Despite all the new pipelines to export natural gas, all of Philly’s many new start-up spaces and high-rise towers, and all the new warehouses in former factory regions upstate, Pennsylvania’s population is shrinking, writes Mark Vitner, chief economist at Wells Fargo & Co., the dominant bank in Philadelphia and many other U.S. metro areas.

The state’s population of 13 million fell last year for the first time since 1985, Vitner noted in a report to clients last week, citing U.S. Labor Department estimates. (Deaths and move-outs outnumbered births, immigration, and other move-ins by nearly 8,000. Among the states, only Connecticut, West Virginia, and Illinois lost more people.)

Philadelphia, which has fallen to sixth-largest among U.S. cities, added fewer than 3,000 residents, “which is disheartening,” given young people’s “renewed interest in urban living” that has boosted downtown populations across the United States, adds Vitner. About 78 smaller U.S. cities attracted more new residents than Philadelphia. The city’s suburbs also grew just slightly. Pittsburgh, the state’s second city, continues to shrink.

What’s wrong? Look first at what’s right: Philadelphia’s constellations of colleges, medical schools, and pharma and medical-related businesses “are a huge positive,”  while start-up company support programs (such as those at University City Science Center) and corporate tech programs such as Comcast’s MachineQ Internet of Things platform are also drawing skilled professionals to town, Vitner notes.

The area remains a bargain for college-educated professionals earning national-scale salaries: Philadelphia’s lower rents eat up just 28 percent of the typical paycheck here, versus 35 percent to 45 percent in New York, Boston, or the big Western U.S. tech centers. And single-family home prices in the Philadelphia region averaged $249,000 vs. $475,000 in the New York area.

There was still job growth here, in some sectors. More than 7 of every 10 jobs added in the state last year were in education and health. There was also growth, but a “marked deceleration,” in other professional and business-service fields, including tech and management.

Most of those jobs, Vitner notes, require college training.

Among categories popular with the non-college-educated majority: Jobs in manufacturing and retail fell. Small job gains were posted in hotels and restaurants, construction, warehousing, and trucking. The warehouse jobs “tend to pay much less than the typical manufacturing job” in many of the same counties. And many of the new warehouse jobs (at Amazon and Walmart, for example) “are seasonal or part time.”

Once you get away from Philadelphia and other metro centers, “the urban-rural divide in Pennsylvania is one of the most brazen in the nation,” Vitner adds. “Personal income per capita is now $13,000 higher in Pennsylvania’s metro areas than in its rural counties,” one of the biggest urban/rural splits in the nation.

The divide might help explain a point that investment manager James Meyer of Tower Bridge Advisors noted in his July 5 report to clients: While many employers complain that they can’t find skilled or entry-level workers, average U.S. wages are still rising only slowly.

Meyer expects that will affect Federal Reserve policy: Instead of more rate increases in the second half of this year, he expects the Fed to concentrate mostly for now on shrinking its “bloated” multitrillion-dollar balance sheet of mortgage-backed securities left from its efforts to restart the economy after the financial crisis of 2008. (The Fed confirmed Wednesday it plans to speed up shrinking its balance sheet.)

Investors don’t seem worried: Stock prices are back at record levels. Meyer credits President Trump, in part: By stalling Obama-era environmental protections and business regulations, Trump has already “lowered some costs and increased optimism.”

Yet U.S. stock prices have been rising faster than U.S. corporate earnings, Meyer warned. Over time, stock prices “hinge on earnings and interest rates, not tweets or Washington tumult.” So he’s worried the big tech stocks leading the market have lately risen “too far, too fast.” And he “would not be surprised” if Alphabet-Google, Apple, Facebook, and even Amazon lose close to half their value, at least for a time, as tech stocks did in the early 2000s.

What to own if Big Tech is headed lower? Maybe banks, suggests Frederick Cannon, in a report to clients of financial-companies investment bank Keefe Bruyette & Woods. He compares what’s happening now with that big pre-2001 tech-stock boom — high-growth software stocks rose through the late 1990s, then tumbled; after that, high-dividend financial stocks rose — until the 2008 blow-up wrecked the party.

Are banks any better a value now?  Raymond James analyst David J. Long notes banks continue boosting loans to midsized businesses. He sees this as a sign that “growth will accelerate in the second half of the year, particularly if Congress can provide some conviction” that tax cuts, or infrastructure spending, or some other Washington plan, will “stimulate the economy,” as Trump has promised.

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