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January 18, 2008
Gloomy Business Outlook Survey from the Federal Reserve Bank of Philadelphia
The Philadelphia Federal Reserve Bank which covers the central and eastern portions of Pennsylvania, southern New Jersey and all of Delaware conducts a monthly survey of manufacturers. January's results were not positive marking a worsening of a three month trend.
Calculated Risk plots the movement in the Philadelphia Index against the business cycle dates reaching back to the 1960s. A negative turn in sentiment in the Index doesn't always coincide with a national recession but it often does.
For Pennsylvania manufacturing workers there is no good news in the survey, here is the opening summary.
"Activity in the region's manufacturing sector weakened this month, according to firms surveyed for the January Business Outlook Survey. The general activity and new orders indexes fell sharply this month, and indexes for shipments and employment also turned negative. A significant share of firms reported a rise in prices for inputs and for their own manufactured goods. Also this month, the region’s manufacturing executives were less optimistic about future activity, and most future indicators have fallen considerably over the past three months.... Weakness was also evident in replies about employment and hours worked. The percentage of firms reporting a decrease in employment (22 percent) was slightly greater than the percentage reporting an increase (21 percent), and the current employment index declined four points, to its first negative reading since September 2003. Weakness was most evident in average hours worked this month: 31 percent reported declines in average hours worked, 15 percent reported increases, and the average workweek index fell from 7.4 in December to -16.1."
Preliminary estimates of Pennsylvania Manufacturing employment in December were released late on Thursday. The sector shed just under 2,000 jobs last month. Averaged over the year, manufacturing employment was down by 10,600 jobs from 2006. January's results from the Philadelphia Fed suggest weakness going forward. They also provide a careful reminder that in weakening economy what matters more to the employment decisions of firms is demand not tax policy. Firms will expand or maintain production if they foresee having more customers not necessarily if they are offered tax breaks.
--Mark Price
Posted by Price at January 18, 2008 08:16 AM