TCB March 2026
The 27% Problem: What Happens When One Sector Props Up an Entire City
By Jeff Hornstein, PhD, Executive Director
Economy League of Greater Philadelphia
Philadelphia’s economy has a paradox at its core: our greatest source of stability is also a growing source of vulnerability.
Here’s the statistic that should focus every conversation about the city’s future. Roughly 27% of Philadelphia employment is in health care and social assistance, compared with 16% nationally. That concentration has insulated us from a national slowdown in job creation. It is also a warning light on the dashboard.
A city economy “that’s bending, not breaking” but also not balanced
At the Federal Reserve Bank of Philadelphia and the Chamber of Commerce for Greater Philadelphia, the theme for 2026 was described as waiting for clarity. Businesses report modest gains and real hesitation at the same time. Twenty two percent of surveyed firms said activity increased in 2025, while 48% reported a decline in regional business conditions. Nearly 58% cited regulatory uncertainty as a top concern.
Meanwhile, costs are still rising. Fifty six percent of respondents reported higher prices in 2025 and 63% expect prices to rise again in 2026. This is what bending, not breaking looks like in real life: growth that exists, but does not feel secure and does not feel evenly distributed across sectors or neighborhoods.
The 27% is not the problem. Over reliance is.
Let’s be clear: health care is one of Philadelphia’s proudest strengths. It provides family sustaining careers, draws global talent, anchors research, and especially in uncertain times keeps paychecks flowing. It is also enormous. Economy League industry analysis shows health care as the city’s largest target sector, with more than 140,000 jobs and an average salary around $70,000.
But the 27% problem emerges when we confuse resilience with self-sufficiency.
Because the same sources that celebrate our insulation also highlight something we should find alarming. Nearly 95% of net private job creation in 2025 occurred in a single sector, health care and social assistance. That is not a diversified engine. That is a one cylinder economy working overtime.
If retail corridors struggle, if hospitality stays uneven, if small businesses cannot get financing, cannot hire reliably, cannot predict costs, and cannot count on consistent foot traffic, then the city’s economy becomes a story of two Philadelphians: one where institutions grow, and one where neighborhood commerce and entry level opportunity thin out.
And that matters, because the sectors that lag – retail, hospitality, main street services, small business – are where many residents get their first job, where immigrants start firms, where local wealth circulates, and where neighborhoods feel alive.
The real risk: an economy that cannot translate strength into opportunity
A healthcare-heavy economy can still produce inclusive growth but only if we build the connective tissue between eds and meds and everything else: suppliers, startups, training pipelines, commercial corridors, and locally owned firms.
Without that connective tissue, we get a brittle kind of resilience. The city stays afloat, but too many households feel stuck. And when too many people feel stuck, our most important economic inputs, talent attraction, retention, and entrepreneurial energy, erode.
I wrote recently that regions are in a literal fight for people, and that talent strategy is economic strategy. That is not rhetoric, it is math. If Philadelphia’s non health care sectors feel like they are waiting for clarity year after year, we lose momentum to peer regions that make it easier to start, hire, build, and scale.
What to do about the 27% problem: build a portfolio economy
The solution is not to shrink health care. The solution is to grow everything around it deliberately.
The encouraging news is that regional leaders are already pointing to the right next frontiers: business to business technology, advanced manufacturing, and life sciences are consistently cited as sectors with significant growth opportunity. That is not a slogan, it is a strategy for diversification.
But turning opportunity sectors into real job growth requires execution. Here are four practical moves, non-ideological, measurable, and achievable, that can help Philadelphia become less dependent on one sector and more competitive overall.
Center small business expansion and streamline growth pathways
Philadelphia lags nationally in terms of small business growth and density. While many place the blame on our anomalous tax structure, our local business income and receipts tax, that is only part of the story; we are also slow to permit, approve, pay, and provide access to capital. The Parker Administration has made some promising moves to help local businesses thrive, notably the creation of and investment in the Office of Business Innovation and Economic Advancement, as well as in initiatives like Supply PHL, a public-private partnership between the City, the Economy League, the Urban League, and The Enterprise Center that helps small local firms navigate complex institutional supply chains. But reforming public procurement systems and processes must become a priority if we are serious about advancing small business growth and density. This is where waiting for clarity must become building clarity. If uncertainty is a top concern for employers, then predictability is a growth tool.
Convert health care dominance into a citywide supply chain advantage
When 27% of employment sits in one sector, procurement becomes leverage. Hospitals and health systems buy an astonishing range of goods and services: construction, food, laundry, security, IT, logistics, professional services.
We should be asking how much of that spending can be captured by Philadelphia based firms, especially minority owned and neighborhood-based businesses. Not through performative commitments, but through supplier readiness programs, faster payment, bid packaging, and transparent targets. That is how an anchor sector becomes a platform sector. The Economy League’s flagship initiative, Philadelphia Anchors for Growth & Equity (PAGE), has been working to increase access to the supply chains of large private institutions to help small, diverse local firms create sustainable growth pathways. While PAGE has had real impact leveraging eds-and-meds supply chains, there are still huge opportunity spaces in the corporate economy.
Use AI adoption to raise productivity without hollowing out opportunity
More than three quarters of surveyed organizations report using AI in some capacity, with many using generative AI. Most say it has not reduced their need for workers yet. That is the window, a moment when AI is still primarily augmenting work rather than replacing it.
Philadelphia should aim to lead in AI for small business. Tools that cut back office costs, improve marketing, optimize inventory, speed up customer service, and reduce the overhead that kills young firms. If we democratize productivity, we widen the base of viable businesses.
Build a workforce system that matches the economy we say we want
If we want advanced manufacturing and business to business technology growth, we need training aligned to those sectors, credential pathways that work for adults, and supports that recognize the real barriers to work, health constraints, caregiving responsibilities, and transportation reliability.
That is not charity. That is labor force strategy.
The bottom line
Philadelphia is fortunate. Health care provides ballast when other metros wobble. But we should not confuse ballast with lift.
A city where one sector accounts for 27% of employment can be stable, yes. But it can also become narrowly resilient, protected from some shocks while exposed to others, especially if the rest of the economy stays hesitant, fragmented, and undercapitalized.
Our task is to build a portfolio economy. One where health care remains a strength, and where growth in technology, manufacturing, life sciences, hospitality, retail corridors, and small business creates the redundancy and dynamism that thriving cities require.
Because a city cannot be carried forever by one sector, no matter how strong that sector is. The goal is not to fear our strengths. The goal is to multiply them.
Jeff Hornstein, PhD
Executive Director
Economy League of Greater Philadelphia
The Economy League of Greater Philadelphia is a nonpartisan nonprofit organization that conducts research and facilitates collaborative action on the region’s most pressing economic challenges.