PA Sees Unemployment Drop, but Fewer People Looking for Work

By Eric Boehm | PA Independent

HARRISBURG — Beneath an optimistic top line, several bothersome facts lurk inside Pennsylvania’s jobs report for March.

The unemployment rate in the Keystone State fell to 7.9 percent, from 8.1 percent in February. While that reduction leaves the state three ticks above the federal mark of 7.6 percent last month, the more worrying aspects of the report are the decline in people working and those looking for work.

According to the federal Bureau of Labor Statistics, the number of people working in Pennsylvania tumbled by about 14,000 in March, following a drop of 6,000 in February. Those reductions in employment were accompanied by a 33,000 reduction in the state’s labor force — the measure of people working or actively seeking work — during March.

The decline in the labor force effectively disguised the drop in employment and gave Pennsylvania a two-notch reduction in the unemployment rate.

Jake Haulk, a former economist with the Federal Reserve who now serves as president of the Allegheny Institute, a free market think tank in Pittsburgh, said Pennsylvania took its share of a national economic slowdown during the first quarter of the year that caused 500,000 Americans to leave the labor force.

“If you look at it right now, there doesn’t appear to be a whole lot of strength in any sector,” Haulk said. “The negative incentives out there are just overwhelming.”

He pointed to the increase in payroll taxes that took effect in January and general uncertainty in the business community about higher taxes that may be necessary to pay for the new federal health care law and the nation’s ballooning debt.

The weakness in Pennsylvania’s economy is of particular interest since the state seemed to avoid the worst of the recession since it began in 2008.

After months of losses, Pennsylvania’s job count bottomed out in February 2010 at 4.8 million.  By a year later, the state had gained 110,000 jobs and Pennsylvania added another 85,000 jobs by February 2012.

The state maintained an unemployment rate better than the national average for that entire period.

But the numbers of have flat-lined in the 13 months since, with private employment growing by a mere 1,000 jobs, according to the March report.

Matt Knittel, director of the Independent Fiscal Office, which plays a number-crunching role similar to the federal Congressional Budget Office, said the slowdown in recovery during February and March follows a pattern that has occurred in each of the past two years.

But he said it is hard to pin-down a single cause for this year’s problems, though he agreed that federal issues like the payroll tax hike and the sequester were more likely to blame than anything at the state level.

He said the federal changes “were like flipping a switch” and were therefore more likely to disrupt a tenuous economic recovery, though job growth should return later in the year.

“We’re cautiously optimistic that once the economy absorbs those hits — and the payroll tax cut was not a small matter — we’re expecting it to pick up later this year,” Knittel said.

Though were not as bad as this year, the first quarters of 2011 and 2012 were also slow in the job growth department.  Knittle attributed those issues to a combination of the financial crisis in Europe and uncertainty in Congress over issues like the raising of the debt ceiling.

In a statement announcing the sobering jobs data for March, Labor and Industry Secretary Julia Hearthway said “Pennsylvania continues to see positive signs for our economy as we cautiously, but steadily, grow out of this recession.”

But Democrats continued to blast the Corbett administration on Monday over the job numbers, while pointing to figures that show Pennsylvania ranked 49th in the nation for job creation during March.  Only Wyoming did worse.

“The whole focus should be how do we get people back working, how do we improve the state’s economy,” said state Sen. Vincent Hughes, D-Philadelphia.

He suggested a temporary suspension of a planned phase-out of one corporate tax as a way to generate more revenue for the state that could be used to invest in job creation programs.

Haulk said Pennsylvania’s policymakers should try to improve the business climate in the state to grow jobs, rather than chasing tax revenue directly.

But anyone trying to pin the job losses on Pennsylvania-specific policies will have to contend with the fact that many other states experienced the same slowdown during the first few months of 2013.

Ohio, Pennsylvania’s neighbor to the west, lost more than 20,000 jobs during March, according to BLS.

Indiana’s employment fell by 12,600 during the month, while Kentucky lost 8,400 jobs. Michigan shed 6,600 jobs and the drop in Illinois was 17,800.

Contact Eric Boehm at Eric@PAIndependent.com and follow @PAIndependent on Twitter for more.