PA Workers Not Likely To Feel Effect Of Recession's End For Many Months, Keystone Research Center Reports

New Study Predicts Unemployment Will Persist

Harrisburg, February 4 -- The U.S. unemployment rate won't begin to fall significantly until the economy is growing by at least 3 percent annually, according to a new study by the Economic Policy Institute (EPI).

The U.S. economy grew at an annual rate of only 0.2 percent in the final quarter of 2001.

"The EPI finding suggests that unemployed workers in Pennsylvania won't feel the effects of any recovery for many months," according to Stephen Herzenberg, an economist who heads the Harrisburg-based Keystone Research Center. "In fact, we may see unemployment continue to grow through 2003 if the anticipated recovery is sluggish," he says.

The EPI report maintains that "estimates of a spring recovery (positive GDP growth) are quite consistent with unemployment rising to 6.5% by late 2002" nationwide.

Herzenberg says the EPI study underscores the importance of Pennsylvania's upcoming budget debate. "With unemployment likely to keep rising, but state revenues down, the choices that the General Assembly makes in this year's budget will be difficult but pivotally important. Lawmakers should keep three priorities in mind as they consider this year's budget: helping families hurt by a softer economy, spending money in ways that will help boost our recovery, but not neglecting our long-term infrastructure, environment, and educational needs."

Pennsylvania's unemployment rate hasn't grown as much as many other states after 9/11, but certain trends merit close attention, he says. The number of workers in Pennsylvania who have exhausted their unemployment insurance benefits has risen sharply over the last year.

According to a recent report from the Center on Budget and Policy Priorities (CBPP), there was a 63 percent rise in the number of Pennsylvania workers exhausting unemployment insurance between December 2000 and December 2001.

"If this disturbing trend continues, there are a lot of workers and families who are going to be in need of a lot more help in coming months -- even if the economy begins to recover," says Herzenberg. "This is a hard fact that the legislature can't and should not ignore."

The EPI report gives two reasons why the economy must grow at 3 percent to prevent unemployment from rising. First, the labor force grows by about 1 percent a year. Second, productivity growth allows the economy to expand without adding employment.

The EPI study, "It Ain't Over Till It's Really Over," is available online at: www.epinet.org.

The CBPP study, "Number of Workers Exhausting Unemployment Insurance Benefits Sets Record Level for a December" is available online at: www.cbpp.org/1-30-02ui.htm.

The Keystone Research Center is the leading source of independent analysis of Pennsylvania's economy and public policy. News and Research from KRC is available at www.keystoneresearch.org.

Contact
David Bradley 717-255-7158
dbradley@keystoneresearch.org