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That Sinking Feeling

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Phila Unemployment 2011.jpgWhy do I get a sinking feeling when looking at the numbers for the Philadelphia economy? 

Nationally, economists are debating whether the recession is about to return. It looks like it already has landed in Philadelphia. All the major indices are headed in the wrong direction -- and that includes measures of poverty and wealth, jobs and joblessness, and city tax revenues, especially those that are attuned to economic activity.

Some examples:

-- Median Household Income, a good gauge of overall wealth, declined in real and inflation adjusted dollars, according to the U.S. Census Bureau American Community Survey.  The survey put MHI in the city at $36,669 in 2009.  When it sampled last year, it was $34,400. This is probably the effect of the previous recession, but it's not good news.

-- People in poverty also increased -- fairly dramatically -- from year to year.  It was 24.2 percent in the 2009 survey.  It rose to 26.7 percent in 2010.  This is a 10-percent increase in the rate.  Again, this data could be capturing the effect the recession that began in 2008 had on local folks.

-- The city continues to lose jobs. It had an average of 657,000 jobs in 2010.  By August of this year, the number had declined to 647,000.  The only sector that grew was leisure and hospitality, which rose from an annual average of 58,400 last year to 61,600 as of August this year, according to the Bureau of Labor Statistics. Every other category either flat-lined or declined, with the steepest decline in the government sector, which shed 5,600 jobs between the end of last year and August (the latest month for which data is available.)

-- Unemployment numbers took an encouraging dip in the first part of the year, but have started to climb back up. The unemployment rate in April, the best month of 2011, was 9.3 percent. By August, it was 11.6 percent. (Some of these numbers are preliminary and are not seasonally adjusted.)Thumbnail image for Phila Unemployment 2011.jpg

-- Among certain categories of workers the rate is even higher. The BLS reported, for instance, that the unemployment rate among black and Latino men in the city was at 20 percent at the end of last year. The likelihood is that those numbers worsened this year.

Put these numbers into the machine and they translate to trouble for city government.

The Nutter administration had projected a 3.4 percent growth this year in wage tax revenues and 3.5 percent for the sales tax.

In the first quarter of the current fiscal year (which began July 1), revenue from the major taxes declined or flat lined. Income from the wage tax was up 7/10ths of one percent; revenue from the real estate transfer tax went down 10.1 percent (a reflection of fewer home sales and lower prices); revenue from the sales tax was down 6 percent. These numbers come from an analysis done by the Pennsylvania Intergovernmental Cooperation Authority, better known as PICA.

Though it doesn't use these exact words, PICA analysis concludes that city government will be in deep doo-doo if these trends continue. When you project a 3.5 percent increase in sales tax revenue and instead it declines 6 percent, you risk creating a hole in the city budget.

No wonder Mayor Nutter alerted department heads recently to prepare for a freeze or some cuts. Unless the economy rebounds and these tax revenues click up, we are headed for a deficit in the city budget.

Keep in mind, we have nine more months before the fiscal year ends on June 30th, but I haven't met anyone who predicts improvement near term in any of the numbers quoted above.

Tough times could easily get tougher for this city and its people.

-- Tom Ferrick

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