Pittsburgh Area Jobs Data Still Weak

The Department of Labor and Industry has released the preliminary employment data for February 2014 and it does not look good for the region.  For the third consecutive month both total nonfarm and total private employment fell from their year earlier totals.  This comes on the heels of data revisions of 2013’s employer survey that severely reduced the original numbers turning what appeared to be strong monthly year-over-year gains into weak ones lowering both the annual average number of total nonfarm jobs (-13,400) and total private jobs (-14,400) significantly.


Most will cheer the fall in the unemployment rate from a seasonally adjusted 6.3 percent in December 2013 to 6.0 percent in January to 5.8 percent in February.  However, the reason for the decline has more to do with a drop in the labor force than it does people moving into the employed category.  For example, the number of unemployed in February fell 22,900 people from February 2013’s count.  However, the number claiming to be employed only increased 4,000—a negligible amount considering there are more than 1.17 million people employed in the area—while the number in the labor force declined by 18,900.  Thus, more than 80 percent of the reduction in the number unemployed is due to them dropping out of the labor force.  Not a ringing endorsement of the area’s economy.


This weakness is corroborated with the employer survey.  The preliminary count of total nonfarm jobs in February came behind that of a year earlier by more than 5,000 jobs.  Total private also fell short of last year’s total (-2,900).  This continues the trend from December, where the rebenchmarked data showed a decline in the year-over-year total nonfarm jobs (-2,900) and total private jobs (-1,500).  January’s final numbers likewise revealed a year-over-year loss of 3,900 total nonfarm jobs and 3,300 total private jobs.


The sectors posting job losses were spread throughout both the goods producing and service providing super sectors.  In the goods providing super sector the only area of growth is in mining and logging, posting year-over-year gains of a couple of hundred jobs for the last three months.  In fact it hasn’t experienced a year-over-year decline since midway through 2007.  Keep in mind that this sector, a beneficiary of the Marcellus Shale drilling boom, only accounts for a small percentage of the area’s job market—less than one percent of total nonfarm jobs.  Both the construction and manufacturing sectors have had slides over the last three months with manufacturing’s streak stretching back to August 2013.


Perhaps the biggest surprise happened in the private service providing super sector—specifically in the education and health sector.  Long an area of growth for the Pittsburgh region, the preliminary February data show no growth from the year earlier totals.  This sector has seen its year-over-year job numbers decline for the entirety of 2013 and into January 2014.  And if the final February data are revised downward—a distinct possibility—the losses will have extended to fourteen straight months.


For the first two months of 2014 the sector with the most growth has been leisure and hospitality with year-over-year increases of more than 1,000 in each month.  This growth extends back through all of 2013 as well.  Oddly enough the largest subsector, accommodation and food services, has not been the source of growth as they have been experiencing large year-over-year decreases.  This subsector accounts for about 80 percent of the leisure and hospitality sector with arts, recreation, and entertainment comprising the other 20 percent.  The latter must be the source of this growth, but with so little data at the regional level, it’s difficult to say where the jobs truly are.


All-in-all the February jobs report shows a continued softness in the Pittsburgh area labor market.  This is showing up in both the household data, despite the falling unemployment rate, and the employer survey with falling total nonfarm and private jobs numbers.  The Pittsburgh area may be a victim of a malaise in the national and state economies, but there are some things that leaders can do to help boost these numbers.   That entails making the business climate more inviting through lower tax rates and fewer regulations that tie the entrepreneurial spirit.

Pittsburgh Area Job Gains Good—But a Mystery

Over the last twelve months-July 2012 to July 2013 (the latest available figures)-private sector employment in the Pittsburgh seven county metro area climbed by 18,700 jobs, a gain of nearly 2 percent. While slower than the 3 percent annual growth registered during the fall of last year, Pittsburgh regional employment improvement far outpaced the sluggish pace recorded in the Commonwealth.  That means much of the state was experiencing very slow growth, and in the case of the City of Philadelphia, an actual decline.


Although the solid increase in employment in Southwest Pennsylvania is somewhat remarkable in the face of statewide weakness and is good news for the region, there is something of a mystery about what is driving the job gains. In the broad categories, gains in financial activities, professional and technical services and leisure and hospitality accounted for 16,000 net new jobs over the last twelve months. Note that both wholesale trade and retail trade along with private colleges posted lower employment figures. Health care and specialty construction enjoyed significant gains as well.


But back to the mystery.  Within the financial activities grouping, finance and insurance firms that represented 57,800 of the jobs in this group posted a measured and reported employment rise of 1,600 over the last twelve months. The business categories other than finance and insurance within the broad financial activities group include real estate rental and property management agencies, and firms renting other assets such as cars, equipment and consumer items. Thus, of the 4,300 total job increase in the financial activities sector, 2,700 were accounted for by the smaller financial activities sector components that, taken together, had total employment of just 14,500 a year ago. That means these businesses had an employment jump of almost 20 percent. 


This is not to argue that the spectacular growth did not happen but it would be reassuring to know which of the smaller sectors enjoyed such massive gains.  Otherwise there is a fear that benchmarking changes next year will find the originally reported numbers were too high.


A similar pattern exists in leisure and hospitality. Of the 5,700 employment rise over the last twelve months 1,700 net new jobs were added in accommodations and food services. Note that accommodation and food services accounted for 92,800 of the leisure and hospitality category in July of 2012, 80 percent of all leisure and hospitality employment.  Thus, the arts, entertainment  and recreation components-the other categories within leisure and hospitality-with combined employment of 24,300 in July 2012 accounted for 4,000 of the leisure and hospitality gain of 5,700. The arts, entertainment and recreation jobs increase amounts to 16.4 percent annual growth. 


Again, this not to say the jobs are not really there. It could be earlier measurements were too low and we are now getting more accurate readings. But it would be nice to know which firms or sub-sectors were adding jobs at such a tremendous rate. It would also be nice to know whether the job growth reflects the weekly hours worked reduction phenomenon brought about the Obamacare provisions whereby firms hire more people but at reduced hours in order to get the work done.  Such behavior could go a long way to explain what is happening. Time will tell.


Finally, professional and technical services employment continued its far above average growth by recording a rise of 6,100 jobs over the last twelve months-an 8 percent jump.  Unfortunately, the Labor Department reports jobs numbers for only two sub-sectors-architecture and engineering along with scientific research and development services. Together these two categories accounted for only 900 of the total professional and technical services sector gain of 6,100. So, here we are again wondering where the job strength is coming from.  The professional and technical services sector covers a wide variety of services including legal, accounting, advertising, computer services, design, consulting, photography, and veterinary services and others.


Since this vast array of services produced 5,200 net new jobs (almost 30 percent of all the net increase in private sector employment) over the last twelve months it would be very helpful to have some idea where the strength lies.  Is it broad based or are there sub-sectors showing tremendous growth? Are there federal, state or local policies boosting the robust growth and is it sustainable?  If so, that would be very useful to know.


In total, some 12,000 of the 18,700 private sector job gain over the last twelve months occurred in categories that are not individually measured leaving us to scratch our heads trying to figure out where those jobs actually are and why the growth is so rapid.

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.

Comparing Pittsburgh Metro Job Gains with National Performance

In June, the seven county Pittsburgh metro area (MSA) unemployment rate stood at 6.8 percent. In the same month, the national rate was 7.6 percent. So, does that mean the Pittsburgh area jobs market was significantly better than the national? 


The unemployment rate is derived from information obtained in a survey of households wherein each month a sample of people are asked to self-report their employment and labor force participation.  As a result, this survey does not tell us a great deal about what industries are adding or cutting jobs. Moreover, the survey tells us little about the quality or wages associated with jobs.


Fortunately, there is also a survey of establishments that hire and pay employees from which we learn a lot more about where the jobs are, the hours worked and the pay rates.  All of which are vital in assessing the state of the economy in terms of income and output growth.


Returning to the question of how the region is faring compared to the nation, this analysis looks at the regional and national payroll employment changes by important sectors over the last twelve months (June 2012 to June 2013) to ascertain whether there are significant differences in the jobs performance. The analysis focuses on the private sector on the premise that all real prosperity in the U.S. is measured by private sector activity; after all, unless there are producers and taxpayers, the government sector will have no real resources to spend.


Total private employment nationally rose by 2.1 percent from June 2012 to June 2013. Meanwhile, private jobs in the Pittsburgh MSA climbed by 1.6 percent. And, over the last three years the national job growth was 6.2 percent and the region’s gain was 5.8 percent.  Interestingly, while the national gains for both the three year period and the one year period are slightly above the Pittsburgh area increases, the national employment total remains 1.5 million below the peak level reached in 2007. On the other hand, Pittsburgh metro area jobs, while growing slightly slower, have climbed well above (31,000) the pre-recession peak set in 2008.


Bear in mind that from 2003 to 2007, the nation added 7.2 million private jobs, a rise of 6.6 percent.  Employment in the Pittsburgh MSA-during the same four years-expanded by only 2 percent.  For the decade, employment gains for the country and region were virtually the same in percentage terms.  The explanation? The nation suffered an enormous 7.1 percent employment drop during the recession while Southwest Pennsylvania experienced a much smaller 2.5 percent decline thanks to the absence of a housing and construction boom and a very favorable mix of recession resistant sectors.


Focusing on industry growth over the last year, a few similarities and differences stand out. Manufacturing, for example, has managed small gains of less than a percent nationally and locally. Likewise, the leisure and hospitality sector, a major source of job strength in both the region and the country, had almost identical employment gains of around 3.3 percent.  Health care gains were reasonably close at 2.9 percent in the region and 2 percent nationally.


Sectors exhibiting very different growth rates include professional and technical services, construction, retail trade, finance, mining, and private education.


The U.S. jobs gain in construction was much stronger than the region, rising 3 percent while the Pittsburgh area had a small decline. This undoubtedly reflects to some extent a rebound from the almost 30 percent loss in construction employment the nation felt in the recession. The Pittsburgh loss was far lower at 13 percent.


A similar pattern was seen in retail trade. Nationally, jobs managed a pickup of 2.1 percent over the past year, in sharp contrast to the region’s slide of nearly 2 percent.  Indeed, the area’s retail jobs in June 2013 remained almost 9 percent lower than ten years earlier. In contrast, U.S. retail jobs are above the ten year ago level although still not completely recovered from the recession induced losses.


Private education jobs nationally increased by just under one percent in the last year. Pittsburgh area employment tumbled by 4 percent after a smaller but significant drop the year before.


Obviously, since the region’s private job growth was in the ballpark with the national gain, not all local sectors could have had slower rises than the country as a whole. Most prominent among the sectors rising fastest in the region is the industry called professional and technical services, a sector encompassing engineering, accounting, management consulting, scientific research, architecture, public relations, computer systems design, marketing and legal services. Unfortunately, for the Pittsburgh MSA, data is collected for only a few of the sub-sectors in this category so that we cannot say with certainty what is driving the gains.


The good news is that over the last year the MSA has seen a major jump of 8.2 percent (6,100 jobs) in the professional and technical category. That means this fairly small sector-it represents only 7 percent of all employment-has generated a third of all net gains. And interestingly, this sector has added more jobs than health care over the last year even though it’s only one third its size in terms of employees on the payrolls. This is a category that bears watching in the future and more research into what is driving it. A reasonable speculation would be that there is considerable outsourcing from other industries. Another would be that the Marcellus Shale gas drilling activity has produced significant demand for scientific and engineering assistance.


Financial services jobs have fared better in Pittsburgh as well, moving up 4.3 percent over the past year.  Nationally, the uptick was far more modest at only 1.4 percent.  And, countrywide, financial services employment remains well below the 2003 level and a half million under 2007. They were hit very hard by the financial crisis and are having trouble recovering. On the other hand, Pittsburgh MSA financials jobs have moved well above ten year ago levels and are contributing a significant fraction of the net job region’s gains.  


Finally, it is noteworthy that mining and logging jobs climbed 10 percent in the past year compared to just 2 percent nationally. This undoubtedly reflects the impact of Marcellus Shale on the area. While the MSA mining jobs growth rate is impressive, it must be remembered that the employment base is small so that 10 percent is only 1,000 jobs. Still the overall impact of Marcellus on the area’s employment and income are quite substantial and are a boon to the MSA’s economy. 


In sum, the local and national economies are performing somewhat similarly overall in terms of private employment gains. But in light of the depth of the national recession and the expectation of some rebound, the job growth for the country over the past three years and last year must be considered extraordinarily slow. And it is a great disappoint in light of the employment increase over the years leading up to the recession. Pittsburgh MSA employment expansion since the recession has been strong relative to its pre-recession pattern and in all likelihood reflects some structural industry shift. Whether that shift will continue to add impetus as we have seen in the last three years remains to be seen. 

Eds and Meds Back as Pennsylvania’s Biggest Job Creator

Pennsylvania’s June employment report sounded an old theme: almost three quarters of net new jobs are accounted for the education and health services sector. Leisure and hospitality also continues its stronger than average growth while good producing industries slipped from May to June. The Professional and Business Service component was also weak in June, after some fairly robust gains.

To say the least it is never a good sign when one sector hogs the growth in jobs. It is not clear how long the strength can continue in light of the medical insurance issues looming nationally. Far better to have some gains in manufacturing, construction and mining as well as broader gains in the service sector.

Still, some job gains are better than none. But there is no gainsaying the worrisome aspects of a jobs picture that is so imbalanced.

The national employment situation is far from solid and Pennsylvania’s policymakers have failed to make the kinds of strategic changes that would energize the state’s economic forces.

Conflicting News in May PA Employment Report

As often happens, the latest employment situation report for Pennsylvania is a tour de force of opposing signals about the market. The household survey that estimates the number of people who say they are working and the establishment survey that reports the numbers of workers on payrolls could not be more at odds.

The household survey claims 24,000 additional people joined the ranks of self-reported employment in May compared to April, while the establishment survey found a drop of 9,200 workers on payrolls. Moreover, since May of 2012, the household survey shows a twelve month rise of 68,000 people who say they are working while the establishment survey shows a mere 4,700 increase.

The Pennsylvania household survey results mirror the recent national numbers to a large extent. For example, the twelve month gain in Pennsylvania employed was 1.1 percent, exactly the same as the national increase. April to May jumps in labor force in the state and nation were also very close in percentage terms.

Meanwhile, the figures from the establishment survey are quite bleak. The report shows data for ten private industry sectors. Pennsylvania employment in six sectors fell between April and May, two were basically unchanged and only two posted meaningful, albeit small gains-Education and Health and the "Other" services sector.

What to make of this disparate behavior? One explanation offered by some analysts is that many people have decided to become self-employed and are captured by the household survey while being missed by the establishment survey. That has some plausibility. There is anecdotal evidence that underground economic activity has increased during the long period of economic sluggishness. People working "off the books", growth in numbers and size of "flea markets" where new goods are sold, and cash transactions would account here. After all, with millions of illegal immigrants, many of whom are employed, what are odds that a big portion of that activity is not measured by the government’s normal methods?

There is also a question of accuracy of the surveys. The measurement problems inherent in household surveys and its self- reporting that are not as easily verified as are the establishment reports. On any case, there will be major benchmarking update at some point that will likely bring the surveys into closer alignment for a while.

Beer Distributors Plead for Continuing Their Special Privilege

When someone’s ox is about to be gored, that person can be expected to protest loudly. Certainly spokespersons for Pennsylvania’s beer distributors, who have a virtual monopoly on retail sales, were in full throated condemnation of legislation that would strip them of that monopoly. Claims that thousands of people would lose their jobs were front in center of the argument-the typical, predictable assertion of almost everyone opposed to any action that promises to eliminate a government created monopoly.

Bottom line: jobs supported by monopoly power granted by the government that are over and above what the free market provision of a good or service would create must be the result of transferring income from consumers to the monopoly providers that is above what a market provided good or service would be. In other words, if the number of full time equivalent employees involved in retailing beer in the current "distributor" regime is higher than will be needed in a free market regime, their income represents an unnecessary transfer of income from consumers. Income that could be used to purchases other goods and services and create other jobs. And it is a virtual certainty that the non-money value of convenience for retail consumers who will be able to buy beer while shopping for groceries or for convenience store items will be enormous. Not to mention the time and gasoline saved not having to make a special trip to a "distributor" store.

Finally, the claim that consumers will have fewer choices of product is laughable. A visit to a major super market chain store in states where beer is sold in grocery stores will reveal a mind numbing array of beers, ales, and other low alcohol beverages available in six packs, quart bottles, in single bottle sales and so on. The variety and choice argument is another indication of just how deeply ingrained the anti-free market mentality has become in Pennsylvania, even among people who are engaged in business activities.

A Glimpse into Pennsylvania’s Economic Thinking

The debate over privatization of Pennsylvania’s liquor stores has uncovered a very sad and costly lack of understanding of economics and a very strong attachment to union doctrine.

No statement has been more revealing than the comment by a Turtle Creek resident who said she was opposed to privatization because it would eliminate jobs. First of all, private liquor stores will need employees. How will shelves get stocked or sales rung up or bookkeeping and accounting done without employees? Thus, the resident’s comments show either a complete lack of understanding of how business works or belief that if a job is not held by a union employee it does not count. Either way, the opinion of this person reflects the thinking of a large portion of Pennsylvanians. And that thinking remains one of the biggest obstacles to strong job growth in the Commonwealth.

Ironically, the comment came in a report on polling results that found Pennsylvanians view the economy and jobs as very important while the privatization of liquor stores by comparison was only moderately important. Ironic because of the difficulty in creating a pro-growth environment in a state where a huge fraction of voters are still in thrall to the idea that unions create good jobs and where the government has been a hand maiden to union entrenchment in the economy and delivery of public services.

Sometimes a short response to a reporter’s question encapsulates a boat load of information about an issue. The Turtle Creek commenter has done just that.

PA Labor Market Develops Signs of Weakness

March’s employment news for the Commonwealth was quite unwelcome. Both the household survey and the establishment payroll survey brought signs of marked weakness in employment.



People reporting themselves as working fell by 14,000 in March after a 6,200 decline in February and a slight 1,000 drop in January. In short, the entire first quarter exhibited a pattern of steady weakening in the number of people working.  Meanwhile, private payroll employment at establishments fell by 6,500 in March, sliding below the January level and up by a mere 1,000 compared to a March 2012. Indeed, private payroll jobs are still 40,000 below the March 2008 number, the high watermark for a March job count, and just before the effects of the national recession pummeled the state’s labor market.


Misguidedly, the headline about the labor market situation was the unemployment rate dip from 8.1 percent in February to 7.9 percent in March. But in light of the fact that the number of people working tumbled by 14,000, it is reasonable to ask; how could the unemployment rate fall?  It fell because the labor force plunged by 33,000. That is to say, an additional 33,000 people in the non-institutional population old enough to work chose not to seek work. While this is a startling number it does mirror the massive half million decline in the nation’s labor force in March. As a result of the 33,000 plunge in the number of people not looking for work, the number of unemployed went down 19,000, mathematically lowering the percentage unemployed.  In sum, the apparent good news of an unemployment rate decline hid the bad news of a significant drop in the number working along with a substantial decrease in the labor force.


Why the recent Pennsylvania weakness?  Based on the national employment situation in March, there has been a similar abrupt slowing countrywide.   Apparently, the state has not been able to sidestep the impacts of the forces restraining the national economy-Obamacare effects, the tax hike in January and the regulatory onslaught coming from the DC governing apparatus.   


Looking back over the three years of the recovery so far, what was the pattern of job gains and what have been the sources of strength-and recent weakness?


From January 2003 to January 2008, private sector employment rose at an average annual rate of 0.8 percent to reach 5,074,400 jobs. Nationally, private employment climbed at a 1.2 percent annual rate over the same period with several states enjoying well above national rates of job gains.  With the steep national recession hitting in 2008, Pennsylvania employment fell to a low of 4,810,100 jobs in February 2010 before starting to rebound. Over the next twelve months, the job count had risen by 110,000, reaching 4,919,000 in February 2011. Between February 2011 and February 2012 jobs grew by 85,000 bringing the two year increase since the recovery began in March 2010 to 195,000. Unfortunately, the solid gain between February 2011 and 2012 marked the end of the good employment growth period. As noted above, from March 2012 to March 2013, private employment managed a statistically insignificant uptick of only 1,000 jobs.


The question that arises is: Which sectors accounted for the two years of fairly good gains and which have led the slowdown? 


Surprisingly to some perhaps, the professional and business services sector posted the largest pickup in employment from March 2010 to March 2012 registering a gain of 51,200. But for those who follow the data closely it is not a surprise. Over the period 2003 to 2008, this sector actually grew more jobs than the larger and rapidly growing health sector. Rebounding from the recession it recovered all lost employment and added to the pre-recession peak level. Over the past year (March 2012 to March 2013), the sector managed another 3,900 increase-a far cry from the year earlier pace but still a positive contribution to the Commonwealth’s employment count. 


Health care and social assistance, the largest individual private sector in terms of employment, supplied 31,200 of the 195,000 total net gain in private employment over the first two years of expansion and was the second largest contributor to the rise. The good news is this sector appears to be recession proof and added another 13,000 jobs over the March 2012 to March 2013 period continuing its decade long upward trend.


Close behind health care in job growth, the leisure and hospitality sector (led by accommodations and food service) added 31,100 to payrolls over the first two year period of recovery and rebound from the recession. That strength has not continued, however, as jobs slipped a bit over the last twelve months. 


The remainder of the 80 thousand or so increase in private employment from 2010 to 2102 was spread over several sectors each of which experienced gains between 10 thousand and 17 thousand. This list includes construction (+17,000), mining and logging (+14,300), transportation and utilities (+13,000), retail (+10,000), education (+8,700) and manufacturing (+10,100).   


Of these sectors that contributed to the burst of solid overall employment gains from 2010 to 2012, only transportation and utilities managed to eke out a modest gain over the last year. Many sectors including mining and logging, construction, retail, finance, leisure and hospitality and the information sector saw employment levels decline during the last twelve months. These declines largely offset the rise in health, professional and business services and transportation and utilities resulting in the slim 1,000 uptick in total private jobs.


In short, employment growth at the major job drivers has slowed dramatically while the slower growing sectors have stopped expanding or even slipped into negative territory. This is not a healthy position for the Commonwealth. Unfortunately, there is little the state can do in the short run to boost employment expansion. The weakness in Pennsylvania stems principally from national policies that are restraining the economy.  Policies that deter investment and punish savings, budget deficits that threaten the national fisc together with continuous calls for higher taxes and reams of new regulations daily are having a smothering effect on the economy. Pennsylvania has been fortunate to have had the substantial boost from Marcellus Shell gas operations but that by itself is not enough to overcome the dead weight of the anchor Washington has attached to the economy.

Pennsylvania’s Meager February Job Gains

Pennsylvania saw its month to month payroll job count stall in February with a mere 600 net gain from January. What’s more, the year over change since January of 2012 was a paltry 0.3 percent. In something of a twist, widespread losses across a number of service sectors led to a drop in private service employment while goods producing jobs led by manufacturing rose just enough to offset the services job losses.

Interestingly, the Professional and Business Services category continued to show strong gains statewide similar to the pattern in the Pittsburgh MSA. From January to February the sector accounted for over half of the growth of the service sectors managing an increase at 3,600 jobs. And over the past year the Professional and Business Services component posted a net job increase of 11,900, accounting for over 70 percent of the growth in nonfarm employment. Moreover, with the 6,300 loss of government jobs, private sector employment rose 22,800 of which over half are attributable to this category.

Three areas of weakness have arisen that were previously producing rapid employment growth rates. In February, private Education and Health Services saw a decline of 5,200 jobs from January and have slowed to a growth rate of less than one percent compared to February of 2012. Similarly, the once near boom- like employment gains in Leisure and Hospitality have been replaced by losses. In February, the sector experienced a drop of 4,000 jobs from January and was down 5,600 jobs from 12 months earlier. Lastly, Mining and Logging jobs were unchanged in February for the January level and have fallen by 1,100 since February of 2012.

Thus, it appears that for the time being at least the state is witnessing a shift in economic leadership from Eds and Meds, Leisure and Hospitality and Mining to the professional and business services component. What this might portend is not clear but it is dramatic nonetheless. One must expect that the very fast gains in the sector cannot be sustained for long unless there is a return to faster growth in other major economic sectors.