PNC Bank predicts financial issues in the local and state government could continue to bog down the regional economy in the third quarter.
The bank’s third-quarter report for the region, which includes Harrisburg, York and Lancaster, said that, while job creation will remain slow but positive, the ongoing budget problems in Harrisburg and the state level will hurt the overall economy.
“Pennsylvania’s state budget situation remains a drag on the regional economy,” the report summary stated. “Ongoing losses in the public sector have kept overall labor market conditions from gaining much ground at all since recovery began. The City of Harrisburg has been flirting with bankruptcy since 2011 and public payrolls will remain under pressure while efforts to restructure existing debt continue.”
The bank reports that, while the unemployment rate has remained stable, that’s more because of a return of workers into the labor force rather than job creation. Job growth is expected to be about 1.1 percent this year in Central Pennsylvania, while national job growth is expected around 1.6 percent.
PNC projects the rate discrepancy to even out next year, projecting 1.3 percent job growth in the region in 2014 and 1.5 percent growth in the U.S.
That has left income growth very slow and below inflation rates, according to the report, “putting consumption-driven growth prospects in the market area at a disadvantage through at least the remainder of this year.”
The slow income growth also has kept the home-buying market from fully recovering, as regional home prices remain below last year’s levels.
While the news isn’t stellar for the present, the future, even the immediate future, could be bright, according to the report. PNC estimates the unemployment rate in 2014 could dip to 6.4 percent, down from 7.2 percent in 2012.
The area’s proximity to the northern expansion of the Washington, D.C,, and Baltimore economies will aid in its growth, as well as its location near the large metro areas of Philadelphia, New Jersey and New York City.
The report also listed the growing Marcellus Shale industry of northern Pennsylvania as an asset to the region’s future.
“The economy’s locational blessings combine with competitive costs to provide plenty of room for development,” the report states.