PA Saw Less Job Growth, Shrinking Labor Force in 2013

With Pennsylvania's December jobs report out today, we are able to draw a few conclusions about job growth in 2013 — and the news is mostly not good. Monthly job growth continued to decelerate across the commonwealth last year, and while the unemployment rate dropped by more than a percentage point from January to December, much of that is linked to a shrinking labor force rather than booming job growth.

Month to month, Pennsylvania's unemployment rate fell from 7.3% in November to 6.9% in December, while nonfarm payrolls fell by 11,400 jobs, according to the Pennsylvania Department of Labor and Industry report.

Since it is a new year, let’s begin with the usual disclaimers about interpreting job numbers:

  • Use caution in interpreting one month moves in any statistic.
  • You will get a better sense of the condition of the labor market by looking for patterns over 3, 6, and 12 months of data.
  • How big or small a one-month change is in any statistic is less important than the trend in that statistic over the previous 12 months.
  • Today’s numbers for December 2013 are not the final word on job growth in 2013. A process called benchmarking will revise job growth using data from the Quarterly Census of Employment and Wages. Those revised job numbers will be out in March.

Now onto the substance. Here are the three most important takeaways from today's job numbers:

1. The pace of monthly job growth in Pennsylvania continued to decelerate in 2013. To quickly get back to an unemployment rate that is low enough to feed wage and income growth for middle-income families, we need average monthly job growth in the range of 7,000 jobs. As you can see in the chart below, Pennsylvania job growth has fallen farther and farther short of that metric since 2011.

2. The labor force in Pennsylvania after growing sharply in 2012 was down by 110,000 from January 2013 to December 2013. In 2012, it was frequently suggested that the rising labor force indicated optimism about the health of the Pennsylvania economy. As I argued at the time, the growth in the labor force was not sustainable given the slow growth of employment. Indeed, as we have seen in 2013, the labor force is now falling sharply as job growth has continued to disappoint.

3. On the surface, the best news from 2013 was the decline in the unemployment rate in Pennsylvania from 8.2% in January 2013 to 6.9% in December. When you look deeper, the primary driver of this drop in unemployment is the shrinking labor force, not growing employment.

The bottom line: Pennsylvania's economy continues to add jobs but at a slower pace than we need to see a drop in unemployment that is more than declining participation in the labor force. And as long as job growth remains weak, most families in Pennsylvania will see very little in the way of growth in their take home pay.


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