LEHIGH VALLEY ECONOMY GETTING BETTER

By Spencer Soper OF THE MORNING CALL

August 18, 2009

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Lehigh Valley businesses believe the local economy hit bottom in the spring, but a recovery won't come until the second quarter of next year, according to a quarterly survey of local business confidence.

The 39th Kamran Afshar-Greater Lehigh Valley Chamber survey found that the number of businesses laying off workers declined in July and the number of businesses hiring people picked up in July compared with April.

The survey notes that optimism among businesses is still well below the optimism measured a year ago. But the encouraging sign is that the quarter-to-quarter free-fall in employment reversed itself in July after deteriorating for four consecutive quarters.

''The July 2009 survey shows that Lehigh Valley businesses, while still not optimistic, believe that the worst of the decline is behind us,'' states the survey, which was conducted by Bethlehem economist Kamran Afshar. ''For the first time in a year, the percent of companies which reduced employment dropped and the percent of those increasing employment rose compared to the previous quarter.''

Unemployment in the Lehigh Valley hit a 25-year-high of 9 percent in June, according the Pennsylvania Department of Labor and Industry, with nearly 11,000 jobs lost in a year and 38,000 local residents looking for work.

But Afshar said the pace of erosion in the labor market is slowing and business spending picked up in July compared with April.

''This is a great piece of news if the trend continues,''Afshar said. ''This could be very real. By the same token, it could be just a blip.''

The survey showed businesses are reluctant to hire in the next six months, which indicates they want to be certain the economy is stabilizing before they invest in hiring and training new people.

The average business does not expect to hire anyone over the next six months, according to the survey. Those most likely to be hiring are in health care, insurance or financial sectors. Those most likely to reduce employment over the next six months are in manufacturing and education.

Tony Iannelli, president of the Greater Lehigh Valley Chamber of Commerce, said businesses see the economic climate improving, but they are wary of government programs that could increase their costs.

''I think people are cautiously optimistic,'' he said. ''They know they're doing better, but they're afraid to say it.''

spencer.soper@mcall.com