Citizen Economists » business climate

Compare Pennsylvania to its Neighbors….

Christopher Briem — Tue, 08 Mar 2011 15:17:36 +0000

Here is a headline… all of the states bordering Pennsylvania are listed among Intuit’s list of the worst states for business tax laws.

Funny that… you listen to the talking heads and you would be sure Pennsylvania was the very worst place in the world for business taxes. I wonder how we compare on personal income tax rates? Or sales tax rates when compared with our real competitors which are our neighboring states.

Easter Week Issues a String Of Positives

Eldon Mast — Thu, 08 Apr 2010 16:40:06 +0000

The last week of economic news has been quite notably positive.

Last Wednesday, March 31, started with the Mortgage Bankers Association reporting that its purchase index was up a very sharp 6.8 percent for the fourth gain in the last five weeks.

A few hours later Chicago’s arm of the Institute of Supply Management reported that business activity in the Chicago region remains robust. According to according to Chicago area purchasers the ISM index came in at a very strong 58.8 — a signal of significant economic growth relative to February.

A few minutes later, the government reported that factories are cranking it up right now with strong orders in February that followed even stronger orders in January and December. Factory orders rose 0.6 percent in February reflecting an upward revised 0.9 percent month-to-month rise in durable goods orders and a 0.3 percent rise in non-durable goods.

On Thursday April 1, Monster Worldwide reported that its index rose to 125 and is now up 11 points compared to January. Their report said the improvement is signaling that companies are starting to hiring again. Their index is a comprehensive monthly analysis of U.S. online job demand and is based on a real-time review of a large, representative selection of career sites and job boards, including Monster’s own postings.

Subsequently, the auto sales in March proved much stronger than February. Sales of domestic-made cars and light trucks rose to an annual unit rate of 8.8M, up more than 15 percent vs. February’s 7.6M rate.

In additional labor news on Thursday, fewer Americans filed jobless claims in the March 27 week. Initial claims for that week came in at 439,000 vs. 445,000 in the prior week. The four-week average fell 6,750 to 447,250 and is down roughly 20,000 from levels in February.

Shortly thereafter, the ISM released its March Manufacturing report on business which offered very convincing evidence of continued recovery. Their PMI index jumped 3.1 points to 59.6 well above all economists expectations. All the major components of the index showed strength and new orders continue to be particularly strong. Inventories — which are a very key positive, soared to a very surprising 55.3 level which is indicative of a broad restocking effort in the sector.

And the big news on Friday was the positive jobs report. Private payrolls (which discount Census hiring and other government changes) jumped 123,000 in March, following an 8,000 rise in February and a 16,000 gain in January.

This week continued to post positive economic news.

On Monday, the ISM published its the non-manufacturing index. It came in at 55.4 for a solid month-to-month acceleration in March and the third month of growth in a row. The the manufacturing report, new orders again led the sub-indexes with a sizzling 62.3 reading — the sharpest month-to-month acceleration in five years.

Co-incident with the ISM report release, the National Association of Realtors reported that pending sales for existing homes jumped 8.2%. The Realtor’s Group, which compiles the data, also reported an increase in multiple offers in some markets. Further they reported that the Midwest was the strongest market in February, jumping 21.8%, with both the South, the biggest region, and the Northeast showing solid month-to-month gains.

And Tuesday the ICSC-Goldman reported a major increase in retail sales in both the April 3 week and for the month of March. Week-on-week, sales jumped 2.1% and year-on-year, sales surged 4.7% These rates are well beyond anything posted by Goldman so far during the recovery. ICSC-Goldman then sharply revised its full-month March sales from a year-on-year plus 3.0 to 3.5 percent to an 8 to 10 percent increase!

These results indicate enormous strength, beyond seasonal adjustments, for the Commerce Department’s ex-auto ex-gas retail category. They continue to underscore our assertion that Q1 2010 GDP growth will come in much stronger than that of an already strong 2009 Q4.

Doing Business 2010

Rok Spruk — Wed, 14 Oct 2009 18:37:40 +0000

The World Bank has recently released the latest Doing Business 2010 report, measuring the level of business and economic regulation around the world. In spite of the financial crisis and the global recession, Singapore, New Zealand, Hong Kong and the United States retained the leadership as the most friendly locations for doing business. Notably, some countries have achieved high ranks. For example, Saudi Arabia moved to 13th placed and Georgia, once the bastion of Soviet-style state capitalism, now ranks as 11th most friendly place for doing business with open investment environment and low regulatory barriers to trade, entrepreneurship and investment. Countries such as Georgia, Thailand and Saudi Arabia have surpassed countries such as Sweden, Finland and Iceland although there is a notable difference in international comparison of those countries when it comes to the issues of the rule of law, property rights and institutionaly quality.

Douglass North, the 1993 Nobel-winning economist once famously wrote the essence of institutional quality for economic development. He said that the inability of societies to develop effective low-cost institutions is the major reason of today’s contemporary underdevelopment of the third world. In terms of the ease of contract enforcement, 3 out of top 10 countries are Iceland, Finland and Norway where institutional quality and the rule of law are on the high level by all international indices and comparison.

In recent decade, embracing free-market ideas has had a significantly positive impact on the institutional quality, regulatory barriers and the overall quality of business environment – all of which affect the size of transaction cost and, by empirical evidence, the standard of living and the wealth of nations. Global economic integration further induced institutional competition in terms of tax structure, regulatory environment, administrative barriers and labor market structures. Thus, when countries such as Georgia, FYR Macedonia, Moldova, Liberia and United Arab Emirates, enacted the liberalization of the business environment, the results were significant ever after. The World Bank also published the list of top 10 reforms in 2010 among which are Rwanda, Kyrgyz Republic, FYR Macedonia, Egypt, Moldova, Belarus, Columbia, United Arab Emirates, Tajikistan and Liberia (link).

The efforts to deregulate and liberalize business environment worldwide, will have a strong impact on high-income countries to remove the existing barriers to trade and investment such as high tax burden, rigid labor market structure and government size relative to private sector. 2008/2009 financial crisis and the growing role of government in the economy will probably deteriorate the country ranking in the next year. However, the leadership in the quality of business and regulatory environment will depend on further liberalization of the business environment, particulary the labor market, which is a major backbone of high-income countries where union density and regulated labor markets are widespread.

If countries such as Italy, France, Germany and the rest of the developed world will hesitate in reforming the remaining barriers to trade, more direct investment flows will move to high-growing emerging markets where macroeconomic stabilization is proceeding and where policymakers impose reforms faster then their peers in the developed world.

If such trend continues, emerging markets will soon reap the benefits and could become the leaders in reforming the business environment, attracting direct investment and, by and large, in economic growth and catch-up with the rest of the world.

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