Northeastern Pennsylvania -
Local economics experts say the region’s economy is improving following the COVID-19 pandemic, with more people going back to work for higher pay, despite a shrinking labor force.
Developers are buying up properties and new industry is moving in.
John Augustine III, president and chief executive officer of Penn’s Northeast, a regional economic development agency, said development along the Interstate-81 corridor will explode over the next few years.
“We are building more than 70 million new square footage for industries to occupy,” Augustine said of Penn’s Northeast in partnership with its eight member counties and the state. “I believe this is more than anywhere else in the country.”
“Overall, we find ourself in a rather interesting situation — an economy that is indeed humming,” said Bob Durkin, president of the Greater Scranton Chamber of Commerce. “A week doesn’t go by we’re not contacted by somebody looking to purchase land. Not just our land, but somewhere in Lackawanna County.”
Durkin said chamber membership is up and members are returning to chamber events, such as the women’s leadership conference and the annual dinner.
More industry means more jobs.
University of Scranton economics professor Satyajit Ghosh, Ph.D., and a colleague, associated professor of economics, Aram Balagyozyan, Ph.D., recently published a report on the Northeastern Pennsylvania economy titled the “Brennan Barometer, May 2022, Kania School of Management, University of Scranton.”
Ghosh said that while they did not look at every aspect of the economy in what was the first of a series of reports, they focused on the labor market and unemployment.
“We also looked at the real estate market, my colleague mostly,” he said. “I also looked at the impact of infrastructure and how we felt it was going to affect the local economy.”
That includes information of the infrastructure appropriations bill signed by President Joseph Biden.
COVID’s lingering effect
Ghosh said the employment story of the Northeastern Pennsylvania is essentially the story of the pandemic and getting out of its recession.
“It had a lingering effect on unemployment,” Ghosh said. “In 2020, there was a great job loss. Luckily, from the end of 2020, we started to see improvement. That has continued up until now. Based on April data that we see, the unemployment went down to 5.7%. This is kind of close to what we had before the pandemic.”
He said Lackawanna County actually has done better than Luzerne.
“But the labor force is not a constant thing,” the professor said. “We should look at the unemployment trend. It looks pretty good. What still is important is to look at the number of jobs, how many folks are working in this area compared to February 2020. Here we see some kind of difference in the story.”
The report states that the April 2020 unemployment rate of 18.2 percent in the Scranton-Wilkes-Barre-Hazleton market area was unprecedented in the post-World War II period. Most of the 49,600 who were unemployed had worked in the service sector.
“Some sectors such as health services and leisure and hospitality suffered substantial job loss from which they have not yet fully recovered,” the professors’ report states.
“The March 2022 unemployment rate of 5.9% in the MSA (metropolitan statistical area) is still higher than the pre-pandemic level. There are still 8,000 fewer jobs. But if the current rate of job creation is sustained, the MSA may return to the pre-pandemic level of employment in another seven to eight months.”
It goes on, “The wages and salaries consistently lag behind the state and the national levels, but given the tightness of the labor market, it is most likely that area will continue to experience wage growth.”
The educational and health services sector did not recover as quickly.
“Because of school closings, the educational services subsector lost 1,600 jobs by December 2020, and in March 2022, it still has 900 fewer jobs. The health services subsector, which includes health care and social assistance and also Hospitals, experienced sharp reduction of employment, not due to weakness in demand but due to reduction in supply – the growing unwillingness of workers to be exposed to heightened health risk. By December 2020, 3,200 fewer individuals were working in this industry. That trend continued and by March 2022, the level of employment in the Health Services industry fell by 5,900 from the level of February 2020 – a drop of about 13%.”
The leisure and hospitality sector was one of the hardest hit sectors in the nation and in this region.
“Due to the lockdown and the health restrictions that were later put in place, accommodations, food services and drinking places all suffered significant job loss. The industry has not recovered yet. The level of employment in the industry was down by 3,400 or 15% in March 2022. Within the industry, there were 2,100 fewer jobs in food services and drinking places by March 2022 – an 11.9% reduction from its February 2020 level.”
The economic report continues that while the unemployment rates in Lackawanna and Luzerne counties in March 2022 (4.9%, and 5.8%) dropped below the levels in February 2020 (5.1%, and 5.9%), the unemployment rate for the MSA in March 2022 (5.9%) is still slightly higher than the rate in February 2020 (5.5%).
Ghosh said that in April 2022, there was a significant improvement in job creation, yet there still were 5,000 or so fewer jobs compared to February 2020.
Labor force shrinking
“Many people quit their jobs or are not looking for new jobs,” he said.
He said there are several reasons for the shrinking of the labor force.
“Typically, when the economy is doing better, the labor force increases because jobs are available,” Ghosh explained. “The reverse is true when the economy is bad. People stop looking for jobs. The labor force goes down.”
There is a new twist following the pandemic.
“Our demographics are a lot of older people,” he said. “It is a fact. the baby boom generation is reaching the retirement age and getting out of the labor force. More are considering it. Our demographic becomes more pronounced for us.”
Another effect the region is seeing is similar to rest of country, because of the pandemic.
“Many people in retirement age feel it is risky to keep working,” Ghosh said. “They may decide to quit the labor force. For us, that has played kind of a more important role in why labor force has fallen.
“Also, folks are looking for better job opportunities, not just in wages but better safety at employment. Folks not jumping to get any job that may be coming their way. The economy seems to be doing well, wages are going up, there are a lot of help wanted signs. I have never seen such signs including wages and benefits. Wages are much higher than the minimum wage.”
Ghosh said, “If the job creation holds steady, then we can expect in maybe five or six months, we can catch up the employment situation.
“But everything now is contingent now what happens with inflation,” he added.
He said the Federal Reserve raising the interest rate will have a limited effect, but if it raises the rate too much, companies and consumers will pull back on purchases, and businesses could decide not to hire any more. Decreased employment could lead to recession.
He said the current inflation is not just because people are spending more, but because costs have gone up, especially the cost of energy.
“Particularly with the Russian invasion (of Ukraine), the cost of gas has gone up,” Ghosh said. “But the pandemic also has done this. Stimulus money has had some effect, but it’s more about supply chains.”
A national recession certainly would affect Northeastern Pennsylvania, where the unemployment rate usually is higher than state and national averages.
Tight housing market
Housing in the region remains relatively affordable compared to the national and regional standards, the professors’ report states.
“In March 2022, the value of a typical house in the Scranton metro area was $167,000, around half as much as in the United States or Philadelphia,” the report states. “At the same time, the average rent for all Scranton homes and apartments was $1,158, about 40% lower than the national average.” However, various indicators reveal the housing market here tightened at a faster pace than across the state and country, the report indicates.
“The inventory of for-sale houses in the Scranton area in any given month since January 2020 was on average 25% lower than a year before. As a comparison, in the United States, the for-sale housing inventory in any given month since January 2020 was on average 21% lower than a year before.”
The economic report also notes the $1.2 trillion Infrastructure Bill, which includes $17.8 billion for Pennsylvania, will benefit Northeastern Pennsylvania in three areas: the repair and replacement of bridges — 226 bridges in the tri-county area are structurally deficient — new passenger rail service between Scranton and New York City that may become operational within three years, and reclamation of abandoned mine land that poses a significant environmental challenge.
“The substantial infrastructural investment in the area is also expected to create a large number of new jobs,” the report states.
Industry interest
Jobs also are expected with the development along I-81 of industrial space with the help of Penn’s Northeast, which works on economic development in eight counties — Lackawanna, Luzerne, Schuylkill, Carbon, Monroe, Pike, Wayne and Columbia.
“From our standpoint at Penn’s Northeast, the activity in terms of leads and interest in the region is very strong,” Augustine said.
He said that during the two years of COVID, more occupied square footage was added than in the past 10 years.
Besides along I-81, there also is activity in the Poconos, right off the Northeast Extension of the Pennsylvania Turnpike and Interstates 84 and 380.
“Location, location, location is key,” Augustine said. “In 11 hours, a truck driver can reach a third of the U.S. and parts of Canada.”
The ship ports in New York and New Jersey, where products come in, also are accessible.
“We’re also seeing an increase in manufacturing,” he said. “We’re seeing that more and more.”
He said companies want to avoid logistic disasters as they experienced during COVID, when they ran out of products. “Companies are making more products, and making more in the U.S.,” Augustine said. “The Northeast United States, and certainly Northeastern Pennsylvania, is one of the hottest markets in the states. Ten, 15 years ago, there were one or two developers. Now, there are more than 30. People are realizing this is the place to be.”
Starting wages that once were $9 an hour are now $19.
“We’ve almost tripled the minimum wage, the right way, by competition and not with government interference,” he added.
He said, though, the area must look at and address multi-family housing, expanding the area’s highways and finding more people to work.
“We need to attract those workers, we need to house them and make sure they can get to work,” Augustine said. “We’re going have thousands of new jobs.”
Durkin, of the Scranton chamber, said there still are problems with workforce development.
“People are looking to hire,” he said. “That is the biggest single challenge facing our economy nationwide.”
He said the chamber will continue with workforce development through Skills in Scranton, working with local employers, school districts and higher education to help ensure future workers are aligned with jobs of the future.
“We try really hard to make sure educators and administrators know what jobs are available so educators can prepare students for jobs,” Durkin said.
