Pennsylvania’s Private Sector Job Growth Sluggish and Unbalanced

Pennsylvania’s Private Sector Job Growth Sluggish and Unbalanced

July’s report on Pennsylvania’s establishment payroll employment reveals an overall slowing growth trend and a very unbalanced situation regarding job gains. 



Consider that total private jobs rose by 82,600 from July 2010 to July 2011; 57,200 over the next twelve months, and only 36,800 from July 2012 to July 2013.  It is noteworthy that private total jobs remain 30,000 below the peak levels reached in 2008.  It is also important to remember that the growth in the 2010 to 2011 period reflected some rebound from the recession losses so that weakening in subsequent years is not overly surprising. But just as in the nation as a whole, post-recession job gains in Pennsylvania are anemic, especially over the last twelve months.  Nationally, private jobs remain 1.5 million below the 2008 peak.


But perhaps more concerning than the slow pace of gains is the limited number of sectors adding jobs. Of the 36,800 increases in jobs over the last twelve months,  four industry groups account for the entire rise; namely, education and health care, leisure and hospitality, professional and technical service and finance.  Meanwhile, goods producing sectors were all flat or down slightly, information was lower, transportation and utilities slipped, retail and wholesale jobs were lower.


Amazingly, employment in accommodations and foodservices that represents eight percent of all jobs accounted for a third of the total private employment increase with education and health care combined with professional and technical accounting for most of the rest.  


Somewhat surprising, employment in mining and logging slipped in the last twelve months and has grown very little since the big jump from 2010 to 2011.  Construction and manufacturing remain flat following modest rebounds in 2010.  On a positive note, finance and private education showed renewed strength over the last twelve months after period of stunted gains in previous years. Then too, the solid growth in professional and technical employment is somewhat reassuring, although the limited data detail does not permit a clear picture of which particular subsectors are propelling the gains. This sector covers a very wide range of services including legal, accounting, public relations, scientific, consulting, architecture and engineering.  It is likely, although not yet provable, that the advent of Marcellus Shale activity has produced a substantial share of the employment increases in the professional and technical sector in Pennsylvania.  


Overall, the relative weakness in recent total job gains, especially when private sector employment remains well below the five year earlier level, is bothersome. And compounding the consternation is the limited sources of job growth. Health care continues to be a stalwart and has accounted for a third of net private job gains for the last three years. This sector is driven in part by massive increases in federal program spending as Medicaid and Medicare demands rise exponentially.  It is not clear what will happen to health care job growth after the Affordable Care Act is fully implemented.  But it seems reasonable to conclude that strong gains will continue at least initially.


At the same time, large gains in the foodservices component that account for an outsized share of private  employment growth  are hardly reassuring since those jobs are typically low wage and increasingly involve shorter hours with no benefits. This is just one of the easily predictable and actual undesirable consequences of the Affordable Care Act.


While some of the recent job growth weakness in the Commonwealth can be laid at the feet of the policies emanating from Harrisburg, as was the state’s below national average growth in the preceding decades, it is clear that much of the fears, concerns and wariness in the business community that hinders expansion and hiring stems from exceptionally disturbing national economic, regulatory, fiscal, monetary and tax policies.  Sadly, the potential for major changes in those policies seem far off.


In the meantime, Pennsylvania needs to address more forcefully its own business inhibiting policies and regulatory environment.  The list is familiar.  Enact a right to work law, get rid of prevailing wage requirement on public projects, lower business taxes and enact substantial and meaningful reform of state and teacher pensions.  Getting Pennsylvania into the 20th century regarding property assessment laws would be very helpful. Getting rid of the right of teachers and public transit workers to strike would also move Pennsylvania closer to the rest of the country.  Assuming some normalcy will eventually return to D.C., Pennsylvania needs to  have more than Marcellus Shale gas going for it if it is to achieve a path of broad based prosperity.