Q2 2012 Philadelphia, Pennsylvania Commercial Real Estate Economy

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Q2 2012 Philadelphia, Pennsylvania Commercial Real Estate Economy

The Philadelphia area economy has nearly stalled according to some BLS data, but it still moving forward as reported by other sources. According to Current Employment Survey (CES) data from the U.S. Bureau of Labor Statistics (BLS), total non-farm employment in the Reis Philadelphia market area, including the Philadelphia Metropolitan Division in Pennsylvania plus the smaller Camden Metropolitan Division in New Jersey (but excluding the Wilmington, Delaware area), was up only 7,600 jobs (about 0.3%) from June 2011 to June 2012. The private sector gained 10,100 jobs (0.6%). This is the second consecutive quarter in which year-over-year growth has been negligible, according to this source. Household-based data from the BLS on the employed residents of the broader Philadelphia-Camden-Wilmington Metropolitan Statistical Area (MSA) continues to be more optimistic, with a gain of 25,900 (1.0%) year-over-year in June. The unemployment rate did not fall because the labor force grew at the same pace.

The City of Philadelphia continues to be the region’s weak point, after having been its strength during the recession. The reason is its institutional, government, and “Eds and Meds” oriented economy, which is being hurt as America’s debt crisis shifts from the private sector to the public sector. CES data show Educational and Health Services lost 300 jobs (0.1%) in the city in the year to June after decades as a perpetual growth machine. The Government sector, plagued by pension underfunding at the local level, lost 9,000 jobs (4.1%) as money was shifted to the retired. Although the rest of the city’s private sector broke even, the city lost 2,500 jobs (0.4%) overall. Looking at the private sector alone, the Camden Metropolitan Division gained 4,900 jobs (1.1%) and the portion of the Philadelphia Metropolitan Division outside the city added 11,900 (1.1%).

The overall weakness masks improvement among the office-based sectors. Following sharp losses during the worst of the recession, the Financial Activities sector broke even in the Camden Metropolitan Division and lost jobs 1,100 jobs (0.8%) in the Philadelphia Metropolitan Division, year-over-year in June according to CES data. This modest decline was more than balanced by job increases in the Professional and Business Services sector, by 2,100 (2.9%) in Southern New Jersey and 9,700 (3.3%) in southeastern PA. The industrial sectors lost a few jobs as a group year-over-year according to this source, with modest gains west of the Delaware River and losses on the New Jersey side.

For the Retail Trade sector, CES data show a year-over-year decrease of 500 jobs (0.3%) in the Philadelphia Metropolitan Division, and 600 (0.9%) in the Camden Metropolitan Division, as of June; the respective figures for Construction are minus 2,700 (4.0%) and plus 100 (0.5%). This indicates weakness in the sectors central to the recession. Household average income was up just 1.8% in the year to the second quarter according to Moody’s Economy.com, and population growth is proceeding at half the national rate. Tourism and entertainment spending are showing some like in the Philadelphia Metropolitan Division; however, as the Leisure and Hospitality sector added 6,800 jobs (4.1%) there in the year to June. The loss in the Camden MSA for this sector was 1,100 (2.5%).