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Cunningham: Diversity Characterizes the Lehigh Valley’s Robust Economy

By Don Cunningham on August 23, 2013

Editor’s Note: This column first appeared in the August 14th, 2013 edition of Lehigh Valley Business that focused on the region’s Top 100 businesses.

There was a time when it was easy to describe the economy of this region.

If the question was, “What’s your major industry?” The answers were quick and easy. While a bit oversimplified, one typically responded in the Lehigh Valley, Bethlehem Steel and Mack Trucks. In Carbon and Schuylkill, it was anthracite coal.

Today, our economic base is much more diversified. There is no quick shorthand for that answer.  Today’s economy, however, is much larger and healthier in its diversification. This issue of Lehigh Valley Business, focused on the top 100 private businesses in the region, is a helpful roadmap to answer the question of where is our economic base today.

The Lehigh Valley region’s economy is large. It ranks number 72 out of the 366 largest metropolitan statistical areas (MSAs) in the United States. The total economic output of the region, measured in Gross Domestic Product (GDP) is $30 billion, making it an economy larger than 104 countries in the world. In the United States, regions with similarly sized economies include Columbia, SC ($32.2 billion), Fresno, CA ($31.4 billion), Worcester, MA ($30.3 billion) and Charleston, SC ($28.9 billion).

Privately-held firms and small business are cornerstones to the strength of the economy here.  Overall, nearly 80 percent of the companies in the Lehigh Valley employ fewer than 100 people. That, however, doesn’t mean their revenue is small.  There are many companies with 100 employees or less with $15 to $20 million in annual revenue.

It may surprise some that manufacturing remains a very strong sector of the economy here. Half of the top ten companies on this list – B. Braun Medical, Inc., Victaulic, Lutron, C.F. Martin Guitar & Co., Inc., and D.G. Yuengling and Son, Inc. – are manufacturers – that employ a total of nearly 7,000 people here.

Manufacturing is far from dead, it’s just different. Manufacturing contributes $4.5 billion to our regional economy. And, since manufactured goods are sold outside of the region, strength in this area drives a healthy trade inflow to our economy.

Three of those manufacturers – B. Braun, Victaulic and Lutron – are what we call advanced manufacturers, meaning that they employ leading edge technologies in the production of their goods and invest in important research that help to drive our region’s innovation ecosystem.

Yuengling is at the top of a growing business sector in the Lehigh Valley: the production of food and beverages. While Yuengling has been around 1829, making it the oldest company on this list, food and beverage production, or manufacturing, recently has become a stronghold in the region. With Ocean Spray moving its East Coast production facility to Lehigh County and Bimbo Bakery, which contract bakes for more than a dozen national brands, like Sara Lee and Peppridge Farm, building a $100 million state of the industry bakery, the region has become a hub for food and beverage. Ocean Spray and Bimbo join a long list of brand name food and beverage producers including Nestle, Kraft Foods, Bazzini, Coca-Cola, Alpo and FreshPet.

While all not privately held, the privately owned firms have a long history in the region. The average age of privately owned firms in the region is 41 years. Small, and large, privately held firms employ tens of thousands of people here in the Lehigh Valley and are a central part of the economic fabric of the Lehigh Valley.

It’s also important to recognize that the economies and workforces of the counties of Lehigh and Northampton, commonly referred to as the Lehigh Valley, are very interwoven with the neighboring counties of Carbon, Monroe and the upper areas of Montgomery and Bucks. As of the last quarter of 2012, 282,000 people worked in the region but they all do not live in the Lehigh Valley. According to census data about 180,000 of those workers live in the Lehigh Valley with the rest (85,292) coming overwhelmingly from the neighboring counties, such as Berks, Bucks, Carbon, Montgomery and Monroe counties. Carbon and Monroe counties send a large share of their total workforce to employers based in the Lehigh Valley. More than a quarter of the Carbon County workforce is employed in the Lehigh Valley.

It’s logical that two-thirds of the list of Top 100 Privately Held Businesses is Lehigh Valley-based but the employment is very regional. The 69 Lehigh Valley companies on the list employ more than 10,000 people in a range of sectors.  Interestingly, in our region, nearly 89 percent of the jobs are in the private sector, higher than the national average of 81 percent.

The Lehigh Valley’s economy is very diverse. There is no simple answer to categorize our economic base but we are fortunate to have a very rich and robust economy that is being led by successful privately held businesses with manufacturing remaining bedrock of the Lehigh Valley.

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