For better or worse, 2023 is likely to look a lot different for businesses, workers and the economy of greater Philadelphia than the year before.
At the Greater Philadelphia Chamber of Commerce’s economic outlook event on Friday, regional business leaders shared their predictions for what will happen in the coming year. They agreed that a recession is possible and inflation could slow down. Mass layoffs are taking place in large companies, and hiring workers to fill vacant positions remains a challenge.
What does this all mean for the Philadelphia region? Here are three takeaways from their discussion.
Hiring is still a challenge in all industries, and burnout isn’t helping.
The labor market was already tight before COVID-19 hit, said Patrick Harker, president of the Federal Reserve Bank of Philadelphia, and it’s only gotten worse.
The pandemic has caused some people to retire early and caused a reduction in the workforce due to illness and death, he said. At the same time, immigration slowed, and millions of fewer workers entered the country, he noted.
A number of businesses in the region are overwhelmed with recruiting jobs they can’t handle in-house, said Marcia Zaruba-O’Connor, president and CEO of the O’Connor Group, a human resources and recruiting firm.
“A lot of burnout happens because people are working two or three jobs, because they can’t find people on their own,” she said, and the constant overwork causes people to leave their jobs.
Employers should think about how to retain people, O’Connor said, which is sometimes as simple as saying thank you. They should also be prepared to invest in mental health, she said, estimating that mental health costs for businesses could double to quadruple in the coming years.
But one area is becoming ripe for recruitment, she said: bringing back colleagues who have left in recent years.
“The boomerangs are coming back,” O’Connor said. “Some people who left during COVID for better jobs realized the grass isn’t greener.”
Technology and life sciences are gaining importance.
Philadelphia’s longtime bread and butter — education and medical services (known as eds and meds) — still serve as important anchors for the local economy, Harker said, but that reliance is diminishing.
That’s a good thing, he said, because eds and medicine are no longer recession-proof: enrollment is shrinking at colleges and universities, and health care is becoming less regionally connected because of telemedicine and other technological advances.
He pointed to the importance of emerging industries, including life sciences, which employ more than 70,000 workers in the Philadelphia region.
O’Connor noted that life sciences companies are getting more creative in training new hires and assessing whether college degrees are even necessary for certain jobs as they struggle to hire enough people.
Another area where employers are hungry for talent is technology. It’s not just major tech giants and start-ups.
Wawa, for example, manufactures its own customer-facing technology in-house and needs skilled people to do so. CEO Christopher Gheysens noted a gap between the amount of mid-level technology talent regional companies need and how much is available nearby. That shortage motivated Wawana’s plans to open a technical worker training center in its former store at 19th and Market Streets.
A recession is likely, but could be eased.
The odd combination of a strong labor market and sluggish economic growth has created a sense of uncertainty and “crushing” for many, Lara Rhame, chief economist at FS Investments, said in a keynote before the panel discussion. Signs point to a likely recession, she said, and “if we don’t have a recession, it’s unlikely to be a year of really strong growth.”
However, Rhame added, recessions come in many forms. While the last two recessions were severe, she said, the previous ones in 1990 and 2001 were “shallow and fairly short-lived.”
Harker, of the Philadelphia Fed, said it was important for policymakers to strike a balance that allows inflation to slow while preventing a large rise in unemployment. “I’m optimistic that we can do some kind of soft landing,” he added.
With that in mind, local business leaders are still planning for growth, sometimes on a grand scale.
Don Smolenski, president of the Philadelphia Eagles, noted the coming profits from major sporting events already on the calendar for the next few years. The 2026 FIFA World Cup is expected to bring 450,000 visitors and have an economic impact of $450 million. And the city is hosting WWE’s WrestleMania in 2024, which had a $200 million economic impact in Dallas last year, he said.
Wawa remains on track to double the number of stores in 2020 to about 1,800 by 2030. Some of that will be outside the region, Gheysens acknowledged, but much of it will be within the chain’s core markets, including southeastern Pennsylvania.
“Any good business will ensure that they are strong and focused during the economic downturn, as we will be,” Gheysens said, “but our planning … is really focused on the decade.”