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Public Employment Job Losses a Drag on Economy

A blog post from Christopher Lilienthal, originally published on Third and State.

Add this to the list of reasons that the economic recovery is limping along. Our friends at the Center on Budget and Policy Priorities explain:

July’s employment report included more bad news from states and localities:  job losses are continuing. Since August 2008, state and local governments have slashed 611,000 positions, and the cuts have been getting worse — 340,000 of those jobs were lost in the last 12 months. July was the ninth consecutive month, and the 29th out of the last 35, in which total state and local employment shrank.

Three Years of State and Local Job Losses

And we haven't seen the last of the public sector job cuts. As the Center notes, many states have enacted new state budgets that make deep spending cuts sure to reduce public employment that much more.

So where are we seeing the most cuts? Cities, counties and other local governments, along with local school districts, account for the lion's share:

  • Local school districts have cut 229,000 positions.
  • Cities, counties, and other local governments have cut 237,000 positions.
  • State governments have cut 145,000 positions.

The Standard and Poor's Downgrade

A blog post from Mark Price, originally published on Third and State.

The economic news of the past two weeks has been decidedly grim.

On July 29, new data confirmed that the economy in the first half of 2011 grew much more slowly than necessary to bring down the unemployment rate.

A few days later, the bizarre debt-ceiling fight was resolved with agreement to cut nominal federal spending over the next two years. Economic forecasts prior to this deal put the U.S. unemployment rate at 8% at the end of 2012. Cuts to federal spending mean higher unemployment forecasts are on the way.

By the way, this morning the forecasters at Goldman Sachs increased their unemployment forecast for the end of 2012 to 9.25% — and that assumes Congress will agree to extend the current payroll tax credit before January.

Unless you are living off the grid, you couldn’t have escaped news that last week was brutal for the Stock Market. Then late in the day Friday, credit rating agency Standard and Poor's — after correcting a $2 trillion math error — decided to go ahead and downgrade the full faith and credit of the U.S. taxpayer from AAA to AA+.

Tax Flight Is a Myth, Report Finds

A blog post from Christopher Lilienthal, originally published on Third and State.

We’ve heard it before. If you increase state taxes, people will up and leave for lower tax states — especially the most affluent residents. You often hear the same argument used to support tax cuts.

A compelling new report from the Center on Budget and Policy Priorities busts this common myth advanced by those who oppose a balanced approach to budgeting and tax policy. Turns out Americans move from state to state for a variety of reasons, but tax levels rarely factor in.

Not surprisingly, cheaper housing and job opportunities are much more likely to drive people to move to another state than tax levels.

As the report finds, the effects of tax increases on migration are, at most, small — so small that states raising income taxes on the most affluent households can be assured of a substantial net gain in revenue.

The report cites numerous examples of research debunking the migration myth and, through case studies, shows how misinformation about the impact of taxes on migration can influence policymakers and the media. Those who support the migration myth often wrongly assume a cause-and-effect relationship, promote irrelevant findings, and inaccurately measure migration, the report found.

On the flip side, low taxes can prevent states from maintaining the kinds of public services that create jobs and build a strong economy — the very things that potential residents value.

Marcellus Shale, Unemployment and Industrial Diversity

A blog post from Mark Price, originally published on Third and State.

Capitolwire has a recent story (paywall) about the impact of the Marcellus Shale on Pennsylvania's unemployment rate. There is no question that oil and gas extraction is creating jobs in Pennsylvania and thus helping reduce unemployment. But it remains an open question precisely how big the impact is given how small employment in that sector is relative to an economy that employs 5.8 million people.

Table 1 below lists the 25 counties that experienced an increase in the number of Marcellus wells drilled between 2009 and 2010. For each county, I also report the change in the number of unemployed workers in that same period as well as the change in employment overall and within key sectors of the economy. It is clear from this data that the biggest impact of Marcellus activity is being felt in Bradford, Tioga, Lycoming and Susquehanna counties.

Listed in Table 2 is the share of employment that Natural Resources and Mining, Construction and Manufacturing represent of total nonfarm employment in these same 25 counties. On average in 2010, Natural Resources and Mining represented 3% of total employment in these counties, construction 4% and manufacturing 16%. Manufacturing in most of these counties is far and away the most important sector.

More Americans Drawing Income from Unemployment, Social Security

A blog post from Emma Lowenberg, originally published on Third and State.

The fact that the economy is still struggling is not news to anyone. The national unemployment rate has increased steadily since February. Now, at 9.2%, it is not too far from its peak of 9.9% in December 2009.

Nationally, the personal income of 20% of Americans comes from the government through programs like Social Security and unemployment benefits, according to a report in The New York Times. The percentage is even higher in the economically worst-off states – like Florida, Michigan, Ohio, and Arizona.

Those who depend on this assistance are running out of luck, though, and so is the economy at large. Extended jobless benefits are set to expire at the end of the year, leaving nearly 7.5 million unemployed Americans without an important lifeline and risking greater damage to an all too fragile recovery. The still tentative agreement in Washington, D.C. to raise the debt limit appears to rule out any additional extensions of unemployment insurance for workers in 2012.

The ratio of job growth to job seekers remains dismally low. In Arizona, for example, there are 10 job seekers for every job opening. According to economist Mark Zandi of Moody’s Analytics, the amount of transfer dollars being paid out has increased by 35% since 2007.

State Cuts to Education, Health Care Will Slow Recovery

A blog post from Christopher Lilienthal, originally published on Third and State.

We have written about the negative impact that deep cuts to state funding will have for Pennsylvania children, seniors and our economy. Now a new report from the Center on Budget and Policy Priorities shows that we aren't alone.

At least 38 of the 47 states with new 2011-12 budgets are cutting K-12 education, higher education, health care, or other key public services, according to the report. As Policy Analyst Erica Williams writes at the Center's Off the Charts Blog:

While states continue to face rising numbers of children enrolled in public schools, students enrolled in universities, and seniors eligible for health and long-term care services, most states (37 of 44 states for which data are available) plan to spend less on services in 2012 than they spent in 2008, adjusted for inflation — in some cases, much less.

State lawmakers no doubt faced tough decisions this year, with revenues still far below pre-recession levels and emergency federal aid all but expired. Still, our review shows that the cuts are unnecessarily harmful, unbalanced, and counterproductive.

Pennsylvania is among that group spending less in 2012 than in 2008 (adjusted for inflation):

More Analysis of Pa.'s June Jobs Report

A blog post from Mark Price, originally published on Third and State.

As I said last week, Pennsylvania's June jobs report raises several concerns about the fragile economic recovery. It was the second month in a row of job losses, with total nonfarm employment dropping by 2,600 jobs.

Taking into account June’s poor performance, the Commonwealth has added an average of just over 2,600 jobs a month in the second quarter. That’s down from the 9,700 jobs per month the Commonwealth added in the first quarter of this year. The Keystone Research Center has a full analysis here.

State level payroll and unemployment numbers should always be viewed with some caution as monthly volatility can obscure trends. But it is clear that weakness in the national economy in the second quarter slowed job growth in Pennsylvania.

While the economy is still growing and adding jobs, the slower pace of job growth is quite troubling given that the labor market in Pennsylvania remains more than 240,000 jobs short of full employment.

Employment in Pennsylvania remains more than 240,000 jobs below full employment

The Middle Class ‘Under Attack’

A blog post from Mark Price, originally published on Third and State.

At the Keystone Research Center, we have been chronicling for years the forces that are putting a tighter and tighter squeeze on middle-class Pennsylvanians.

Last week, we released a new report in partnership with the national policy center Demos that takes the temperature of the state's middle class in the wake of the Great Recession. I'm sorry to say, once again, the patient is not well.

The state's annual unemployment rate is the highest it has been in nearly three decades and the cost of going to college is on the rise.

According to the report, times are particularly tough for Pennsylvania's young people, with state budget cuts to 18% of public university funding and a 7.5% tuition hike in Pennsylvania's State System of Higher Education. Pennsylvania's young people already bear the seventh highest rate of student debt in the nation — at approximately $28,000 on average.

Pennsylvania's June Jobs Report More Cause for Concern

A blog post from Mark Price, originally published on Third and State.

Pennsylvania’s unemployment rate rose to 7.6% in June from 7.4% in May, according to a report Thursday from the state Department of Labor and Industry. Overall, the seasonally adjusted number of nonfarm jobs in Pennsylvania was down 2,600 in June to 5,676,900.

I issued the following statement on the new jobs report:

"The June jobs report continues to raise concerns that Pennsylvania, like the rest of the nation, has hit a bump in the road to economic recovery.

"This is a disappointing report across the board, with the labor force dropping, employment falling and the unemployment rate rising slightly. While the economy is still growing, that growth has been slower than expected and has translated into much less job creation than we need at a time of high unemployment.

"One of the few bright spots was the addition of 2,000 jobs in the manufacturing sector. In a recent survey, the Philadelphia Federal Reserve Board found some modest growth in manufacturing payrolls. Hopefully, that will translate into more job gains in this crucial sector.

"If we don't see stronger job growth in the fall, we can expect pressure to build for another round of intervention by national policy makers in the Federal Reserve and in Congress."

State Spending Cuts Kill Private Sector Jobs

A blog post from Mark Price, originally published on Third and State.

Recent debates about the impact of state taxes and spending have taken place in a “fact-free” zone, where anti-tax advocates urgently warn that “taxes kill jobs” without offering any evidence that this is true.

Thanks to recent analysis by economist Adam Hersh at the Center for American Progress, we now have some fresh data on the health of the economy in states that cut their budgets in recent years compared to those that increased spending.

The verdict: Those states that made steep public spending cuts in the wake of the Great Recession have seen weaker economic growth in the years since. Budget-cutting states have experienced rising unemployment, fewer new private sector jobs and weaker economic growth than the states that increased spending.

While this analysis does not tell us whether the spending cuts caused the negative economic outcomes, it is clear that steep spending cuts are correlated with markedly worse economic performance.

This could all be very bad news for Pennsylvania, where lawmakers and Governor Corbett recently enacted a 2011-12 state budget with deep cuts to education, health care and human services. Overall, the budget cuts spending by an inflation-adjusted rate of 4%, as the Keystone Research Center notes in a new policy brief interpreting the Center for American Progress data.

Study Shows Medicaid Has Positive Health, Financial Impacts

A blog post from Emma Lowenberg, originally published on Third and State.

This just in: providing the poor with medical insurance has a positive impact!

This isn’t news, exactly, but the argument for insuring low-income people has gotten a big boost from a groundbreaking new study in Oregon. This is good news for advocates of affordable health insurance, especially at a time when many are fighting state efforts to trim health care services for the poor.

As The New York Times reports, the study became possible because of an unusual situation in Oregon:

In 2008, the state wanted to expand its Medicaid program to include more uninsured people but could afford to add only 10,000 to its rolls. Yet nearly 90,000 applied. Oregon decided to select the 10,000 by lottery.

Economists were electrified. Here was their chance to compare those who got insurance with those who were randomly assigned to go without it. No one had ever done anything like that before, in part because it would be considered unethical to devise a study that would explicitly deny some people coverage while giving it to others.

But this situation was perfect for assessing the impact of Medicaid, said Katherine Baicker, professor of health economics at the Harvard School of Public Health. Dr. Baicker and Amy Finkelstein, professor of economics at M.I.T., are the principal investigators for the study.

Legislative Inaction on Drilling Tax Costs Pa. $200 Million

A blog post from Christopher Lilienthal, originally published on Third and State.

This afternoon, Pennsylvania will hit a less-than-noble milestone: $200 million lost to legislative inaction on a Marcellus Shale drilling tax.

We're talking about lost revenue that could have helped prevent cuts to schools, colleges, environmental protection and health services for the state’s most vulnerable.

The Pennsylvania Budget and Policy Center is tracking in real-time how much drilling tax revenue has been lost since October 1, 2009 by not having a tax in place. The ticker will hit $200 million by mid-afternoon on Friday.


Click here if you have trouble viewing the Ticker.

A Detailed Look at Pennsylvania's 2011-12 Budget

A blog post from Sharon Ward, originally published on Third and State.

Two weeks ago, the Pennsylvania General Assembly completed work on a 2011-12 state budget that achieved Governor Tom Corbett’s primary objective — to meet a target spending number of $27.3 billion or lower, regardless of the impact.

The budget spends $27.249 billion, the lowest amount since the 2008-09 enacted budget, with cuts totaling more than $960 million.

Still trying to piece it all together? Well, the Pennsylvania Budget and Policy Center has you covered. On Wednesday, we released a detailed analysis of the new budget. Check it out and get all the details.

Here are a few highlights:

Your Job or Your Hours

A blog post from Chaquenya Johnson, originally published on Third and State.

When the economy is hit by a sudden drop in demand, employers typically react by cutting employment or hours of work — sometimes both.

In a recent paper, John Schmitt of the Center for Economic and Policy Research reviews the experiences of Denmark and Germany in the Great Recession and finds that, while both countries experienced a comparable decline in their economies, the outcomes for employment were very different.

German employers absorbed the decline in demand entirely with reductions in employee hours of work. As a result, unemployment actually fell over the course of the Great Recession, even as Germany’s Gross Domestic Product (GDP) declined.

The German approach is partly attributable to negotiations with unions; union coverage in Germany is 63%. But German employers also took this path because of a program called “short work,” a version of what we know in the U.S. as Shared Work.

Under these programs, an employer facing a decline in demand can cut hours of work rather than jobs. Employees who take a pay cut because they are working fewer hours have their pay supplemented with unemployment insurance benefits.

Employers get the benefit of having workers available when demand returns, which saves them training and hiring costs. Workers get unemployment benefits, while keeping their job and their skills and maintaining ties to the workforce.

In Denmark, employers reacted to the Great Recession in much the same way as they have in the U.S.: they cut mostly jobs.

Third and State Recap: Marcellus Jobs, Pa.'s Budget, Paid Sick Days & a Misleading Health Care Study

Over the past two weeks, we blogged at Third and State about Pennsylvania's state budget, Marcellus Shale job creation, paid sick days legislation in Philadelphia, and a thorough debunking of a misleading study on the Affordable Care Act.

IN CASE YOU MISSED IT

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