.

pdpgraph1-030411The Bureau of Economic Analysis collects vast quantities of data to help government, business and research understand the economy. Last month, the bureau released detailed 2009 gross domestic product data for the nation’s metropolitan statistical areas, or MSAs, which consist of core cities and their surrounding counties.

GDP refers to the final market value of all goods and services produced in a given period in a defined region. It is typically reported for nations but can be calculated at larger or smaller scales, too. It has become the standard measure of the size of an area’s economy.

GDP data for Pennsylvania and the midstate reward perusal and allow those so inclined to fact-check some commonly held beliefs. Some turn out to be myths, others hold up.

Agriculture is often called the state’s No. 1 industry. Yet “agriculture, forestry, fishing and hunting” account for just $2.4 billion of state gross domestic product, 0.4 percent of the total.

The state Agriculture Department bumps that number up to “nearly $61 billion,” citing related economic activity such as transportation, processing and marketing. But even then, agriculture contributes less output than manufacturing does without add-ins.

Manufacturing is the state’s true No. 1 economic sector, according to the Bureau of Economic Analysis. It contributed $68.5 billion to state GDP in 2009, or 12.5 percent of the total.

Yet those who fear manufacturing is on the decline are right, at least relative to the rest of the economy. Pennsylvania’s manufacturing output grew just 2.1 percent from 2001 to 2009, while its overall economy grew 34.7 percent.

Moreover, manufacturing shed 242,000 jobs from 2001 to 2009, a 28.7 percent decline. Its share of the state’s work force fell from 12.1 percent to 8.4 percent.

“The (declining) manufacturing sector can have significant implications in Pennsylvania in terms of development issues,” Nihal Bayraktar, professor of business administration at Penn State Harrisburg, said in an e-mail.

However, given the recession — which would have affected the 2009 numbers — plus the challenges of overseas competition, it’s encouraging that manufacturing has done as well as it has, said David Black, president and CEO of the Harrisburg Regional Chamber & Capital Region Economic Development Corp.

The sector’s job losses are to be expected because the area has transitioned to advanced manufacturing while labor-intensive production has moved overseas, he said.

Construction also appears to be struggling to hold its place in the state’s economy, though it retained jobs better than manufacturing. Construction accounted for $19.2 billion in output in 2009, just 2.3 percent more than in 2001. Employment fell by 9,600 jobs in the period, to 366,989.

Construction is highly sensitive to the business cycle — again affecting the 2009 numbers — and is likely to rebound once the economy picks up, Black said

Education and health care are widely viewed as expanding sectors, and the data bears that out. Both grew a little more than 60 percent from 2001 to 2009, close to twice as fast as the economy as a whole.

Likewise, the widely publicized boom in the Marcellus Shale natural gas extraction industry has started to appear in the data. The GDP value of mining and drilling doubled, and employment in oil and gas extraction grew by 166 percent.

The sector “management of companies and enterprises” grew 160 percent. The category includes bank and nonbank holding companies as well as “corporate, subsidiary and regional management offices,” according to the U.S. Census Bureau.

How about our local economy?

“Compared to the state, the trends here look good,” said Antonio Callari, professor of economics and director of the Local Economy Center at Franklin & Marshall College in Lancaster.

York grew the most briskly over the past decade, likely bolstered by development near the Maryland border to accommodate migration from Baltimore.

Also, York County has preserved its manufacturing base a bit better than other regions. The sector grew 16.2 percent from 2001 to 2009 and still accounts for 23.6 percent of the county’s economy, down from 28.6 percent.

“York is doing well in all service (sectors) as well,” Bayraktar said.

As one would expect, government is indeed the biggest share of the Harrisburg-Carlisle area’s economy — though many people think the figure is larger than it actually is, which is 17.3 percent, Black said.

Other important contributors are finance and insurance (11.2 percent), real estate (9.8 percent) and education (9.5 percent).

In Lancaster County, agriculture has a five times greater share of the economy compared with the state as a whole. Yet even in Lancaster, it accounts for just 2 percent of output.

Manufacturing is Lancaster’s top sector, but output declined slightly, and the sector lost nearly 9,300 jobs in the period 2001-08.

Lancaster County’s economy grew more slowly than the state’s from 2001 to 2009. York County’s growth rate exceeded the state’s, while the Harrisburg-Carlisle region matched the state’s almost exactly.

As a whole, Pennsylvania has lagged the rest of the nation somewhat in economic growth, Bayraktar said.

Besides the manufacturing sector, she pointed to low growth in the utilities sector, indicating lagging infrastructure development, “which can hurt industrial development significantly,” she said.

Callari, Bayraktar and Black all highlighted the vital role education plays in economic development.

Companies need workers who are skilled, creative and able to continue educating themselves throughout their careers, Callari said.

“No one set of skills is secure,” he said.


• • •

Next week: As economic change accelerates, what steps can the midstate take to assure future prosperity?

Click here to read part 2.

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