PhillyInc

"What they have is a better entrepreneurial culture." That's how Richard E. Caruso, chairman of Integra LifeSciences Corp. (Nasdaq: IART), of Plainsboro, N.J., describes the Boston and Stanford regions compared to Philadelphia's region in their ability to translate federal biomedical research funding into actual businesses. And doing his part to change it, Caruso told the Greater Philadelphia Chamber of Commerce's "State of the Region" conference in Drexel Hill that he is launching what might be a MySpace for the entrepreneurial set. It's supposed to go live in about a week, and it's not just about starting a business. "The whole idea is enable each individual to become the entrepreneur of their own life. You have to have an entrepreneurial spirit." The beta site is at www.uif.org, Caruso's Uncommon Individual Foundation. The conference was held to release the third annual Regional Report (register to download) of the Select Greater Philadelphia Foundation. -- Harold Brubaker

No matter how hard Philly tries to buzz-market itself as the latest hot urban destination, the word is still out there: Not quite. In this recent posting on Phillyblog, Celeste22 writes that she is moving to Philly and wants to meet other young professionals but recalls "hearing that everyone comes to Philly to get the education and leave as soon as they can. Is this why there are no 30 somethings in town?? The issue of region's entrepreneurial culture, its brain drain, its attractiveness to young professionals, all this prompted a little discussion here last week about Philly vs. Boston, specifically that there is a deficiency of jobs and there may be a dearth of entrepreneurial opportunities as in Boston, thanks in part to high business taxes that Boston slew in the 1980s. Could it be that until the tax bogeyman here -- real or imagined -- is slain, discussion of other real factors such as business involvement and city leadership will be stuck? Other efforts seem to be in place. Wharton has an active entrepreneurial program here. The Chamber of Commerce is trying things like the Young Professionals Network. Even the NYT has written that Philadelphia is the next "sixth" borough (ok, it was an arguable line by an NYT freelancer). Apparently Celeste22 isn't reading the NYT. Buzz only goes so far. - Thomas Ginsberg

Sure, sometimes PhillyInc gets a day or two behind. But we can always depend on SEPTA to make us feel better. This SEPTA map was posted by Phila Weekly's blog Philadelphia Will Do. Not clear where they saw it. To PhillyInc, this is a statement not just about SEPTA's struggles, but also about the pace of economic and property development in the city. Development was stagnant and declining for so long in Center City. Not so anymore. The faster and bigger things change, the harder it is to keep up. And vice versa. Take, for example, something as easy as a photo of the Philly skyline. It has changed significantly every year in the past few years, and should continue to change. Even our photo on this site is outdated, and it's not very old. Sure, SEPTA is way behind. But we'll be careful about throwing stones these days.

Courtesy www.motorauthority.com

So while the population ranking is down, the parking-cost ranking is up. The trend is pretty clear: Philadelphia's ranking was up from 6th in the 2006 Colliers' survey. It had been 5th in 2005, 7th in 2004 and 7th in 2003. (Unable to readily find the earlier surveys). This year's rise came in a year that Colliers International marked as only "modest" in its overall price increase compared with previous years.

Why is this happening, and is it really so bad? Sure, Center City has enjoyed a real estate boom this decade and its slowdown in the past year probably has been less than in other big cities. And there is benefit to parking-lot operators, owners, entrepreneurs like www.BestParking.com (see the Wall Street Journal today), and even the Philadelphia Parking Authority itself (which certainly takes its share of ridicule). But on the other hand, cities with stronger economic growth in regions with a true real-estate bubble are still cheaper: i.e. Los Angeles and Miami. Parking rates do have a pretty direct impact on Center City commerce and economic activity. Can Philadelphia really justify parking rates higher than San Francisco or Washington D.C.?

On the other hand, be thankful you don’t have to park in No. 1 London, where this year's median hit $1,198 per month.

- Thomas Ginsberg

He told PhillyInc: "It would be silly to ask them to give the work to an N.J. [company] and not take advantage of the return on taxes they're entitled to." Pringle said nobody has told him explicity that Pennsylvania would, or even could, favor Pennsylvania-based companies in awarding contracts for dredging-related work. But he figured it wouldn't hurt to preempt such questions. Besides, he said, at least one of his employees lives in the Downingtown area. And he has his eye on other contracts with the Commonwealth.

- Thomas Ginsberg

Imperium Renewables Inc,, one of the largest makers of biodiesel fuel, says it will build a production facility in Philadelphia to tap the growing demand for the environmentally friendly fuel in the U.S. and Europe.

The company expects to lease an 8.5 acre site in Philadelphia during the second half of the year, according to a filing today with the Securities & Exchange Commission. Construction is scheduled to begin next year on the 100 million gallon per year capacity plant with completion slated for early 2009.

"Our East Coast location will give us a cost advantage over our competitors who must transport biodiesel via rail or road to the East Coast," the filing said. "Additionally, several U.S. East Coast states have enacted laws that mandate or encourage the use of renewable or low emissions fuels or that provide tax or other incentives for renewable fuels, which we believe will stimulate demand for biodiesel."

Last week, Seattle-based Imperium, which also is going public, opened a plant near Grays Harbor, Wash., with a capacity equal to what's planned for Philadelphia. On a capacity basis, the $78 million plant, is the biggest in the U.S., according to the National Biodiesel Board. The company's plant would join one a much smaller in the area operated by Philadelphia Fry-O-Diesel LLC, which converts restaurant grease to fuel. That company hopes to have a commercial-scale plant with a capacity of 3 million gallons next year.

"They serve a very, very different market than we do," said Fry-O-Diesel president Nadia Adawi, who was aware of Imperium's plans. "Their model is not to serve the local market. I don't think we will be competing with them at all."

Philadelphia provides Imperium with a central location to supply Baltimore-based power company Constellation Energy Group Inc. with biodiesel for power plants in 20 states and the District of Columbia under an exclusive contract.

"However, under our contract with Constellation, we may lose this status if we are unable to timely commence operations of our U.S. East Coast production facility," the filing said.

In addition to Philadelphia, Imperium also is planning to build plants in Hawaii and Argentina. The company also is "evaluating" sites in Belgium, China and the Philippines. An Imperium spokesman declined to comment, citing the so-called "quiet period" in which limits the companies going public can release.

Biodiesel is growing from a niche product targeted environmentally conscious consumers to a big business. This year, domestic production is expected to reach more than 300 million gallons, up from 25 million in 2004, according to the National Biodiesel Board, which estimates that demand for the environmentally friendly fuel has tripled in each of the past three years.

"The industry is growing pretty rapidly right now thanks to people's interest in renewable fuel and finding out about more diesel vehicles," said Amber Thurlo Pearson, a board spokeswoman.

- Jonathan Berr

For their annual Inc. 500 list of the fastest-growing private companies in the U.S., the magazine’s editors dug deep and produced a list of the nation’s 5,000 fastest-growing. That wide net caught a lot of local fish, more than 130 in Philadelphia, it’s seven suburban counties in Pennsylvania and New Jersey, and New Castle County in Delaware. In the traditional top 500 were 10 local companies, including Xsell Resources Inc., Alpha Card Services Inc. and Health Advocate Inc., all in Montgomery County; Market Resource Partners LLC in Philadelphia; and SUNRx Inc. in Cherry Hill. The full searchable list is available here. A list of all the local companies among the 5,000 will be published in the Inquirer's Business section on Monday.

Ed Rendell's second "Pennsylvania International Week," a once-a-year chance for local companies to get exporting advice and pitch wares to a roving band of foreign tade representatives without leaving home, actually runs for two weeks this year. Perhaps it should be renamed the "Pennsylvania International Fortnight" to be truly international. (Yes, fortnight means "fourteen nights" a.k.a. two weeks in Middle English). And somehow the acronym PIF seems catchier than PIW. Anyway, the merry band of money-makers starts Wednesday in western Pa. and moves across to state, arriving in the Philadelphia region on Sept. 18. The schedule and flyer is here, the state agency's website is here. Its local host is the World Trade Council of Philadelphia, which probably could use the boost.

- Thomas Ginsberg

The executive consulting firm Vistage International, based in San Diego, says today that its latest survey of "business leaders" in Philadelphia conducted this past August has found that their confidence in the national economy in the third quarter has dipped along with CEOs nationwide, and some plan to put investments "on hold" to brace for a slowdown.

The survey (Download the press release) found that 115 regional chief executives of small- and mid-sized businesses who responded to the survey had a Confidence Index of 81.5 percent. That's 3.4 points down from 84.9 pecent in the prior second quarter. It's down 5.1 points from 86.6 percent a year earlier. The national index is also down to 81.4 percent.

Unfortunately, the survey does not ask the local CEOs what they feel about the local economy. And just 115 people answered the survey (taken in the middle of vacation season Aug. 16-24), giving the local results a pretty big margin of error - almost 8 percent, compared with 2 percent for the national survey. So it's probably best to take this survey as an anecdotal round up of opinions on national trends - for what that's worth. The 115 local execs generally expect a slowdown, but not a turndown, in the national economy. Vistage said they "still expect strong growth in their revenues and have no plans to cut payroll. Just like the prior quarter, recruiting and retaining talent is the most important challenge executives face, although uncertainty about the economy may slow hiring."

Vistage quotes its consultant on the survey, Richard Curtin, director of consumer surveys at the University of Michigan at Ann Arbor, as saying: “Of the Philadelphia business leaders surveyed, the concern is not only about the economy, but also about the availability and cost of credit to their companies. Because of this, executives plan to put some of their planned investments on hold for the remainder of the year.”

Vistage quotes its Mid-Atlantic regional vice president, Michael Hagy, formerly of Pinnacle Performance Group in Philadelphia, as saying: “CEOs are apprehensive about their company’s optimism going forward in the up-coming quarters. As well, our members are resistant to downsizing their productivity, they feel a sense of security keeping a steady pace rather than growing their company during the current financial slump. They’re watching their steps a little more than they have in the past.”

- Thomas Ginsberg

College students in the greater Philadelphia region (meaning everything from Paoli to Princeton) contribute $2.2 billion, or about $8,000 per year per student, to the regional economy. (Parents, can you imagine?!! The answer, probably and painfully, is yes. Think about the book bill alone!) This statistic comes from Select Greater Philadelphia, which today released a study showing how higher education impacts the greater region's economy. Select Greater Philadelphia is an organization that markets the area to businesses. By the way, that $8,000 does not include room, board and tuition.

The group points out that the higher education sector contributes almost 7 percent of the region's jobs, or 210,600 jobs, which average $63,200 in annual pay. The gross economic impact is $15.2 billion in the larger region, which it defines as stretching from Mercer County to Salem County in New Jersey, and including the city and its surrounding counties in Pennsylvania.

Beyond the $15.2 billion is the $3.7 billion set aside for capital projects at area colleges and universities over the next five years. These projects will employ in 5,555 on construction sites, indirectly providing work for 4,200 more. The area's schools typically spend between $400 million and $500 million on capital projects, the study says.

All this spending produces quite the education machine, churning out 67,169 degrees in 2004-05 academic year, the most recent year included in the study. Of those, nearly a third were advanced degrees, which yield the highest salaries for their recipients, the study said.

How many of pizza-eaters are there in the area? All together 359,511 full and parttime students are enrolled in area colleges, the study said.

- Jane M. Von Bergen

In response to our poll (see left side of this page) and post on Philly businesses and Philly gun violence, this came today from the new blog of the Greater Philadelphia Chamber of Commerce:

Recently, some of Philadelphia's jounalistic community have questioned the role of the business community in making Philadelphia's neighborhood safer (http://blogs.phillynews.com/inquirer/phillyinc/2007/09/goldsmith_tells_businesses_to.html). Here's what our President & CEO, Mark Schweiker, has to say about it:

The Chamber's primary mission is regional economic development. Still, even more important than the fate of our economy is the future of Greater Philadelphia and in particular, Philadelphia's families. As a parent, I share in the sadness of the victims' loved ones at the senseless violence that we are enduring. How to diminish if not eliminate this violence is a condition which many leaders are addressing.

Let me mention that the business community has been a steadfast participant in efforts to reduce violence. Our political efforts range from the Chamber's 1999 testimony in Harrisburg in favor of one-gun-per-month sales legislation to our recent testimony in July in support of Philadelphia's efforts to pass gun laws more restrictive than the state's. Financial efforts and backing include the record-setting workplace donations to United Way of Southeastern Pennsylvania in 2006 as well as the millions of dollars which individual corporations donate directly to social service agencies.

To offer opportunity to Philadelphia's youth, it delights me to know and report to you the final tally on our Working Solutions program. It stands at 1,049 interns. That's right. We coordinated the successful placement of 1,049 interns in employer-paid positions last summer. While there is still much more to be done, I am proud that our collective efforts indirectly help to reduce violence and inspire safer neighborhoods.

We will never cease in our efforts to support making this city safer and, in turn, this region more prosperous.

Ed Rendell's econ development chief, Dennis Yablonsky, says the administration's 2007 survey of Pennsylvania businesses finds 77 percent projecting that they will "grow" in the next 12 months, something Yablonsky DCED calls "confirmation" of a "dramatically improving economy."

But in fact, the state agency's comparable survey a year ago found slightly more companies projecting 12-month growth. Sure, it was just one percentage-point more last year. And three-quarters is still a strong rate, no matter what. But we wonder if these types of breathless proclamations of improvement actually help businesses? It's interesting that the DCED does not provide a longitudinal comparison of results of this 10-year-old survey, something that professional, legitimate pollsters would do. We're going to ask DCED for all the surveys and will post the answer.

- Thomas Ginsberg

We asked and the DCED answered, and here is the reply:

Tom,

Click the link below and go to the 3rd link down: BREP Report 2007. This should have information from the previous years.

http://www.newpa.com/search.aspx?keywords=brep

Let me know if you have any other questions.

Thanks,

The link goes to a list of press releases, where you can rummage around and find previous reports from two previous years only. Seven previous years of survey data is apparently not available, and it is not compiled anywhere else that we've found.

By a hefty margin, PhillyInc poll respondents say Philadelphia businesses have no particular responsibility to help to combat the city's worsening gun and violence problem. At least that's what they said in our unscientific and anecodotal, though perhaps indicative, online poll.

We asked: "Do local businesses and/or executives have a responsibility to help combat rising violence in Philadelphia?" The most popular answer, chosen by 45 percent, was: "No, their job is to prosper and create jobs, period." The second-most popular chosen by 29 percent was: "Yes, but they have shirked it and could do more." Two other options accounted for the rest. (Click below for bigger chart).

We were prompted by Philadelphia's ex-managing director Phil Goldsmith and Inquirer columnist Monica Yant Kinney, who say city businesses with so much at stake have been more talk than action on the problem. Responding to our poll and disputing Goldsmith, Mark Schweiker of the Greater Philadelphia Chamber of Commerce insisted on the Chamber's blog that businesses have done quite a bit. Even so, he and Goldsmith do implicitly agree that businesses have a responsibilty to the community to help deal with the problem.

And that's where this poll is interesting. It seems most PhillyInc poll respondents think both guys are off-base on that point. In total, the share who answered "no" on whether business have such a civic obligation was 62 percent. That was 36 out of 58. (Yes, just 58 plus 1 write-in. We actually get hundreds of visits a day). You could argue, correctly, that our online poll is soft, anecdotal and unreliable. But perhaps no more unreliable than the way most people form opinions about what others think. Imagine it this way: Over the course of a year you attend 58 dinner parties, and 22 guests insist over apetizers that businesses ought to step up to the plate, while 36 scream during dessert that the job of businesses is business, period. For most people, just three people saying something make them think it's trend. Here's 36. Of course, that doesn't mean they're right. We intend to run Q&As with people on both sides of the topic. Stay tuned.

- Thomas Ginsberg

Innovation Philadelphia, the Philadelphia city office created by John Street to juice the local entrepreneurial economy and which probably has had more than its share of ups and downs, said today it has unveiled a new Web site. Take a look at www.innovationphiladelphia.org and give it a review. Wonder why George Burrell couldn't wait to leave before it unveiling this?

Marcia Gelbart at The Inquirer reports today on something akin to a great sign of relief that David L. Cohen has agreed to become the next chairman of the Greater Philadelphia Chamber of Commerce a year from now. She quotes outgoing chairman Joe Frick telling a chamber conference today that Cohen's return to a civic role and Michael Nutter's impending election may help release some "pent-up energy" for a business-friendly tone from City Hall than they've had under Mayor Street.

- Thomas Ginsberg

Mark S. Schweiker of the Greater Philadelphia Chamber of Commerce says businesses are pivotal to the city's anti-violence efforts and blames the media for missing it. On the other hand, health-insurance company CEO William George says businesses could be doing even more to combat violence.

And so it goes. In the last couple of years, many horrific slayings in Philadelphia, a rising homicide rate and an intense debate over gun-control laws have led officials, residents and activists to scour the community for solutions. The city business establishment says it has joined in efforts to tighten gun laws and improve the job situation. That claim has been questioned by former Philadelphia Managing Director Phil Goldsmith and Inquirer columnist Monica Yant Kinney. In our unscientific, anecdotal online survey on the topic, most respondents indicated they think businesses need to focus on prospering and creating jobs, period. (See all our previous posts here.)

Now we've conducted Q&As with two thoughtful leaders on the topic: Schweiker of the Greater Philadelphia Chamber, and George of Health Partners, a nonprofit health plan. These CEOs don't seem to disagree in substance as much as in tone and focus. Each insists they are not adversaries on the topic. In fact, their approaches strike us more as complimentary than contradictory, maybe even the foundation for some new efforts.

Both Q&As are published in full below. Or you can jump straight to the Schweiker Q&A or the George Q&A. Shorter versions are appearing in print today and tomorrow in The Inquirer's business section. Please, feel free to comment, pontificate or criticize (politely, please).

Philadelphia has snagged $60 million in federal tax credits for development projects along commercial corridors citywide. So crows Mayor John Street and the Philadelphia Industrial Development Corp., which competed against other places for the funds.

Give the city credit for pursuing the money, although its publicity was a week late and bit curious. According to the city's press release, PIDC was "the only allocatee in the Commonwealth of Pennsylvania in this fifth round of awards." Yes, but the U.S. Treasury Department's Community Development Financial Institutions Fund, which administers the grants, lists at least eight allocatees from other places that will be investing in projects specifically in Pennsylvania, meaning credits may be available on the ground here, whether or not they come through PDIC. (There are 10 listed for New Jersey.) An odd omission from the city, although technically PDIC is correct in calling itself the only allocatee from Pennsylvania that facilitate credits.

According to the PDIC, "the New Markets Tax Credits Program permits taxpayers to receive a credit against federal income taxes for making qualified equity investments. The credit provided to the investor totals 39 percent of the cost of the investment and is claimed over a seven-year credit allowance period."

- Thomas Ginsberg

The AP's Marc Levy has done a solid investigation of the Rendell administration's aggressive policy of granting tax incentives to companies to create jobs in Pennsylvania. It says that out of 56 businesses that were awarded $44 million in incentives in 2003-2004, "only 25 had hired the number of workers they had promised to hire." (Chart is here, and one local paper, the Bucks County Courier Times, fleshes out the results here a bit.)

The Rendell administration did far better on the total number of jobs, as opposed to number of companies, though it still was behind its own goals. The AP found that the jobs added by all 56 companies combined was 9,654, or about 88 percent of the total 10,917 promised.

We'd note some caveats: the AP said it was unable to get data on "more than 800 projects" that were offered money from the Rendell administration for a variety of reasons. We also would note that the number of jobs "promised" may not correlate to a company's total economic impact, nor does it necessarily mean the money was wasted in the "arms race" with other states that also throw their own incentives. Still, the report is great new fodder for debate over the value of and return on corporate welfare. Sure, the government's role in part is to take risks and make investments for the greater good that the market won't or cannot undertake. But how much loss is too much? (Note Karl Stark's story today on GlaxoSmithKline PLC).

- Thomas Ginsberg

Yaromir Steiner, chief executive officer of the private Ohio-based firm that has managed the Camden Adventure Aquarium for several years, told us some interesting things last week after his Steiner+Associates announced a state-approved deal to hand off most - but not all - of its N.J. aquarium-management subsidiary to Herschend Family Entertainment Corp., which owns Philadelphia's "Ride the Ducks" buses.

Steiner said by phone that he's turning his focus to real estate development and away from running attractions like the Camden facility and another aquarium in Kentucky. (Both were included in the sale to Herschend.) Then Steiner lamented that the Delaware Riverfront boom has not yet materialized, mainly because of stifled development on the Philly side, including the unbuilt river tram. He essentially conceded that the mission of helping Camden got under his skin and it may have infulenced his business decisions.

"What happens is, you get involved in Camden, and you get emotionally attached to it, and it becomes more than a money-making venture," Steiner told us by phone from his home in New Albany, Ohio.

He said he had a tram-related escape clause, but he stuck by the business in Camden hoping for the best. And then he says this: "In retrospect, maybe we would not have done it."

So did he lose money in Camden? Does he regret the aquarium business? "We did not lose money on the deal, but we'll make more money on doing real estate."

Including in Camden. Steiner said he is not done with Camden and reportedly will continue what the Courier Post has called a "potentially lucrative role" as master developer of 27 acres of residential land north of the aquarium. The Inquirer has reported that he's working on a hotel project. But the aquarium business was tough. Steiner, who managed the aquarium through a wholly owned Camden subsidiary, has had his share of controversy including a lot of hand-wringing over his deal and the expansion costs. He came in 2004 when the facility, which is owned by the state of New Jersey, was struggling as the New Jersey State Aquarium and about to close for expansion. The state contracted Steiner's firm to revamp the facility's image and management after expansion. It reopened in 2005 as the Adventure Aquarium, with Steiner paying the state a leasing fee and retaining all door receipts, minus a small share for city taxes. It has clocked more than 2 million visitors at an average ticket price of $16.

But the best laid plans, well, you know. The tram project stalled. The Street administration in Philadelphia couldn't figure out its Penn's Landing strategy. In August Steiner let it be known he wanted to get out of the aquarium-management business. He approached Herschend about taking control of his subsidiary and asked N.J. officials to approve his plan to sell part of the subsidiary to Herschend. Herschend initially wanted full ownership but, according to Steiner, eventually relented and let Steiner keep a small share without control. The state granted its approval in mid-November. Then the deal was sealed and announced on Friday.

Neither Steiner nor CEO Joel Manby of Herschend, of Norcross, Ga. would reveal the value of their transaction. Manby said in the announcement: "We will operate business as usual, with a focus on making the operating transition as smooth and transparent as possible for the Aquariums' guests and employees." And maybe Herschend will run its Ducks buses all the way across the river, so the tram won't be needed anyway.

- Thomas Ginsberg

Charles Plosser, president of the Federal Reserve Bank of Philadelphia, spoke to the WSJ tonight in an online Q&A. For those who are still waiting for Rupert Murdoch to loose the Journal's coverage onto the Internet, Plosser said he doesn't expect a recession. And he's the hard-liner on Fed policy. But he also says if he's wrong, there's not much the Fed can do with monetary policy to avert it anyway. Excepts are below.

This surprised us, but perhaps we weren't paying attention: The Philadelphia region allegedly is rising fast on the national ranking of millionaire households as a percentage of all our households. Faster even than other metro areas. This comes from Claritas, the demographic marketing data firm owned by The Neilsen Co. It says, out of 200 large metro areas nationwide, Philly ranked No. 10 last year in percentage of our households with incomes of $2 million or more, up from No. 19 a year earlier. Our share of slumming households -- those with income of $1 million to $2 million -- was No. 9 nationwide, up from No. 14 a year earlier.

In other words, the odds around here of hitting a baseball through the front window of a millionaire's house is going up. And of a $2 millionaire's house, way up.

Hard to tell what's going on here, if anything. Baltimore and Boston also rose in rank, while Santa Barbara and other rich spots fell entirely off this list. Frankly, it's suspicious. Claritas says it tweaked its calculation formula but says the rankings are still comparable from year to year. We'll have to see next year. Meanwhile, you have 12 months to brag.

- Thomas Ginsberg

A little background re millionaire households: One commenter wonders if there was an effect from the changing housing market. First, the Claritas data are from 2006, long before the housing market tanked. Second, it says its calculation of income producing assets (IPA) does not include home equity. Third, we track this trend based strictly on the internal order of the rankings, not on the actual number or share of households from metro to metro, which is NOT comparable from 2005 to 2006. Nonetheless, here is Claritas' explanation of its formula:

Over the past three years, homeownership rates and home values have increased, causing a decrease in IPA. Households have been using income-producing assets for housing down payments, home purchasing closing costs, and mortgage payments. These housing costs come out of IPA and eventually move into home equity, and home equity is not part of the IPA model. Additionally, IPA is based off of a three-year average of survey results. This year’s three-year average no longer contains the impacts of 9/11 and the slight recession that followed the attack. Finally, the baby boomers are nearing retirement age. As this group retires, the growth of IPA will slow as the boomers tap into their retirement nest eggs. Furthermore, their incomes assets are going to be declining, as well as their IPA.

In recent years, the higher IPA distributions have been gradually shifting away from representative survey results, and in 2007, it became clear that it was time to redistribute the IPA ranges so they better reflect the reality today. Claritas’ distribution realignment is a result of two consecutive years of national financial survey results displaying a similar story. Additionally, federal sources such as the Internal Revenue Service, Bureau of Labor Statistics, and Census Bureau are issuing reports with similar findings in the change of assets across the nation.

- Thomas Ginsberg

The Tidewater Grain Elevator, an abandoned structure next to I-95 in South Philadelphia so constant that most people stopped noticing it, now is gone. The urban blog Necessity for Ruins has video of the implosion early Sunday morning. It also has this comment from a guy it identifies as Harry Hagin, site superintendent for Camden Iron and Metal Inc., which owns the site and arranged the demolition: "Philadelphia used to have a lot of industry. Not so much anymore."

We'll poke around for more information. We missed word of this implosion. And it's unclear what Camden Iron and Metal has in store for the site.

- Thomas Ginsberg

Lists of '07's worst stocks are filled with home builders, mortgage lenders and other financials who have gotten hammered with the subprime/housing bubble/credit crisis. The Inquirer/Bloomberg Philadelphia Index is no different. But just because a stock is a mutt one year doesn't mean it can't become a show dog the next. Case in point: SunCom Wireless Inc., this year's best-performing local stock. In 2006, SunCom shares lost 75 percent of their value. That year, the Berwyn company had posted widening losses, CEO Michael Kalogris was severely injured in a car crash, and its shares were delisted by the New York Stock Exchange. The wireless service provider's finances improved in 2007, but the stock popped in September, thanks to a buyout launched by T-Mobile.

Three men from the region's business and economic development communities have been tapped for three-year terms on the board of the Federal Reserve Bank of Philadelphia. An honor, yes, but anyone serving on the nine-member board is in a position to throw in their two cents about economic conditions and try to influence monetary policy. The new board members are:

* Keith S. Campbell, chairman of Mannington Mills, the flooring maker in Salem, N.J. (His local paper has a lot of background here);

* Ted T. Cecala, chairman and CEO of Wilmington Trust (NYSE:WL) , the big Delaware bank;

* Jeremy Nowak, president and CEO of The Reinvestment Fund, the Philadelphia organization that finances neighborhood revitalization.

The Rendell administration proudly announced 43 economic development projects on Friday that it claimed would create more than 2,000 jobs in three years. And it included helpful links in its news release to specify how it was spending $35 million. But when hackers from China brought down the state government's Web site on Friday you couldn’t learn that XL Capital Ltd. plans to move its 428 employees into a 140,000-square-foot building in Uwchlan Township and create 92 jobs. Or that Auxilium Pharmaceuticals Inc. intends to upgrade its 50,000-square-foot lab in Horsham to not only retain 27 people but also create 60 life-science jobs. For XL's $10 million project, Pennsylvania will provide the insurer with $684,000, which is composed of a $400,000 grant, $100,000 in job training funds and $184,000 in job-creation tax credits. Auxilium will get $255,000 for its $7 million expansion.
But the big winner locally was Exton-based Advanced Automation L.P., which will get a $2 million low-interest loan plus $300,000 in other funding to lease or buy a new headquarters. This Chester County information-technology company has 78 workers and says it would create at least 77 new jobs within three years.

Whenever any member of the Federal Open Market Committee or president of the various Federal Reserve banks speaks, the markets listen and trade on the interpretation of those words.

How’s the economy and where are interest rates headed?

Today it was Charles I. Plosser’s turn at the Main Line Chamber of Commerce. And the Philly Fed president’s message was delivered in typical Fedspeak: “I think the U.S. economy will experience several quarters of sluggish growth in 2008 before returning to a sustained expansion over the next two years.”

Plosser indicated further rate cuts may be necessary but would not say whether he would call for a cut Jan. 30. But today’s econo-spiel was a little different for him: It was his first speech as a voting member of the FOMC.

Inquirer staff writer Harold Brubaker, who covered the speech, said he’d never seen so many media outlets at a chamber of commerce meeting. He also said it was striking that “I didn’t say that” was Plosser’s response several times during a question-and-answer session after the speech. His new status as a Man Whose Opinion Really Counts will mean his comments will be dissected more closely.

If you want to get a clue about consumer spending, follow a 49-year-old with a 19-year-old living at home and see how they spend.

That's the advice Mark Zandi, chief economist of Moody's Economy.com, gave the 460 people at this morning's Greater Philadelphia Chamber of Commerce's economic outlook breakfast.

Why?

Because those two ages account for the largest population groups in the United States. Zandi, who is 48, said he's not quite in that demographic sweet spot, but he invited the crowd to watch him spend.

Another panelist wasn't buying the entertainment value of watching Zandi decide how to part with his monetary gains. "I can't think of anything more exciting than following a 48-year-old economist around to see what he does," said Walt D'Alessio, with tongue firmly in cheek. "Mark, I don't think the line is going to be very long."

But the chairman of Brandywine Realty Trust wasn't done. After hearing Urban Outfitters founder Dick Hayne talk about the spending resilience of his stores' female customers, D'Alessio said: "I think I want to follow one of Dick's upscale women around."

- Michael W. Armstrong

More than 20 years ago, "Divest Now!" was rallying cry on college campuses as activists implored companies to shed ties with South Africa. The Rendell administration has announced it is organizing a trade mission to the post-apartheid nation Feb. 18-22 to encourage Pennsylvania companies to establish contacts to boost exports. As of Sept. 30, Pennsylvania was the seventh-largest U.S. exporting state to South Africa. Keystone State firms exported more than $180 million of products to South Africa in 2006.

- Mike Armstrong

On a day packed with releases of government statistics on the economy, one to watch will be the 2 p.m. release of the Federal Reserve's 'beige book' report. The Fed publishes it eight times a year.

It is a compilation of anecotal information about current economic conditions in the 12 districts that make up the Federal Reserve system.

So yes, we'll be getting a snapshot of how Philadelphia is faring during this economic slowdown. Check back this afternoon for details.

In the meantime, if you want to do like I am, check out the Fed's beige book page and read up on last year's reports. It ain't poetry:

Business activity expanded modestly in the Third District in October and early November.

But you can limit your scanning to the Philadelphia portions. I'll be looking for a change in the bank lending environment.

- Mike Armstrong

Hate to be a killjoy on the doom-and-gloom scene, but the Federal Reserve's "beige book" report finds that business activity "increased slightly" in December in the Philadelphia region.

Manufacturers? "Modest increases in new orders and shipments."

And those banks I wondered about this morning? "Overall bank lending has been rising slowly, with better growth in business lending than in consumer and real estate lending."

Retail was soft and residential real estate sales were lower than last year. But the big service sector reports business has been "expanding steadily."

And the overall forecast? Continued growth, but companies have "scaled back their forecasts for 2008."

- Mike Armstrong

The monthly survey of Philadelphia-area manufacturers indicates that sector weakened in January, according to the Federal Reserve Bank of Philadelphia.

The report says that its indexes of new orders and "general activity" fell sharply. That's the indexes show that. This survey, called the Business Outlook Survey and released the third Thursday of the month, is presented as a diffusion index.

The footnotes to the Philly Fed's survey say this:

"Diffusion indexes represent the percentage of respondents indicating an increase minus the percentage indicating a decrease."

While it sounds more esoteric than saying that new orders fell by 2 percent last month, for example, there's no ignoring how gloomy this Fed survey is. The current general activity index touched a level not seen since 2001.

It noted that price pressures were elevated. More manufacturers recorded increases in their "input" prices and passed on price increases for their own goods.

The outlook for manufacturing growth over the next six months was also less optimistic than in December.

- Mike Armstrong

As we all look for signs of a U.S. recession, don't ignore what the consumer with disposable income does when the going gets tough.

A story in this morning's New York Times discusses research that suggests that "pinching pennies on everything from toilet paper to yoga classes" in times of economic stress makes consumers feel better, even if it's not saving that much money.

It quotes Wharton School marketing professor Robert Meyer on "dollar-stretching consumers":

They’re seeing all this news media saying the value of your house has gone down, the value of your portfolio has gone down. Well, none of it is relative to their day-to-day spending. Nevertheless it creates a feeling of poverty, which feels bad. The way they can undo that is their daily savings perks, which make them feel richer.

Yes, these also are not people living paycheck to paycheck. But the next time you're at your daughter's indoor soccer game, ask some of the other parents how they've trimmed household expenses. Rib-eye instead of filet mignon? Kmart bobos instead of Nike Air running shoes?

Is thrift coming back in vogue?

- Mike Armstrong

With so much economic news expected today, Inquirer staff writer Joseph N. DiStefano asked a local institutional money manager for his thoughts. The following are e-mailed responses from Michael Hogan, head of equity investments at Delaware Investments, a $150 billion money manager based in Center City. Please note that his responses were sent before the release of the fourth-quarter gross domestic product report which showed the U.S. economy grew by 0.6 percent.

Question: What do you expect from today's GDP release?

Answer: We believe [today's] report will show that US economic growth slowed significantly in the fourth quarter. We expect the range to be between 0.5% and 1.5%. It is likely that the positive economic momentum experience earlier in 2007 did continue into the fourth quarter but that the strains within the housing sector and the US financial sector are causing a sharp deceleration in growth. The GDP report will likely continue to point in the direction of continued Fed easings.

Q: Do you expect the Fed will cut 50 basis points from the Federal Funds rate this afternoon? What will happen next?

A: Although we believe that the there is a better than 50/50 chance the US economy will remain out of recession - the severity of a downturn - if one should in fact happen, could be exacerbated as financial distress in one part of the economy spills over into other parts of the economy. If left unchecked - it would likely lead to a rapid deterioration in financial conditions within the economy as a whole and deepen the recession.

Because of this potential - we expect the Federal Reserve to remain particularly aggressive with monetary policy until there are strong signs that the health of the financial sector has begun to improve. We expect a further rate cut tomorrow of between 25 [basis points] to 50 bp.

Because of the complexion of the current economic weakness, it is also likely that Fed actions in the next several months are going to be far more driven by conditions in banking sector and other parts of the financial system than would be normal even if other economic indicators are producing conflicting signals.

When Federal Reserve Bank presidents speak, the markets listen. Philly Fed CEO Charles I. Plosser spoke to the rotary club in his hometown of Birmingham, Ala., and sounded the inflation alarm once again.

"Ignoring price stability during times of economic weakness risks undermining our ability to achieve economic growth over the long run," he said.

"We cannot be confident that a slow-growing economy in early 2008 will by itself reduce inflation."

So while Plosser did vote with the majority of member on the Federal Open Market Committee to cut the federal funds rate by 125 basis points over the last two weeks, Wednesday's speech clearly outlines his concerns about inflation bubbling up in the U.S. economy.

- Mike Armstrong

The economic slowdown has exposed the extremes that have defined Americans for years: too much debt, chronic spending and little savings.

The U.S. economy depends a great deal on consumer spending. Repeat after me: Consumption accounts for 70 percent of the $14.08 trillion U.S. economy.

To buy what we want, Americans have taken on massive amounts of debt. We have done so even as our savings have evaporated. No, check that: Even as we have blown it all.

Conventional wisdom says that when money get tight in the household budget, you tighten your belt. But many of us haven't done that. We've taken on more debt. We've charged things on credit cards. We've refinanced the mortgage — two, three, four times. All in the name of delaying that payback.

So along comes the President and Congress with an economic stimulus check for you. What the politicians, economists and Wall Street want you to do is to run to Best Buy (better yet, drive your Hummer there) and buy that plasma TV. Or hit the mall to buy those spring fashions at Macy's.

In a report, that won't send anyone dancing into the streets, the Federal Reserve Bank of Philadelphia released a survey of professional forecasters that sees "weak growth" for the first half of 2008.

Those surveyed see economic growth of 0.7 percent, rather than the 2.2 percent they projected three months ago, the Fed says.

Guess what? That's not a recession, but weak growth doesn't feel too good either.

The pros are looking for real gross domestic product to grow 1.8 percent in 2008 and 2.9 percent in 2009.

However, the New York Times is looking for recession. David Leonhardt has this analysis, reading between the lines of the Fedspeak:

The recession-probability index — which the Philadelphia Fed calls the Anxious Index — has yet to miss a recession entirely or to signal one that never happened.

- Mike Armstrong