A Mixed Bag for Pennsylvania's January Jobs Report

A few minutes before 5 p.m. on Friday, the Corbett administration released new data on the state's employment situation in January. The picture that emerged from the data was mixed.

On the one hand, the unemployment rate climbed by three-tenths of a percentage point to 8.2%, while the number of unemployed climbed by 18,000. On the other hand, nonfarm payrolls had a better month than typical with payrolls over the month climbing by 5,200 jobs. 

In 2010, nonfarm payrolls grew, on average, by just under 7,000 jobs a month; in 2011, that figured fell almost in half to 3,800 jobs a month; and in 2012, it fell again to 2,900 jobs a month. So, with growth of 5,200 jobs, January was better than average for the past two years. It is estimated that Pennsylvania needs average monthly job growth of 11,000 jobs a month to get back to full employment in three years. 

Returning to the household survey, unemployment in Pennsylvania started to climb in March of last year, as employment growth (as measured in that survey) slowed, while the labor force continued to grow. January was an extreme version of this pattern, with the household survey registering zero employment growth as the labor force grew, thus driving the number of unemployed up by 18,000. The increase of 18,000 in unemployment was the largest monthly increase in state unemployment since April 2009 when the economy was officially in recession.

After remaining about a percentage point below the national unemployment rate during the recession, Pennsylvania's recent climb in unemployment has eliminated what advantage the commonwealth had over the nation as a whole.

Employment growth would have most likely been stronger and the economy better able to absorb the increase in the labor force had national and state policymakers taken steps to grow rather than shrink the economy.

In Pennsylvania in particular, policymakers held back at least a half a billion in spending, refused to tax Marcellus Shale drillers at a rate competitive with neighboring states, and lowered corporate tax bills. While these policies were pitched as a boon to employment growth, Pennsylvania’s job performance has actually deteriorated.

State policymakers chose a path that required deep cuts in education spending and extended delays in badly needed investments in roads and bridges. Taken together, these policies mean the unemployment rate is higher than it should be in Pennsylvania and total employment farther away from full employment than it would otherwise be.

Another way to see the failure of this policy is by examining the time people remain unemployed. Reflecting a more mild recession, the percentage of people unemployed for more than six months was at 33% in the 4th quarter of 2011, which compared favorably to 44% in the rest of the country. However, as employment growth has slowed, the addition of 44,000 new people looking for work since March has led to an increase in long-term unemployment in the commonwealth. In the 4th quarter of 2012, 39% of the unemployed in Pennsylvania had been out of work for six months or more. Although still below the national figure of 41%, it is a troubling indicator to see on the rise in Pennsylvania.

 

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