The great disconnect: PA businesses not experiencing ‘improving economy’

The rate of inflation has dropped, the jobs market remains strong, and the Federal Reserve has cut interest rates for the first time in four years. All are signs of an improving economy. But businesses in Penn's Woods are not feeling the vibe.

By a three-do-one margin, respondents to the "Fall 2024 Keystone Business Climate Survey" of business owners, CEOs and key managers say the state's economy got worse, not better over the past six months. As for inflation, 40% report the impact of inflation on their business has been greater over the past six months, just 12% say the impact of inflation is easing while 44% say it is about the same.

Trailing inflation as the top challenge (46%) are concerns over current economic conditions (42%) and concern over future economic conditions (37%). Difficulty finding qualified employees ranked fourth (34%) on the list of business challenges along with keeping qualified employees (30%). State taxes on business income (26%) and federal taxes (26%) along with government regulation (22%) have been perennial concerns. Those concerned with supply chain disruptions, which was high during and in the years immediately after the COVID-19 pandemic, have dropped to just 19%.

While the rate of inflation may have dropped the impact of over 20% cumulative inflation over the past three and a half years is significant. Ninety percent of the business leaders participating in the survey say inflation has impacted their operations with 49% saying the impact has been significant 42% saying it has had a moderate impact. Only 7% reported inflation having no impact on their business.

As a result of inflation, 42% say they have raised the price of their goods or services over the past six months. Another 22% have raised prices for reasons other than inflation. Twenty-one percent report they have not raised prices are the past six months. Eight percent have lowered prices.

When asked what factors are contributing to higher costs to their business 39% said it is the rising cost of materials and supplies. Thirteen percent said utility (electric, heating and cooling) costs have risen with 11% citing the cost of fuel (gasoline, diesel fuel, etc.). Twelve percent cited increasing rent while 12% said higher labor costs have contributed to their rising expenses.

Issues

In addition to inflation and the economy most public opinion polls taken in recent months also show illegal immigration to be a top voter concern. Fifty-six percent of the business owners and top managers participating in the "Fall 2024 Keystone Business Climate Survey" say illegal immigration has had a negative impact in Pennsylvania with 31% saying the impact has been significant. Fifteen percent say the impact of illegal immigration has been positive.

Education and education funding continues to be a top state issue. When asked if they would favor or oppose giving parents and K-12 students universal school choice, which is the ability to attend the private, parochial or public school of their choosing regardless of where they live, 71% were in favor of universal school choice – 41% were strongly in favor. Twenty-one percent oppose the concept.

With the 2024 presidential election rapidly approaching election integrity continues to concern a segment of the electorate. Fifty-nine percent of those participating in the survey said they are confident that the upcoming General Election will be fair and free from fraud. Nineteen percent say they are somewhat not confident the election will be fair. Eighteen percent say they are not at all confident that the election will be fair and free from fraud.

Driving concerns are mail-in balloting. Twenty-four percent of the business owners/executives said they believe no excuse mail-in voting to be totally safe and free from fraud. Another 32% believe mail-in voting to be safe, but less secure than in-person voting. Forty percent believe the method to be subject to fraud.

Generally speaking, 53% of the participants in the 2024 Keystone Business Climate Survey say they were better off during the administration of former President Donald Trump. Thirty-five percent say they are better off under the Biden Administration. Twelve percent ventured no opinion.

Business conditions

The survey found the overall perception of the state's business climate has become more negative over the past six months. Forty-five percent say business conditions are worse than they were six months ago; 17% say conditions are better; 35% say business conditions are about the same.

For comparison, the Spring 2024 Keystone Business Climate Survey found 36% saying business conditions had gotten worse in the preceding six months; 26% felt conditions had gotten better; 37% felt they were about the same.

Looking ahead six months, 31% expect business conditions to continue getting worse; 20% expect conditions to get better; 39% expect business conditions to be about the same.

Overall, more businesses have cut rather than added employees. Twenty-two percent said employment levels at their company are lower than they were six months ago; 15% say they are employing more people. Fifty-five percent said employment levels are about the same as they were six months ago. Not much change is expected in the next six months as 15% project lower employment and 17% expect higher employment with 59% saying employment levels will remain about the same as they are now.

Perhaps explaining why more businesses say the state's economy as gotten worse than better are sales. Thirty-three percent report sales have declined in the past six months; 19% say sales have increased; 39% say sales have remained about the same. There is a hint of optimism looking ahead six months. Thirty percent expect sales to increase; 18% expect sales to decrease; 45% expect sales to remain about the same.

Job approval ratings

Governor Josh Shapiro is the only major political figure to have earned a positive job approval rating in the 2024 Keystone Business Climate Survey. His job performance is viewed favorably by 46% of the respondents with 37% giving him a negative job approval rating.

President Joe Biden is viewed negatively by 56% of the respondents with 35% giving him a positive rating. Vice President Kamala Harris fared slightly better with a 53% negative/39% positive rating. U.S. Senator John Fetterman scored a 30% positive/43% negative rating while U.S. Senator Robert P. Casey, Jr. earned a 29% positive/45% negative rating. Federal Reserve Chairman Jerome Powell has a 16% positive/32% negative rating with 52% offering no opinion. U.S. Treasury Secretary Janet Yellen has a 18% positive/37% negative rating with 45% giving no opinion.

None of the three statewide constitutional or row officers were in positive territory. Pennsylvania Attorney General Michelle Henry was given a 15% positive/25% negative rating with 60% having no opinion. Auditor General Tim DeFoor scored a 11% positive 26% negative rating with 63% having no opinion. State Treasurer Stacy Garrity has a 22% positive/24% negative rating with 55% offering no opinion.

Legislative bodies and the courts also received negative reviews from the business owners and managers who participated in the survey. The United States Senate received a 30% positive/47% negative rating while the United States House of Representatives scored a 26% positive/54% negative rating. The Supreme Court of the United States earned a 36% positive/46% negative rating. The job being done by the Pennsylvania Senate scored a 32% positive/39% negative review and the Pennsylvania House of Representatives garnered a 33% positive/40% negative rating. The Pennsylvania Supreme Court did the best turning in a 34% positive 32% negative score.

Methodology

The "Fall 2024 Keystone Business Climate Survey" was conducted electronically October 1 thru October 7 with a total of 220 completed responses. Of those responding, 47% were the owner of the business; 11% serve as a CEO/COO/CFO; 9% are a state manager, 15% a local manager with 8% labeling themselves as other. Twenty-three percent of the respondents are in Northwest, Pennsylvania; 23% in Northeastern Pennsylvania; 13% Southwest, Pennsylvania; 15% Southeastern, Pennsylvania; 9% southcentral, Pennsylvania; 8% in the Lehigh Valley, and 2% in the Altoona/Johnstown region.

Complete numeric results of the poll are available at www.lincolninstitute.org and www.patownhall.com.