A third quarter economic update from PNC sees a gradual improvement in the economy, with a lack of manufacturing growth holding back gains.
According to the report, job growth on a year-over-year basis has slowed to below the national average through the first half of 2015, due in part from continued weakness across the market area’s manufacturing base.
Delaware manufacturing has never sprung back from he closing of both of the state’s auto plants in 2008 and 2009.
On the plus side, the jobless rate is near pre-recession levels.
“The size of the Delaware market area’s labor force is also above its pre-recession peak, meaning that excess labor supply will not hinder wage growth potential,” the report stated.
Service industries will continue to lead job growth over the coming year, with gains in the financial activities industry having led the way thus far in 2015.
“Once the relatively higher-paying manufacturing and transportation hiring gain traction, local household spending capacity should stabilize as well,” the report stated.
When it comes to incomes, “A return to stability in higher-paying manufacturing industries in the second half of 2015 should also put median household income growth back in the black. Low energy prices will continue to support inflation-adjusted incomes this year.”
Tighter labor markets are also expected to lead to higher incomes, according to report.
However, the state’s high share of retirees will be a drag on income growth due to small Social Security cost-of-living adjustments as inflation remains low. House price appreciation has lagged the national average since the recession ended, but a lower jobless rate could help boost prices.
On the plus side, residential building permit activity continued to outpace the national pace through the first half of 2015.
New homebuilding still sits at about half the pace prior to the housing market bubble years.
In the meantime, population growth is expected to run at about the national rate, a change from the slowdown in the recession that by some accounts led to at least a temporary decline in population in northern Delaware.
PNC reported that the state still has affordable housing, lower taxes, and a strategic location on the East Coast that will bring residents.
“The Delaware market area has settled into a stable growth pattern after returning to pre-recession levels on most fronts over the past year. Sustained U.S. economic growth over the next year will support the market area’s growth prospects, in particular via increased demand for financial services and associated professional and business industries,” the report stated.
Greater demand for manufactured goods, further improvement in housing, and less emphasis on Federal spending cuts will help to fill in some of the gaps in the local economy, and which have combined to yield disappointing income growth thus far during the recovery,” the PNC report continued.
Near-term risks are limitations to reaching local growth potential, rather than the threat of outright declines. Financial regulations could weigh on profits and hiring in a key employment sector.
In northern Delaware, improved rail links to Philadelphia could help draw commuters drawn by state taxes that are lower than in most areas of the region. PNC is one of the largest full-service banks in Delaware. It also has a sizable investment and wealth management business in the state Click on the link below for the full report.
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