Economic outlook projects modest growth in Pennsylvania

By Anthony Hennen | The Center Square

HARRISBURG, PA — Pennsylvania’s economic outlook looks brighter than expected, with modest growth on the horizon.

Such is the projection the Independent Fiscal Office issued Wednesday. The office doesn’t expect a recession over the next two years, but does expect inflation to decline to 3.2% in 2024 – a stark drop from the 7.9% recorded in 2022.

Using national economic forecasts by IHS Markit, Wells Fargo, and PNC Bank, the IFO notes that real GDP is expected to grow from 1.2%-1.3% in 2023, and from -0.4%-0.9% in 2024.

Pennsylvania, however, will do better than the national trend. The IFO anticipates real GDP to grow by 1.6% in 2023 and 1.2% in 2024. Wages and salaries are expected to rise by 5.3% in 2023 and 4.1% in 2024.

Payroll jobs will increase by 80,000 in 2023 and 24,000 in 2024, a slowdown from 227,000 in 2022, the IFO projected.

The IFO’s initial tax revenue estimate for the commonwealth’s General Fund was also revised upward of $2.52 billion. The growth was driven by corporate net income tax, motor vehicle sales and use tax, and Treasury funds that “dramatically outperformed expectations.”

While job numbers and the labor force participation rate have essentially recovered from the pandemic – or are about where the IFO would estimate without the impact of COVID-19 – Pennsylvania’s economy did not emerge unscathed. The office provided numbers comparing economic growth in 2019 with 2023 and found some lag.

“The real GDP or real economic growth over this four-year period was about 3%,” IFO Director Matthew Knittel said. “Ordinarily, in normal years, this would be double that, about 6%. So COVID reduced the real growth for the state by about half.”

Much of the loss for payroll employment since the pandemic has been concentrated in government jobs, accommodation and food service, health care, and manufacturing. The highest growth has come in transportation and warehouse jobs, professional and technical jobs, and social assistance positions.

The IFO will give its final revenue estimate on June 20, after more economic data is available on the state and national level.