Pennsylvania's stagnant 2013 growth has political repercussions

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Pennsylvania’‍s economy stalled last year, according to a report from the federal Bureau of Economic Analysis.

Pennsylvania’‍s real gross domestic product, an indicator of general economic conditions, grew just 0.7 percent in 2013. Only three states and Washington, D.C., saw slower growth.

Pennsylvania was also out-performed by its neighbors, West Virginia and Ohio, which saw 5.1 and 1.8 percent growth respectively. West Virginia has now outgrown Pennsylvania for six straight years, and Ohio has for two. Even struggling New Jersey beat out the Keystone State, posting 1.1 percent growth.

This marks the first time New Jersey’‍s GDP out-paced Pennsylvania’‍s since 2006. Also across the border, Maryland’‍s real GDP was flat in 2013, and New York’s was about the same as Pennsylvania’‍s, at 0.7 percent growth.

In general, Midwestern and Northeastern states performed the worst last year, while Great Plains and Rocky Mountain states performed best.

While Pennsylvania’s unemployment rate has been falling, other production- and workforce-related indicators have raised concern among experts.

“The governor’‍s biggest problem is directly related to the growth of the economy in this state,” said G. Terry Madonna, director of the Center for Politics and Public Affairs at Franklin & Marshall University. The BEA report, along with other economic indicators, do not bode well for Gov. Tom Corbett’‍s re-election bid, he said.

In such tough economic times, voters “usually react by looking for change,” he said. The slow growth in the state’‍s economy has also created tax revenue shortfalls, leading to the projected budget deficit of up to $1.4 billion that Harrisburg is grappling with now.

Meanwhile, Western Pennsylvania is grappling with its own issues, which could impact Harrisburg’‍s financial balancing act. Over the past year, construction employment in the Pittsburgh region plummeted, even as it ticked up statewide and jumped nationally, according to a report from the Federal Reserve Bank of Cleveland.

The Fed report also showed a stagnant employment market. The Pittsburgh metro area’‍s unemployment rate fell from 7.3 percent to 6.3 percent in 2013, yet almost all of the decline resulted from a shrinking labor force. Shrinking labor force, relative to the overall population, is caused by discouraged workforce dropouts and, largely, baby boomer retirees.

Allegheny County also saw a decline in sales tax remittances to the state during the 2012-2013 fiscal year, which could signal a slowdown in retail and other commercial activity. The Philadelphia region saw increased remittances over the same period. Allegheny County’‍s sales tax remittances are the highest of any county in the state, so a drop in sales tax revenue has implications for Harrisburg’‍s budget debates.

There are some bright spots, though. Guhan Venkatu, a vice president with the Pittsburgh Branch of the Federal Reserve Bank of Cleveland, said that the steady wage growth in the region should lead to higher tax receipts.

Characterizing the recession’‍s impact on the Pittsburgh region as “fairly mild,” he said it is not out of the ordinary that growth here during the recovery has not been robust.

Mr. Madonna, the Franklin & Marshall pollster, said the slow growth will make it even more difficult to sustain increased state spending, which he said is a necessity for Mr. Corbett, due to voter outcry over reduced education funding and other cuts made during is first three budgets.

The state’‍s budget deadline is June 30, though Mr. Corbett has said the state may not pass an on-time spending plan this year.

The report from the BEA, a division of the U.S. Department of Commerce, can be viewed online at http://​​yc2wO.

Matt Nussbaum: or 412-263-1504.

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