Signs of Labor Market Weakness in Pennsylvania

Pennsylvania’s unemployment rate held steady in June as a 40,000 drop in employed persons was accompanied by a similar sized decline in the labor force. Thus, the number unemployed but looking for work rose only very slightly. (The unemployment rate is the ratio of unemployed but looking for work divided by the sum of people working and those not working but looking.)

While the steady unemployment rate in June could be viewed asa sign of labor market conditions not getting worse, there are some other indicators that suggest the labor market has not yet stabilized. First, the average manufacturing work week dipped two full hours below the June 2008 level. This means overtime has been virtually eliminated and, combined with the big drop in jobs, it points to very weak worker income in this sector. The 39.1 hour week in June 2009 is the lowest recorded June weekly hours number in at least ten years and is over an hour below the June work weeks during the 2001-2002 recession.

Second, the number of outsourced type jobs, including administrative and support services and employment services, are down sharply from 2007 peak levels. Admin and support jobs are off by 36,000 or more than 10 percent while employment services (temporary help) jobs are off by 28,000 or 28 percent. Although weakness began to emerge between June of 2007 and 2008, the last twelve months have seen shockingly large declines in these groups.

The severe employment weakness in these sectors combined with the big falloff in manufacturing hours-along with employees who are facing mandatory short term leaves and who are losing benefits-all add up to real problems for government tax collections.

There is one sector that has no need to worry however. Public education employment continues to rise, hitting a new decade long high in June as state payrolls rose by 3,000 compared to June 2008 to tie the 2003 mark and local public education nudged upward to its new record high. And with no worries about job loss, there is the added benefit of not having to lose income due to belt tightening. Indeed, for employees with contracts scheduled wage increases will have to be paid.

If ever there was sacred cow this must be it. Whether academic results are good or bad, the money just keeps on rolling in.