Pa. sees gains in employment growth
The state has turned an economic corner, according to one expert.
PHILADELPHIA (AP) -- A robust health care sector, increased tourism and fewer manufacturing job losses propelled Pennsylvania's employment growth to its highest quarterly rate in more than four years, according to a report released Tuesday.
The number of jobs rose by 1.1 percent in the first quarter, a healthy pace for the state even if it still lags the U.S. average, according to a state profile by the Federal Deposit Insurance Corp.
Overall, Lebanon, Erie and State College experienced the fastest pace of growth but all metropolitan areas showed improvements.
Even Pittsburgh, which had the weakest employment growth of all metro areas, improved slightly, helped by job gains in health and leisure services, the report said.
Health care to the rescue
"I think the state has turned the economic corner," said Mark Zandi, chief economist for Economy.com, a West Chester-based economic consulting firm. "Health care is a big part of that turnaround. It has been a steady provider of jobs through thick and thin."
Since 1990, health care and social service jobs have been increasing and now account for 14 percent of all jobs in the state, according to the FDIC.
That ranks Pennsylvania among the top 10 in the number of health and social workers per capita and third as a percent of the work force.
The fastest growing jobs are in areas such as outpatient services, home health care and nursing care for elders, the report said.
Zandi is forecasting job growth of 1.3 percent in 2005. Last year, employment rose by 0.5 percent, turning positive after three years of job losses.
The first-quarter's performance compares favorably to Pennsylvania's historical job growth.
"In the best of times, in the late 1990s, it was growing by 1.5 percent to 2 percent," Zandi said.
Improvements in the tourism industry also added to job growth, the FDIC said. The number of tourism jobs went up by 2.4 percent in the first quarter, the highest first-quarter growth rate in five years.
Hotel occupancy rates in the state rose to 61 percent last year, about on par with the national average after lagging behind in 2003.
Rising home prices also helped the economy. The FDIC has identified the Philadelphia metropolitan area as one of 55 hot housing markets nationwide, bolstered in part by population and job growth as well as limited housing supply.
Price appreciation hasn't been that torrid in western Pennsylvania, however, due to a weaker economy and smaller population growth.
"In the Philadelphia area and southeast Pennsylvania, pricing here is close to a top," Zandi said. But for the state as a whole, "it's not a bubble."
Since 2000, Pennsylvania home prices have grown faster than personal income, which could price out first-time home buyers and people with poor credit, the report said.
To afford homes, buyers increasingly have turned to adjustable-rate mortgages in the past two years. Interest-only mortgages also became more popular, representing 11 percent of all securitized mortgage loans originating in the state last year.
"The increased use of innovative mortgage products may suggest that home buyers are stretching to keep pace with increasing home prices," the report said.
When interest rates rise, some ARM borrowers might not be able to keep up with payments. Holders of interest-only mortgages also might get squeezed when the loan re-prices or payments on the principal start.
"It's an area of caution," said Richard Brown, FDIC's chief economist. "The spread of those is relatively recent and it is fairly pronounced in boom markets."
At present, Pennsylvania's median loan delinquency ratio of 1.29 percent among FDIC institutions is below the national average. But it's weaker in the western part of the state.