PA Job Numbers: 2012 Ends With A Whimper

The Bureau of Labor Statistics today reported that the unemployment rate in Pennsylvania rose slightly in December to 7.9% (up slightly from 7.8% in November). Nonfarm payrolls in Pennsylvania declined in December by 4,800 jobs.

Overall, December's numbers weren't what you would call stellar, but there is no reason to believe that the recovery in Pennsylvania has stopped; we just had a bad month. I would expect unemployment to resume its decline over the next several months and for growth in nonfarm payrolls to pick up as well.

Figure 1, 2 and 3 below present the change in total nonfarm, private and public payrolls in each year since 2002. In each figure, I calculate the change in employment in two ways: first based on the current month of employment (which is December), and second based on the change in the annual average of employment.

These three charts tell what should by now be a familiar story. After substantial job losses concentrated in late 2008 and early 2009, job growth resumed in Pennsylvania in 2010. Job growth was strong early in 2010 but then weakened substantially in 2011 as large scale layoffs mostly in public schools slowed the pace of overall job growth. Private-sector payroll growth weakened further in 2012. Although the number of jobs created in 2012 is smaller than in previous years, the number of jobs added in 2012 is on par with the job gains made from 2004 to 2007.

On the downside, continued growth in the working-age population in Pennsylvania (3.7% since December 2007) means that the jobs deficit, or the difference between the number of jobs Pennsylvania has and the number it needs to regain its pre-recession employment rate, is 277,400. To close this deficit in three years, Pennsylvania would have to add about 11,000 jobs a month. In the past 12 months, Pennsylvania added just over 3,300 jobs a month.

Without stronger job growth, the unemployment rate is going to remain too high, and that will continue to mean the unemployed will take longer to find a new job. High unemployment will also mean that those of you with jobs will face little or no prospect of wage growth in the year ahead.

Figure 4 below indexes unemployment, employment and the labor force in Pennsylvania over the last year to their levels in December 2011. In the first half of 2012, employment was growing faster than the labor force and thus the number of unemployed declined. In the second half of the year, employment growth slowed and drove up the number of unemployed as the labor force continued to grow. I would expect employment growth in 2013 to pick up and help once again drive down the number of unemployed.

As figure 5 illustrates, the ground lost over the summer on unemployment helped drive the unemployment rate back above the national unemployment rate. I can't emphasize enough how harmful it was to Pennsylvania's economy in the short run to absorb so many public-sector layoffs at the start of the last school year (2011-12). Were it not for those layoffs, the employment situation in 2012 would have been substantially better. With most of those layoffs concentrated in schools, the larger worry is the impact these job cuts had on educational outcomes in the commonwealth.

Finally, Table 1 below breaks down the change in total nonfarm payrolls by industry since December of last year. The big gains since last December were a 9% (3,300 jobs) increase in Mining and Logging employment, a 4.5% (13,700 jobs) increase in Professional, Scientific, and Technical Services, and a 3.5% (8,500 jobs) increase in Transportation and Utilities. The biggest losses in employment since last December were a 3.4% (-7,700 jobs) decline in construction employment, a 2.9% (-7,400 jobs) decrease in Educational Services (private education), and a 2.5% (-2,500 jobs) reduction in Federal employment.

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