A Harrisburg Rooster Takes Credit For The Sunrise

A recent tweet (see above) from our good friends over at the Commonwealth Foundation highlights that private-sector job growth in 2011 was the strongest in Pennsylvania since 1999 and links that outcome to state tax and spending policy.

The figure below plots the 12-month moving average of private-sector payrolls in Pennsylvania since 1990. What you will notice about the figure is that in the period following a recession (the areas shaded gray*) private-sector payrolls expand. That's what is known in macroeconomics as an expansion; it's been a characteristic of every business cycle on record since 1854. Given where we are in the business cycle, to link private-sector job growth to 2011 state tax and spending policy is like the rooster taking credit for the sunrise.

This, of course, doesn't mean that policymakers can't influence the pace of private-sector job growth, but the role of state policymakers, especially in a single year, is very difficult to identify precisely. However, there are some instances where the impact of policy on total job growth is very simply a matter of counting. 

Total non-farm payrolls grew by 58,800 jobs or 1% from December 2010 to December 2011. If state and local governments hadn't shed 18,500 jobs over that period, employment would have grown by 77,300 or 1.4% during the year. 

State policymakers did not have the means to prevent all of the public-sector job losses that occurred over the last year, but they did choose a policy path that led to more job losses than were necessary. The loss of thousands of teachers and first responders is not something most people are going to be celebrating over the next few years.

* Note: The recession dates on the figure above are precise where there was, as each point on the figure represents, an average of employment over the previous 12 months. So construction payrolls in the figure will only turn down after several months of job loss. This doesn't alter the main point, which is that private payrolls always expand after the end of a recession. A 12-month moving average is used to plot the data because the Bureau of Labor Statistics does not produce seasonally adjusted private non-farm payrolls for Pennsylvania.


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