Labor Market Performance in Pennsylvania, 2001-2004: 
Pennsylvania Lags Behind the Nation

John Schmitt¹

September 2004
Revised October 2004

From the peak of the last business cycle in March 2001 through the summer of 2004, the national labor market has struggled. Over the same period, the labor market in Pennsylvania has generally performed even worse. Pennsylvania has seen a greater loss in jobs (down 1.4 percent, compared to a 1.1 percent decline nationally) and a higher rise in the loss of "long-tenure" jobs (those held at least three years). The unemployment rate has risen by about equal amounts in the state (up 0.8 percentage points) and the country as a whole (up 1.2 percentage points). Pennsylvania has only outperformed the nation with respect to the employment rate (the share of the working-age population in work). Between 2001 and 2004, the employment rate fell 2.5 percentage points nationally, but only 1.3 percentage points in Pennsylvania.

Four key indicators

Table 1 and Figures 1-4 summarize four key labor-market indicators over the period 2001-2004. Wherever possible, the figures compare data from March 2001 – the peak of the last business cycle as established by the National Bureau of Economic Research  – with the most recent data available (as late as July 2004).

Job creation

Between March 2001 and July 2004, the national economy lost a total of over 1.4 million jobs (see Table 1 and Figure 1), or about 1.1 percent of employment at the height of the last business cycle. Over the same period, Pennsylvania lost more than 81,000 jobs, or 1.4 percent of all jobs in the state as of March 2001.

Unemployment

Between March 2001 and July 2004, the national unemployment rate increased 1.2 percentage points, to 5.5 percent (see Table 1 and Figure 2). Over the same period, the unemployment rate in Pennsylvania increased 0.8 percentage points, to 5.3 percent, or about 334,000 Pennsylvanians.

Employment rates

The current economic recovery has been unusual in that the unemployment rate has not fully captured the weakness in the labor market. The period of sustained employment growth and low unemployment rates from about 1996 through 2000 led many individuals to enter the workforce for the first time or after long absences from work. As the economy faltered and employment fell in 2001, many of these workers seem to have withdrawn from the labor force altogether, and have not appeared in official unemployment statistics. In the current economy, data on employment rates – the share of the working-age population in jobs – help to complete the picture presented by the unemployment rate.

Panel (c) of Table 1 and Figure 3 present employment rates for Pennsylvania and the national economy. Between the first four months of 2001 and the first four months of 2004 (the latest comparable data available), employment rates in Pennsylvania fell 1.3 percentage points from 75.1 to 73.8 percent. Nationally, employment rates fell 2.5 percentage points from 75.4 to 73.0 percent (the slight discrepancy is due to rounding error).

Displacement rates

Every two years, the Bureau of Labor Statistics (BLS) tracks "displacement" from long-tenure jobs (those held at least three years). The BLS counts a worker as displaced if he or she lost a long-tenure job due to a plant closing or insufficient demand, or because his or her position or shift was abolished (without the expectation of a recall within six months). Job displacement from long-tenure jobs captures a particular kind of job loss that is likely to have more negative consequences for workers than other kinds of job separation. By definition, displaced workers have involuntarily lost a long-term job through no fault of their own.

The last panel of Table 1 and Figure 4 summarize data from the two most recent BLS surveys of displaced workers. The first, conducted in January 2002, covered job displacement over the period 1999-2001; the second, conducted in January 2004, covered the period 2001-2003. Nationally, displacement increased noticeably (0.9 percentage point) between the two surveys. In Pennsylvania, however, the rise in displacement was even larger (up 1.2 percentage points). By 2004, almost one-in-twenty (4.6 percent) of workers in Pennsylvania had been displaced from a long-term job sometime between 2001 and 2003.

Probably the most important reason for the large increase in displacement rates in Pennsylvania in the high concentration of manufacturing jobs in the state. Over the last decade, manufacturing has had high and rising rates of displacement, relative to the rest of the economy (see John Schmitt, "The Rise in Job Displacement, 1991-2004: The Crisis in American Manufacturing," Center for Economic and Policy Research Briefing Paper, August 2004).

References

Schmitt, John. 2004. "Job Displacement Over the Business Cycle, 1991-2001," Center for Economic and Policy Research Briefing Paper (http://www.cepr.net).

Schmitt, John. 2004. "The Rise in Job Displacement, 1991-2004: The Crisis in American Manufacturing," Center for Economic and Policy Research Briefing Paper (http://www.cepr.net).

Tables and Figures

                Source: BLS, Current Employment Statistics. See Table 1.

                Source: BLS, Current Population Survey. See Table 1.

                Source: CEPR extract of Current Population Survey Outgoing Rotation Group.  See Table 1.

            Source: CEPR extract of Current Population Survey Displaced Workers Survey. See Table 

Endnotes

1. John Schmitt is a Senior Research Associate at the Center for Economic and Policy Studies.