ECONOMY

Building blocks: There’s still room for development at the Naval Yard. (Photos by Michael Persico)

Positive Thinking

Reports about Philly’s lagging economy are misleadingly negative.

by Jeffrey Hill

Photographs by Michael Persico

Recession may be the buzzword of the moment for the national business media, but according to those working directly with Philadelphia’s industries, the city’s broad economy has crucial highlights and bloopers that are missing from the reels.

According to an April report from the Philadelphia Federal Reserve Bank, indexes for the city’s general activities, shipments, new orders and employment are in the red. This set off a string of ill-researched comparisons and premature funeral marches for Philly’s industrial markets.

Sam Rhoads is a client relations specialist for the Philadelphia Industrial Development Corporation (PIDC), a nonprofit formed 50 years ago as a joint venture between the city and the Greater Philadelphia Chamber of Commerce. For 13 years Rhoads has helped the PIDC leverage real estate financing resources to promote employment in the city.

Rhoads responds to statements made by economist Ian Shepherdson on Bloomberg.com recently in which he traced Philadelphia’s manufacturing slowdown to American Axle strikes in Detroit.

“This city has a pretty broad economy and manufacturing sector,” says Rhoads. “Let’s say for example that [Shepherdson’s] quote is correct. They would be saying that a lot of Philadelphia industries supply American Axle, so if the company goes on strike, it would impact Philadelphia’s industrial index. That’s not intuitive to me at all.”

Rhoads mentions that remanufacturing plants like Cardone, the largest industrial employer in the city, actually trend in the opposite direction of the new automobile industry. “When the economy goes down, people hold onto their cars longer and order more auto parts.”

Shepherdson couldn’t be reached for comment.

“We never say no to anybody,” says former city comptroller Jonathan Saidel. “We have to have a game, a plan, and try to attract businesses that blend with our population and employment pool.”

Saidel was Philadelphia’s comptroller for 16 years between 1990 and 2006, supervising financial reports for the city. Looking ahead at Philadelphia’s economic future, he believes the city needs to start organizing and stop being soft on handing out tax breaks. “This city has never had a structured plan as long as I can remember.”

When it comes to accuracy in assessing the specific conditions of individual industries within the city, there are varying opinions. Saidel believes the local economy can no longer be assessed by looking at companies started in Philadelphia, while Rhoads believes in individual success stories.

“Philadelphia has a significant share in specialty manufacturing,” says Rhoads, who mentions the high-end specialty printing presses, food distribution centers and retail clothing companies such as Urban Outfitters, whose corporate headquarters is in Philadelphia. “These industries have turned strong profits despite the economic slowdown.”

Saidel argues that employment issues are more important. “These companies may be doing well, but they don’t employ significant numbers of people,” he says, stressing the importance of appealing to companies by supplying a workforce pool that can be easily trained in certain industries. “We have to better educate our future workforce.”

While the recession and the weak dollar may elicit initial feelings of despair, Saidel believes the two factors can provide opportunity and employment from outside investors.

“I’ve been in communication with the new government in Italy, and they want to bring new manufacturing jobs to Philly, New Jersey and parts of Pennsylvania. Of course if the dollar is so weak (one euro is now worth $1.55), and it’s cheaper to manufacture the goods here, they can set up shop and provide employment. And these are union jobs,” says Saidel.

Rhoads sees a report from the Philadelphia Business Journal about Philadelphia’s healthy Center City office market as a sign of potential positives. “You keep your eye on things like supply, which in the real estate market you count in terms of square feet and the vacancy rate,” says Rhoads. “There’s a little less than 40 million square feet of total office space in Center City, and our vacancy rate is around 10 percent, which is below the national average and right around the point where you start talking about building new construction. Our industrial vacancy rate is in the 8 percent range, which is also below the national average of about 10.”

He also mentions that the Liberty Property Trust is proposing to build approximately 200,000 feet of flexible industrial space down at the Naval Yard. “They wouldn’t be drawing up plans to build there if they didn’t think there was a market for it,” adds Rhoads.

Then why is it so difficult to fit Philadelphia’s decades-long trend of manufacturing job loss into the landscape of the national economy? Saidel believes it’s all about timing. “What generally happens in Philly is that we’re the last ones to feel an economic upturn, and we usually don’t feel the immediate impact of an economic downturn,” he says. “If you look at the primary employment areas of Philadelphia, it’s the systems of higher education, and they’re not affected directly at the moment there’s a downturn. We haven’t cultivated high-tech or new-age industries in Philadelphia. These industries feel immediate positive and negative effects.”