May Jobs Report Weak Growth Cause for Concern; Jobs Deficit Persists

Publication Date: 
June 20, 2011

Policy Brief: May 2011 Jobs (PDF)

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Overview

Total nonfarm employment in Pennsylvania fell in May by just over 14,000 jobs, according to a new report from the Pennsylvania Department of Labor and Industry.  This is an abrupt reversal from March when the state added 23,000 jobs and highlights that monthly state-level payroll data are volatile and should be viewed with some caution.

Taking into account May’s poor performance, the Commonwealth has added an average of just over 7,700 jobs a month since December.  This remains a healthier pace of job growth than in the recovery from the 2001 recession. Still, Pennsylvania is more than 230,000 jobs short of full employment.

Jobs Deficit in May 2011

All but three major sectors — mining and logging, manufacturing and information — lost jobs in May. The public sector shed another 3,100 jobs bringing its total losses since May of last year to 33,100. The public sector is likely to continue to be a drag on job growth for the rest of the year, as budget cuts force more layoffs of state and local employees.

Job growth over the last year in Pennsylvania was the fifth highest out of 50 states by volume and 18th highest in percentage terms (Table 1). Relative to neighboring states, only Ohio had a better job performance over the last 12 months.  

Job Growth In The Last Year

The household survey, which measures unemployment, showed a slight reduction in the unemployment rate to 7.4 percent in May, although that was due in part to 12,000 people dropping out of the labor force last month. The household survey, like the payroll numbers, paints a picture of a state economy that has been improving somewhat over the past year. The unemployment rate has dropped more than a percentage point since May 2010.

Pennsylvania’s poor job performance in May comes on the heels of a disappointing national jobs report for the month. If weakness in the national economy continues, it may continue to bleed over into Pennsylvania.  Although the job market in Pennsylvania continues to outperform those of most states, the possibility of somewhat slower job growth in the months ahead is quite troubling when you consider how far away the job market is from a full recovery.

The Jobs Deficit

When the recession began in December 2007, Pennsylvania had 5,809,600 jobs. Pennsylvania 's employment trough occurred in February, 2010 when Pennsylvania had 242,300 fewer jobs than it did before the recession started.  As of May, Pennsylvania has 130,900 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 235,200. That number includes the 130,900 jobs Pennsylvania lost plus the 104,300 jobs it needs to keep up with the 1.8% growth in population that has occurred in the 41 months since the recession began.

Putting Pennsylvanians Back to Work Should Be Top Priority

Pennsylvania has not recovered from the Great Recession. As elected officials at both the state and federal level make policy choices to deal with budget shortfalls and other challenges, they should take care that their actions do not throw this very tentative recovery into reverse. Putting Pennsylvanians back to work should be a top priority for lawmakers.

Federal policymakers urgently need to take up legislation to raise the debt ceiling in order to avoid destabilizing financial markets, which in recent days have become unsettled by the possibility of the default of the Greek Republic.  Federal policymakers also need to urgently take up policy proposals to further support employment in the broader economy.

State policymakers are now in the final stretches of the state budget process.  Given the potential weakness in the economy and the still high unemployment rate, they should use the state’s revenue surplus and raise additional revenue to avoid making deep budget cuts that will set the economy back.  The public sector in Pennsylvania, which already represents a smaller share of total employment than in most states, has already shed 33,100 since last May. 

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