Survey: Lehigh Valley business outlook shows decline in enthusiasm

Though he was quick to point out that it did not signify the start of a recession, economist Kamran Afshar said a July survey of businesses in the Lehigh Valley revealed signs pointing to a potential slowdown in economic growth.

Afshar shared the results of the survey – a poll of 220 Lehigh Valley businesses – on Wednesday at DeSales University.
The survey includes data on business projections, such as purchases, hiring and revenues for the next six months, and compares them with data from the prior six months.

July represented the third drop in a row for the index.

In October, the index was at 69.4, but in January, it dropped a few points to 66.9. April showed a drop to 62.9 and July showed 62.6.

“Lehigh Valley businesses are not as enthusiastic over the next six months,” Afshar said, adding: “This is not a prediction of a recession.”

If the number drops to 50 or below, however, that signals the economy could be in a recession.

Afshar gathers data four times per year for the Business Sentiment Index and has conducted the quarterly surveys since 1998. Afshar also serves as an economist for the Greater Lehigh Valley Chamber of Commerce and director of the Kamran Afshar Data Analytics Center at DeSales.

Participating companies include those in health care, education, retail, manufacturing and finance. Companies in the professional, scientific, and technical field represented the highest percentage of companies polled, at 18 percent. Three percent had 100 employees or more.

Most of the companies were small businesses, with 36 percent counting fewer than six employees.

As far as hiring over the last six months, the report showed that health care had a 1.9 percent increase in jobs and transportation/warehousing had 2.2 percent.

But hiring for transportation and warehouse workers likely hit a peak over the last few months, Afshar said, partly because companies have to wait for the construction of new buildings, but also because of the rise of automated warehouses.

“That’s why we are seeing that the rapid growth of warehousing and transportation is slowing down,” Afshar said.

In April, the survey showed a significant drop in businesses’ hiring plans and for July, the trend shows a sharp drop in hiring over the next six months.

One reason for the decrease in hiring is a tight labor market, though companies now are finding they need more employees with expertise and fewer employees with general skills, largely due to automation, he added.

“This is something that’s coming,” Afshar said. “There are companies experimenting with this.”

Even as fewer companies are planning to hire, those that are appear to be relaxing their hiring standards to find the people they need, he said.

“The pool of labor in and of itself is shrinking and the expertise within that pool is shrinking even more,” he said.

Corporate purchasing also has declined though it is still showing signs of expansion, Afshar said. The index figure for purchase plans over the next six months was 62, a drop from 65 in October.

“Serious caution is coming into play as everyone is planning for the future,” Afshar said.

Looking ahead brings more uncertainty for business owners as the economic expansion approaches more than a decade, which he said is the longest recovery in recent memory.

Growth, Afshar said, is likely to slow going forward.