Pennsylvania Economy: Manufacturing, Energy, and Healthcare

Pennsylvania is one of the largest state economies in the United States, usually ranked in the top ten by GDP — the dollar value of everything a place makes and sells in a year. The Pennsylvania economy is a careful blend of old and new: heavy manufacturing and steel built the state, while healthcare, energy, and finance keep it running today.

This is a plain-English tour of how the Pennsylvania economy works. For the national picture, see The State of the U.S. Economy and the Economy hub. For a deeper look at one of its biggest cities, see Philadelphia.

How big is the Pennsylvania economy?

For example, recent state GDP for Pennsylvania has run around $1.0 trillion, according to the Bureau of Economic Analysis. Population is roughly 13 million, per the U.S. Census Bureau. The Philadelphia and Pittsburgh metro areas hold most of the people and an even larger share of the state's economic output.

The biggest industries

Pennsylvania has one of the most diversified industry mixes in the country. The main pillars are:

• Healthcare — the state's largest private employer category. Hospital systems like UPMC in Pittsburgh and Penn Medicine in Philadelphia anchor whole regional economies.
• Manufacturing — Pennsylvania is still a top-ten manufacturing state, with strong machinery, food processing, chemicals, and specialty steel.
• Energy — the Marcellus Shale makes Pennsylvania the second-largest natural gas producer in the United States.
• Finance and insurance — Philadelphia hosts large asset managers and insurance companies; Pittsburgh has a meaningful banking cluster.
• Education — Pennsylvania has one of the densest networks of colleges and universities anywhere, with Penn State, Pitt, Temple, and dozens of private schools.
• Agriculture — dairy, mushrooms, poultry, and apples are all major; Pennsylvania grows the most mushrooms of any U.S. state.
• Logistics — the state's east-west location makes it a natural warehouse and trucking hub for the Northeast.

Jobs and wages

Pennsylvania labor data is published by the Pennsylvania Department of Labor and Industry, with national-level numbers from the Bureau of Labor Statistics. For example, the Pennsylvania unemployment rate has typically run close to the national average, with the Pittsburgh and Philadelphia metros usually a bit lower than rural counties.

The Pennsylvania minimum wage is tied to the federal floor of $7.25 per hour. There has been ongoing debate about raising it, and many large employers in the state already pay well above that level on their own.

Taxes in Pennsylvania

Pennsylvania has a flat state income tax, meaning everyone pays the same percentage on income regardless of how much they earn. The flat rate is one of the lowest of any state with an income tax. Some cities — Philadelphia in particular — also charge a separate local wage tax on top.

The state sales tax rate is 6%, with Philadelphia adding 2% and Allegheny County (Pittsburgh) adding 1%. Pennsylvania notably does not tax most clothing or groceries, which is unusual.

State tax forms and rules live at the Pennsylvania Department of Revenue. You can read more about how sales tax works in our glossary.

Cost of living

Cost of living in Pennsylvania is roughly average overall, but it varies a lot. Center City Philadelphia and the Main Line suburbs are well above average; Pittsburgh sits a bit below the national average; and rural central and northern Pennsylvania are among the most affordable parts of the Northeast.

The federal government tracks region-specific Consumer Price Index data through the BLS Mid-Atlantic region, and HUD publishes Fair Market Rents for every county at HUD User.

Energy and the Marcellus Shale

Natural gas drilling in the Marcellus Shale changed the Pennsylvania economy. The state went from a modest gas producer to the second-largest in the country in just over a decade. That growth created jobs in drilling, pipelines, and petrochemicals, especially in the southwestern and northeastern parts of the state. It also created political and environmental debates that are still being worked out. Federal energy data is published by the U.S. Energy Information Administration.

How does the Pennsylvania economy fit into the national picture?

Pennsylvania is unusually balanced. It is not as tech-heavy as Massachusetts, not as energy-heavy as Texas, and not as finance-heavy as New York. That balance makes the state's economy more stable in downturns but also slower-growing in booms. Population has been roughly flat for years, with growth in the southeast offsetting declines in some older industrial counties.

A note on the numbers

Numbers in this article change every quarter — always check the latest from BEA, BLS, and the Pennsylvania Department of Revenue for the most current data.