Hospitals and universities often serve as key anchors for regional economies, driving job growth through direct hiring and local consumption. Research shows these institutions play a crucial role in long-term regional growth by providing skilled workers and fostering innovation. How regions rely on their anchor institutions has been an area of significant research at the Philadelphia Fed.
In this study, researchers sought to understand how regions with large research universities fare during economic downturns. They examined the metro area of State College, PA, home to Pennsylvania State University (Penn State), to compare its labor market performance during the last three recessions with the rest of Pennsylvania.
Their findings indicate that Penn State has a significant stabilizing effect on State College’s economy. During the past three U.S. recessions, State College’s unemployment rate rose less than the rest of Pennsylvania, and the area experienced faster employment growth during recovery periods, driven by strong hiring in education and health services sectors. However, reliance on these anchor institutions also presents vulnerabilities, as seen during the COVID-19 pandemic.
Among their key findings:
- State College’s unemployment rate increased less during recessions compared with the rest of Pennsylvania.
- Faster employment growth in State College during recovery periods, especially in education and health services sectors.
- Higher reliance on anchor institutions can pose risks, evident during the COVID-19 pandemic due to reduced campus activity.
Research shows that anchor institutions like Penn State can help stabilize local economies but are not recession-proof. Policymakers can use this research to better understand their advantage in sustaining employment during downturns, as well as their susceptibility to events like the COVID-19 pandemic or other changes to funding or enrollment.
View the Full Report