June Jobs Report: Job Market Remains Weak

Authors: 
Mark Price
Publication Date: 
July 25, 2011

Policy Brief: June 2011 Jobs Report

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Overview

Total nonfarm employment in Pennsylvania fell in June by 2,600 jobs, according to a new report from the Pennsylvania Department of Labor and Industry.  This is the second month in a row of negative job growth.  State level payroll and unemployment numbers should always be viewed with some caution as monthly volatility can obscure trends.

Taking into account June’s poor performance, the Commonwealth has added an average of just over 2,600 jobs a month in the second quarter.  That’s down from the 9,700 jobs per month the Commonwealth added in the first quarter of this year.  It is clear that weakness in the national economy in the second quarter slowed job growth in Pennsylvania.  While the economy is still growing and adding jobs, the slower pace of job growth is quite troubling given that the labor market in Pennsylvania remains more than 240,000 jobs short of full employment.

Employment in Pennsylvania remains more than 240,000 jobs below full employment

Employment Change by Industry

One of the few bright spots in this month’s report was the addition of 2,000 jobs in the manufacturing sector.  In a recent survey, the Philadelphia Federal Reserve Board found some modest growth in manufacturing payrolls.[1]  Hopefully, that will translate into more job gains in this crucial sector.  There was also a large gain in public employment in this month’s report, but that gain is likely driven by technical issues in data collection rather than real increases in public-sector employment.

Because industry specific jobs data are particularly volatile on a month-to-month basis, trends are easier to spot over three- and six-month periods.  Table 2 reports the change in Pennsylvania employment, by major sector, in the last three months and in the last six months.  The weakest sectors in terms of employment growth in the last six months have been Construction, Financial Activities, Other Services[2] and Government.  Education and health services, which were relatively strong through the recession and even in the last year, have shed jobs in the last two job reports.  By volume, manufacturing, trade, transportation and utilities, and leisure and hospitality have generated the most new jobs in Pennsylvania.

Table 1: Change in Employment in the Last Three and Last Six Months by Major Sector

How Does Job Growth in Pennsylvania Compare to Surrounding States?

Despite Thursday’s dismal numbers, Pennsylvania has had much healthier job growth than most states since the Great Recession ended in June 2009.  In the last two years, Pennsylvania saw the fourth highest rate of job growth out of 50 states by volume and 10th highest in percentage terms (Table 2).  Pennsylvania’s economy, as a result, has produced a greater percentage of jobs than neighboring states.

Table 2: June 2009 to June 2011 Seasonally Adjusted Employment

Increases in the Number and Percentage of Unemployed

The household survey, which measures unemployment, showed a slight increase in the number and percentage of people unemployed.  At 7.6% in June, Pennsylvania’s unemployment rate remains just over a percentage point lower than it was last year and well below the 9.2% U.S. unemployment rate.  Weakness in the job market is probably also depressing participation in the job market as people who would like work remain on the sidelines.  The civilian labor force declined again in June and is now 140,000 below its peak in November 2008 (the height of the financial crisis).  The Pennsylvania underemployment rate reached 14.4% in the 12-month period ending in March 2011.  While below the U.S. underemployment rate of 16.5%, the state rate still represents one out every seven workers.[3]  (The underemployment rate includes all those who cannot find the amount of work that they want, as a share of the employed plus the unemployed.)

The Jobs Deficit

When the recession began in December 2007, Pennsylvania had 5,809,600 jobs.  As of June, Pennsylvania has 132,700 fewer jobs than it did when the recession began.  This number, however, fails to capture the jobs required to keep pace with growth in the working-age population.

Pennsylvania's 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 240,100.  That number includes the 132,700 jobs Pennsylvania lost plus the 107,400 jobs it needs to keep up with the 1.8% growth in population that has occurred in the 42 months since the recession began.

Slow Growth is a Serious Challenge

The job market nationally and in Pennsylvania slowed substantially in the second quarter of this year.  It is widely hoped that this weakness represents the effects of one-time shocks emanating from the disruption of U.S. supply chains by the earthquake and Tsunami in Japan, as well as the pressure placed on consumers by spikes in fuel prices.  Jobs data in Pennsylvania continue to reflect the lingering effects of the collapse of the U.S. housing bubble as construction, finance and government remain the weakest sectors in terms of employment growth some three years after the start of the recession.  Although Pennsylvania has outperformed much of the country, job losses in the last two months have led to an increase in the jobs deficit.  Hundreds of thousands of workers willing and able to work cannot find sufficient work.


Footnotes

[1] http://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2011/bos0711.pdf

[2] Other services captures employment in equipment and machinery repairing, promoting or administering religious activities, grantmaking, advocacy, and providing drycleaning and laundry services, personal care services, death care services, pet care services, photofinishing services, temporary parking services, and dating services. For more on the composition of this sector, go to http://www.bls.gov/iag/tgs/iag81.htm.

[3] Officially, the underemployment rate is the U-6 measure of the underutilization of labor.  For the data and full description, see http://www.bls.gov/lau/stalt.htm.