Pennsylvania’s modest employment growth in 2015 trailed that of most other states, says economist at Cleveland Fed’s Pittsburgh branch

Employment in Pennsylvania grew 0.7 percent in 2015, less than half the 1.9 percent employment growth posted nationally and a marked deceleration from the state’s 2014 employment growth of 1.2 percent. The commonwealth’s exposure to the oil and gas industry as well as demographic trends are likely driving the state’s modest employment gains, says Guhan Venkatu, vice president and senior regional officer at the Pittsburgh branch of the Federal Reserve Bank of Cleveland.

“Given Pennsylvania’s status as one of the largest producers of energy in the country, it’s perhaps not surprising that the recent downturn in energy markets has had an outsized impact on the state,” says Venkatu.

According to the US Department of Energy, Pennsylvania was the second-largest producer of natural gas in 2014, behind Texas. The state also ranked fourth in coal production in 2013. According to Venkatu, the mining industry, which includes activities related to the extraction of both coal and natural gas, experienced an employment decline in Pennsylvania of nearly 11 percent in 2015, after growing about 4 percent in 2014.

“All of the seven states that saw their total employment decline in 2015 are major energy producers,” notes Venkatu. He says that the major energy-producing states that avoided employment declines in 2015—Pennsylvania, Texas, Colorado, and New Mexico—did so, in part, because of their more diversified economies.

Demographics are also impacting Pennsylvania’s employment growth. “If local labor resources are close to fully employed (Pennsylvania’s unemployment rate was 4.8 percent in December, similar to the US unemployment rate of 5.0 percent), then employment growth will come largely from new entrants to the labor market, and employment growth will roughly parallel population growth,” says Venkatu. “From 2000 to 2010, population growth was much faster for the South and West (14.3 percent and 13.8 percent, respectively) than for the Midwest (3.9 percent) and Northeast (3.2 percent).”

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The Federal Reserve Bank of Cleveland is one of 12 regional Reserve Banks that along with the Board of Governors in Washington DC comprise the Federal Reserve System. Part of the US central bank, the Cleveland Fed participates in the formulation of our nation’s monetary policy, supervises banking organizations, provides payment and other services to financial institutions and to the US Treasury, and performs many activities that support Federal Reserve operations System-wide. In addition, the Bank supports the well-being of communities across the Fourth Federal Reserve District through a wide array of research, outreach, and educational activities.

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