Lehigh Valley business sentiment index crashed to historically low levels

In April, the Lehigh Valley Business Sentiment Index, the BSI, dropped 32% below its January 2020 level.

The LV BSI is based on the Greater Lehigh Valley Chamber of Commerce-Kamran Afshar survey of the Valley businesses done on a quarterly base since 1998.

The Valley’s business sentiment, which had already given up a year’s worth of growth during 2019, gave up 10 years of gradual climb in April 2020, falling to 43.9, almost a point below its lowest level during the Great Recession.

Our employment indices were dropping since the middle of last year. In April, the index of actual hiring in the previous 6 months, followed its 5% drop in January with an alarming 24% drop. While the Valley’s unemployment rate vaulted out of a tight labor market lows into a high unemployment environment, it was already on the way up well before April. It bottomed out last June at 4.2% and then started to rise and was already close to 5% before jumping to 6%, and we predict it will exceed 15% in April on its way up. It is not just that the tight labor market is over; the unemployment rate is expected to rise to historically high levels.

The percent of local companies which reported layoffs, was 5% during 2018 & 2019, while the percentage of those which were hiring hovered close to 30%. In January 2020, we observed a significant change; percent of businesses that were laying off almost doubled, while the percentage of those which were hiring dropped. And in April, the percent of companies laying off tripled, while the percent of those hiring was almost halved.
Our purchasing indices, both actual and planned, had large losses, dropping by more than 40%. Unlike the hiring indices, the purchasing indices were not dropping before April 2020, and now they are falling twice as fast as the hiring indices. The revenue indices dropped by 50%. And to add insult to injury, it is the index of expected revenues over the next 6 months, which has dropped significantly worse than actual revenues over the last 6 months.

The future thankfully is not as dark, and while there are more than the usual number of companies that are planning further layoffs, there are also almost twice as many who are planning to hire.

The Lehigh Valley’s data indicate that we are in a very sharp recession, the economic cycle is expected to be U-shaped, with recovery starting in the 4th quarter and hopefully getting legs in the 1st quarter of 2021.