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Employment Trends in Pennsylvania

Pennsylvania's unemployment rate was 5.7 percent in September. This put the state close to the middle of the distribution of state unemployment rates, ranking 20th, as well as below the US average of 5.9 percent. Additionally, the state has seen its unemployment rate fall fairly sharply in 2014. Among the 50 states, it’s experienced the 8th largest decline (1.1 percentage points, tied with 5 other states) during the year.

Figure 1: Unemployment Rate: US and Pennsylvania
Figure 2: Unemployment Rate Change, December 2013 to September 2014

These data seem like a good indication of conditions in the commonwealth’s labor market, though recent unemployment rate changes have been associated with declines in the labor force.  From December 2013 to September 2014, Pennsylvania’s labor force fell by 76,791 workers, or 1.2 percent. This compares with an increase nationally of about 0.6 percent over the same time span.

Figure 3: Annual Payroll Employment Change, US and Pennsylvania
Figure 4: Payroll Employment, Change Relative to December 2007

One way to understand the significance of these developments is to hold the labor force constant after December 2013, and assume that the roughly 77,000 workers who were in the labor force in December 2013 had not left by September 2014 and had remained unemployed. Doing so would produce an unemployment rate in Pennsylvania of 6.8 percent, entirely eliminating the 1.1 percentage point decline in the official measure since the end of last year.

A survey of establishments by the Labor Department provides another perspective on the state’s labor market.  According to this survey, the state’s employment growth in 2014 is on pace to slightly exceed its employment growth in 2012 and 2013. However, this pace (0.6 percent) is considerably weaker than that for the US (2.0 percent). Indeed, outside of 2010, Pennsylvania’s employment growth (in percentage terms) has consistently lagged behind that of the US throughout the recovery. As a result, Pennsylvania has yet to fully recover the jobs it lost in the Great Recession. The US, by contrast, achieved this milestone in May of this year.

Year-over-year employment growth rates (September 2013 to September 2014) were similar to those noted above—0.6 percent for the commonwealth versus 1.9 percent for the US. Several relatively large sectors, like retail trade, manufacturing, and leisure and hospitality, experienced no employment growth or outright declines over this period in Pennsylvania, even as these sectors saw gains nationally. Other large sectors—like health care and professional and business services—saw employment expand much less in Pennsylvania than in the US. On the other side of the ledger, mining and logging experienced stronger employment growth in the state than in the US.

Figure 5: Pennsylvania Industry Employment Growth, September 2013 - September 2014

Examining Pennsylvania’s two major metro areas (MSAs)—Philadelphia and Pittsburgh—since the onset of the Great Recession can give us a sense of the relative contributions of each to the state’s employment recovery, given that they collectively account for about half of the commonwealth’s population. Using 2010 Census figures, the Pennsylvania counties of the Philadelphia metro area accounted for about 32 percent of the state’s population (4,008,994 residents), while the Pittsburgh metro area accounted for about 19 percent of the state’s population (2,356,285 residents). With respect to employment, the Pittsburgh MSA had largely returned to its late 2007 employment levels by 2012 and has since added to these gains. As of September, it has about 17,000 more jobs than it did in December 2007. The Philadelphia MSA (which includes some areas outside of Pennsylvania), on the other hand, has about 47,300 fewer jobs that it did in December 2007—one of the key reasons why the state remains below its pre-recession employment peak.

Figure 6: Payroll Employment: Pittsburg and Philadelphia Metropolitan Statistical Areas

When compared with the 100 largest American metro areas, Pittsburgh’s cumulative employment gains since the onset of the Great Recession rank it 41st best. It has about 1.5 percent more employment than it did in December 2007. Philadelphia, by contrast, ranks 76th, and as described above, has yet to recover its Great Recession-related employment losses. This is something of a reversal from the previous business cycle. By the end of that episode, Philadelphia had expanded its employment more than 2 percent over its March 2001 levels (when that recession began), while the Pittsburgh area failed to recover to its pre-recession employment levels. Taking these two episodes together, employment levels in Pennsylvania’s two largest MSAs are now almost the same in September 2014 as they were in March 2001—less than half a percentage point higher in both cases.

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