economy

Pennsylvania Private Job Performance Through the Looking Glass

By Stephen Herzenberg, Third and State

In the 1890s, scientist George Stratton reported that, after four days of wearing a lens that inverted his vision, his brain reprocessed what he saw and flipped everything back up the right way.

John Micek’s Friday article brought this experiment to mind. Micek quotes Pennsylvania House Speaker Sam Smith summing up the accomplishments of the House of Representatives in the 2011-12 legislative session: "We … focused on the economy and private-sector job creation." Majority Leader Mike Turzai echoed Smith saying: "We kept our commitments on fiscal responsibility and private-sector job-creation."

Let’s take a look at some actual job numbers.

Between January 2011 (the start of the current legislative session) and September 2012 (the latest data available), the number of private-sector jobs in Pennsylvania grew by 87,000, an increase of 1.8%. In this period, Pennsylvania ranked 31st out of the 50 states for private job growth by percentage. National private-sector job growth equaled 3%.

If you look at the last 12 months, from September 2011 to September 2012, Pennsylvania’s private-sector job ranking falls to 35th, with the state’s private-sector job growth equal to about half the national rate.

Now, compare that to job growth between January 2010 and January 2011, when the commonwealth ranked 12th among the 50 states with job growth of 1.8% (compared to the national rate of 1.3%).

'How 'bout No, You Crazy Dutch....'

By Mark Price, Third and State

The Only Proper Villian We Could Find From the NetherlandsOn Monday night, the Lower Allen Township commissioners in Cumberland County considered a proposal from Ahold USA, the corporate parent of Giant Food Stores, for a $400,000 property tax abatement on a meat repackaging plant on which the company has already broken ground. (Ahold USA is itself the subsidiary of the Netherlands-based Ahold.)

The company has neglected a basic principle of the economic development game through which companies extract subsidies and tax breaks from states and localities where they were going to build anyway: until you have the subsidy in hand, don't give away that it will not impact your location decision.

But since the company made this error, the title of this blog post, taken from the Austin Powers movie Goldmember, should suffice for the township's answer. (It is pure coincidence that Goldmember, a Dutchman pictured to the right, has a gold G on his velvet sweatsuit.)

Here are two stories on this issue.

The Lower Allen commissioners should continue to say no to Ahold's request because it is a simple giveaway that diverts needed tax revenue from the township. It would be that much costlier if the West Shore School District (which has absorbed $2.2 million in state budget cuts since 2010-11) and Cumberland County (where property taxes for most homeowners and businesses may rise by 22% next year) follow suit.

The repackaging plant will consolidate meat cutting operations for Ahold USA's stores in the mid-Atlantic region. Customers will no longer get their meat freshly cut in the store, instead, the meat cutting and packaging function is being moved to a central location with easy access to the interstate. Some meat cutters will lose their jobs in the process, while others might be offered jobs at the new facility, at a lower wage.

For its $400,000, Lower Allen Township is being promised between 450 and 800 jobs; there is no word on how many jobs will be lost at Giant Food Stores in the region or at the company's Maryland division.   

Normally, a corporate giant like Ahold will approach government officials to inform them they are on the short list for a new facility being planned. Just look at how the Shell Corporation enticed incentive offers from Ohio and West Virginia before securing the mother lode of all incentives from Pennsylvania (a $1.67 billion, 25-year tax break).

Unfortunately for Ahold USA, the company has already broken ground on the meat repackaging plant. So the township commissioners made the right move by putting the request on hold. Why divert scarce tax dollars to a profitable corporation to do something they are already doing anyway?

While they make good beer in the Netherlands, Ahold corporate honchos could learn a thing or two about economic development blackmail from Dick Yuengling Jr., the owner and president of D.G. Yuengling & Son’s.

Although the company recently expanded distribution in Ohio, making Western Pennsylvania an economically attractive location to expand production, the brewing scion doubts he would build a new brewery in Pennsylvania. Yuengling wasn't specific about what he means by business climate, but it is pretty clear from a Patriot-News interview that he doesn't think Pennsylvania as a rule offers enough taxpayer cash to corporations. (Although, Yuengling says his decision of where to build will not be based on the incentives offered.)

The decision comes down to taxes, incentives and the state’s business climate, Yuengling said. 

In the interview, Yuengling hinted that there are far more business-friendly states. And while he didn’t directly criticize any Pennsylvania administration, past or present, he said he can never be certain which way the state is leaning in terms of its tax and business policies. 

By contrast, he said enticing incentives offered by other states might be too good to pass up. However, he declined to cite any states he might be considering for the brewery... 

“We don’t necessarily base business decisions on incentives like that. But if they are going to give them to somebody, we would stand there and take them.” 

Fact Checking the Corbett Jobs Record...and Some Unsolicited Advice

By Stephen Herzenberg, Third and State

The Corbett administration has a new summary of Pennsylvania's recent job performance. Today's news that Pennsylvania's unemployment rate is as high as the national unemployment rate underscores, however, that the state's recent jobs record is not  good. Let’s take a closer look.

PA vs. U.S.: The Corbett jobs summary notes that Pennsylvania's unemployment rate is below the national rate — and it was when the summary was first released. This was not a new trend: the Pennsylvania rate was a point or a point-and-a-half below the national rate for most of the four years before Governor Corbett took office. A year ago, the gap between the Pennsylvania and U.S. unemployment rate was still statistically significant. (See Table A.) But the gap between the two rates — the "Pennsylvania advantage" — has been shrinking steadily since 2010 until the Pennsylvania rate finally climbed to the U.S. level in August 2012, both equaling 8.1%.

Private-sector Job Growth: While the administration touts private-sector job growth in 2011, the numbers reflect a national trend, rather than a unique Pennsylvania story. 

The U.S. economy has had 30 consecutive months of private-sector job growth. In fact, Pennsylvania's rank for the percent growth in private-sector job growth has fallen from 8th in 2010 to 36th in the 12 months ending in July 2012. One of the reasons that Pennsylvania's private-sector job-growth ranking is down is the deeper cuts in public employment in Pennsylvania compared to other states. Deep cuts to Pennsylvania public schools and colleges led to a loss of 14,000 education jobs alone in 2011.

These layoffs impact the classroom and Main Street too. Unemployed teachers, like unemployed factory workers, don’t have money to spend, which affects the broader economy. 

Manufacturing Job Growth: Manufacturing jobs growth improved in 2011, but again reflects national trends. In fact, Pennsylvania's manufacturing job growth since early 2010 is slightly below half the national increase. (See The State of Working Pennsylvania 2012.) 

New Hires in Marcellus Shale: Not this one again. The administration is touting natural gas industry growth by citing the number of new hires. As we've explained repeatedly, new hires are not new jobs (most new hires replace people who quit or are fired). In fact, the number of new hires is basically a meaningless number. Statewide there were 580,400 new hires during the 2nd quarter in Pennsylvania, while total non-farm employment rose between the 1st and 2nd quarter by less than 300 jobs. In other words, the only reason to cite new hires is to make the job gain seem substantially larger than it really is. 

The gas industry has led to some job growth in Pennsylvania, just not on the scale claimed by the industry. Between the 4th quarter of 2008 and the 4th quarter of 2011, employment in the core Marcellus Shale industries grew by 18,000. That gain was largely wiped out by the loss of 14,000 education jobs in just one year. Even using the most generous estimates, employment in the Marcellus Shale in direct and ancillary industries in the 4th quarter of 2011 (as published by the Pennsylvania Department of Labor and industry) was 238,400 – about 4.2% of total state employment.

Here's the unsolicited advice: Twenty months into Governor Corbett's first term, there is still time for the Governor to pursue policies that will improve Pennsylvania's job performance. There are multiple options that have strong bipartisan and business support. For example, investing in transportation infrastructure as recommended by the Governor's own transportation commission. 

In manufacturing and workforce development, the administration is also saying some of the right things. But talk is cheap: we need actual investment in skills and innovation if our job performance is going to improve relative to other states and the nation.

Post-Labor Day Thoughts: Middle Class Can't Afford Another Lost Decade

By Mark Price, Third and State

Labor Day 2012 is behind us, but the challenges confronting the middle class are not.

As we do each year around this time, the Keystone Research Center has released the State of Working Pennsylvania. My co-author, a.k.a El Jefe, had a Labor Day op-ed in the Harrisburg Patriot-News where he laid out the theme of this year's report — namely, that the middle class in Pennsylvania and the U.S. cannot afford another lost decade.

The next three figures lay out the major elements of this year's State of Working Pennsylvania: employment growth over the last decade has been weak (Figure 1.10); as a result, incomes over the last decade declined (Figure 1.11); and in the first year of the recovery and of the new decade, income inequality resumed its growth as the top 1% increased their share of all income (Figure 5.1). 

With job growth weak and many policymakers advocating that we lay off more teachers and continue to put off needed investments in infrastructure, we are very concerned that working and middle-class families may end the next decade with less income from work than they started with in 2010.

PA's July Jobs Report Is Out, and It's Not Good News

By Mark Price, Third and State

Pennsylvania's unemployment rate shot up three-tenths of a point in July to 7.9%. Just two months before in May, the rate was 7.4%. Total nonfarm jobs in the state were down 3,100 in July.

That's not all. There was a big revision downward with the state's nonfarm payroll count for June: it was originally reported as 5,729,700, but was revised down by 17,400. To put it in some perspective: Pennsylvania reported a June jobs gain in its report last month of 14,600 jobs. After the latest revisions, Pennsylvania actually lost 2,800 jobs in June.

Industry-wise, the July report is a mixed bag. Mining; trade, transportation & utilities; information; professional & business services; and other services saw gains. Constructions; manufacturing; financial activities; education & health services; leisure & hospitality; and government saw losses.

Overall, July was not a good month for the labor market in Pennsylvania, with employment falling in both the household (-10,000) and establishment (-3,100) surveys, and, of course, with the unemployment rate rising to just shy of 8% and shamefully close to the national unemployment rate of 8.3%.

I say shamefully because Pennsylvania weathered this recession better than most states and early in the recovery posted strong job gains. The Pennsylvania advantage coming out of the recession is being slowly whittled away by the persistent loss of public-sector jobs, mostly in local school districts, that has followed deep cuts in state funding.

I wouldn't panic over these numbers; there is no reason to believe the Pennsylvania or national economy are headed into a recession. Growth just remains disappointingly weak and will likely remain so through the end of the year.

Pa. Budget: Failing to Invest in a Stronger State Economy

By Chris Lilienthal, Third and State

Despite ending the 2011-12 fiscal year with a $649 million fund balance, Pennsylvania fails to make the investments essential to building a strong economy or to reverse a recent trend where job growth in the commonwealth has lagged behind other states.

So concludes the Pennsylvania Budget and Policy Center analysis of the enacted 2012-13 state budget, which was released Friday.

In the final budget, the General Assembly restores some of the cuts proposed by Governor Tom Corbett, while leaving intact a 10% cut to human services and deep cuts to public schools and higher education made in 2011. The budget continues to shift costs to local governments and taxpayers, while adding new tax breaks for businesses.

The spending plan, at $27.656 billion, is $517 million more than the Governor’s February proposal but remains below budgeted 2008-09 levels, despite four years of recession-driven increases in demand for services. The largest cut in this budget comes from the elimination of the General Assistance Program, which provides a temporary monthly benefit to 68,887 Pennsylvanians who are sick, disabled or escaping an abuser. It ends next month

Cuts to education enacted last year, meanwhile, have diminished the quality of instruction in our poorest school districts and resulted in the loss of 14,000 jobs in 2011.

Uncompensated Care Costs Rise at PA Hospitals

By Chris Lilienthal, Third and State

More than a year ago, the Corbett administration decided to end the state's adultBasic program, which provided affordable health insurance to about 40,000 low-income Pennsylvanians who were unable to obtain coverage from an employer or through other programs.

We worried at the time that many of those newly uninsured would delay treatments until a health condition snowballed into a more serious and costly problem, sending more people to the emergency rooms of our community hospitals.

The Pennsylvania Health Care Cost Containment Council released a report this week showing that uncompensated care costs at hospitals did in fact rise in the 2010-11 fiscal year, when adultBasic ended. Uncompensated care totaled $990 million — an 11% increase over the prior year.

Dave Wenner at the Harrisburg Patriot-News has more:    

PA Job Numbers Out, The War On Unemployment Insurance, and Inequality

By Mark Price, Third and State

Happy Sunny Friday, people! Now for the not so good news. The job numbers for Pennsylvania came out Thursday, and the overall picture was somewhat disappointing. The unemployment rate edged down slightly to 7.4% and nonfarm payrolls declined by 600 jobs. Focusing on the jobs data, the biggest loser in April was construction, which shed an eye-popping 5,400 jobs. That is a big swing at a time of year when construction projects should be ramping up. Odds are that loss is driven by sampling error rather than real trends in construction activity. Another troubling stat was the loss of 1,700 jobs in the public sector.

Because monthly data are somewhat erratic, you shouldn't make too much out of any one-month change in employment overall or within a sector. Looking at nonfarm payrolls since October, the jobs picture is somewhat brighter with Pennsylvania adding, on average, 3,900 jobs a month. So Pennsylvania's labor market, like the national labor market, is continuing to recover.

Now for the bad news: if you were hoping the Pennsylvania economy would finally return to full employment by 2015 (remember, the recession started in December 2007), nonfarm payrolls need to grow by about 10,000 jobs a month. So by that metric, we are a long way from fully recovering from the worst recession since the Great Depression.

Pennsylvania Hunger Games Diet: Cash for Corporations, Cuts for Kids

By Mark Price, Third and State

On Tuesday Marty Moss-Coane, the host of WHYY's Radio Times, moderated a question-and-answer session with Governor Tom Corbett at an event sponsored by the Greater Philadelphia Chamber of Commerce. The Governor ran wild with analogies.

Corbett repeated a folksy analogy to the business suit-and-tie audience, saying that state revenue amounted to an eight-inch pizza pie before the 2008 financial crisis. Now, he said, it’s a six-inch pie “but with the same mouths to feed.”

Moss-Coane noted near the end of the hour-long conversation that Corbett could hear demonstrators beating drums and chanting slogans outside. What would he say to them, she asked.

“I understand that you’re upset because we’ve had to put the state on a diet, for want of a better description,” Corbett said. “I haven’t met anybody who likes to go on diets. It is not easy. It is not what we want to do.”

Predatory Payday Lending Bill Flies Out of Cramped PA House Committee

By Mark Price, Third and State

Room 148 of the State Capitol might as well double as a Capitol broom closet. That's where the House Consumer Affairs Committee this morning rushed out amendments to House Bill 2191, which legalizes predatory payday lending in Pennsylvania.

The amendments to HB 2191 were misleadingly pitched as adding more consumer protections to the bill. Even the Navy Marine Corps Relief Society took a look at these amendments and said they do "nothing to mitigate the already harmful aspects of HB 2191," and that one amendment "actually worsens the problem it claims to solve."

One focus of the amendments this morning was language banning renewals or rollovers of a payday loan, as if that was a solution to stopping the long-term cycle of debt. It is not.

Good News on PA Revenue But Don’t Count Your Blessings Just Yet

By Sharon Ward, Third and State

Pennsylvania’s Independent Fiscal Office (IFO) released its revenue estimate this week, offering a more upbeat view of the economy moving forward. The official revenue estimate predicts a smaller revenue shortfall for the current year and more robust revenue collections for 2012-13.

The IFO estimate leaves the General Assembly with as much as $800 million available to restore cuts proposed by the Governor. This is clearly good news, but both the Corbett administration and legislative leaders are already dampening expectations about the scale of funding restorations.

A Look at the Numbers 

In the current 2011-12 fiscal year, the Corbett budget pegged revenue at $27.1 billion, with a revenue shortfall of $719 million. The IFO estimates revenue collections will be $419 million higher, at $27.5 billion and a shortfall of $300 million for the fiscal year. With $700 million in current-year reserves, this leaves an actual year-end surplus of around $400 million.

In the 2012-13 fiscal year, the IFO predicts revenue at $28.7 billion. This is approximately $404 million higher than the Corbett budget (the IFO excludes $142 million in new revenue sources proposed by the Governor in his budget plan, since those measures have not yet been enacted). See a table with more details.

Inequality and Infrastructure

By Chris Lilienthal, Third and State

U.S. funding of infrastructure has declined dramatically since the 1960s, and Congress appears to be moving in the direction of even more cutbacks in the years ahead.

There is a bit of irony to this. With borrowing costs still very low and the market still somewhat depressed, now would be an ideal time for government to step up investment in infrastructure. In other words, it costs a lot less to build roads and bridges today than it might down the road if we hold off on the billions of dollars in needed repairs.

Sam Pizzigati laments this irony in a recent op-ed in The Star Ledger of Newark, N.J. And he has an interesting take on why infrastructure is getting short shrift: blame income inequality:

The cost of borrowing for infrastructure projects has hit record lows — and the private construction companies that do infrastructure work remain desperate for contracts. They’re charging less.

Yet our political system seems totally incapable of responding to the enormous opportunity we have before us. Center for American Progress analysts David Madland and Nick Bunker blame this political dysfunction on inequality.

The more wealth concentrates, their research shows, the feebler a society’s investments in infrastructure become. Our nation’s long-term decline in federal infrastructure investment — from 3.3 percent of GDP in 1968 to 1.3 percent in 2011 — turns out to mirror almost exactly the long-term shift in income from America’s middle class to the richest Americans.

March Job Numbers For Pennsylvania and CEO Pay

By Mark Price, Third and State

The Pennsylvania Department of Labor and Industry released new data for March on Pennsylvania's employment situation. According to the household survey, the unemployment rate edged down slightly to 7.5%, and the survey of employers showed healthy growth in nonfarm payrolls of 7,800 jobs.

As always, caution should be exercised in interpreting a month change in employment statistics.

In terms of levels, there were big gains in Leisure and Hospitality (7,000), Trade Transportation and Utilities (4,000) and Manufacturing (2,100). We will not have full information until the fall whether the job losses in the public sector will put a drag on employment growth in 2012, but the March data shows we are off to an uncomfortable start, with 2,500 jobs lost.

Over the last several months, Pennsylvania nonfarm payroll counts have been particularly volatile, showing big one-month gains and losses thanks to a combination of unusually warm weather and some technical issues. On average over the last six months, Pennsylvania has added just under 6,000 jobs a month. We need about 10,000 jobs a month to move back to full employment by March 2015 (three years from now).

While unemployment remains high today and for the foreseeable future, the distance between CEO pay and the pay of the typical worker reached an all time high in 2011.

High CEO Pay Comes Under Fire from Shareholders

By Michael Wood, Third and State

In the news today, a couple of instances of CEOs being taken to task by shareholders over excessive pay.

USA Today reports that at Citigroup, 55% of shareholders rejected or abstained from rubberstamping a $25 million payday for their CEO Vikrom Pandit. The vote is only advisory, unfortunely, but is still described as being "historic" for Wall Street firms in the aftermath of the recession. The report notes:

Wall Street's massive compensation packages have raised the ire of shareholders for years, especially when they appear to have little relation to the performance of specific executives. ...

"Citigroup is one of most egregious example of disconnect between incentives of top management and value creation of shareholders," said Mike Mayo, bank analyst at brokerage firm CLSA and author of the book "Exile on Wall Street."

"The owners of the big banks, namely the shareholders, are finally taking a greater amount of responsibility by speaking up."

Closer to home, the Pittsburgh Post-Gazette has a story this morning about discontent at Pittsburgh-based EQT's annual shareholder meeting. Again, executive compensation seems to be at the heart of this dispute — as well as unease about natural gas production. 

A Recovery for the 1%

By Jheanelle Chambers, Intern, Third and State

Even in a Down Year, Top 1% Have More Total Income Than Bottom 50 Percent CombinedWhile many middle-class Americans are still struggling in a down economy, the 1% is doing quite well.

The Center on Budget and Policy Priorities has an eye-popping chart (right) showing that in 2009, despite the weak economy, the top 1% of households captured $1.32 trillion in gross income while the bottom 50% earned $1.06 trillion.

Economist Chuck Marr explains further at Off the Charts:

The long-term trend in the United States has been towards much greater income concentration at the top. But the trend isn’t perfectly smooth: high-income people tend to benefit more from economic expansions than other income groups but tend to get hit harder by recessions. The swings are particularly pronounced in financial booms and busts...

At the height of the previous expansion, in 2007, the top 1 percent had 87 percent more total [adjusted gross income] than the bottom 50 percent. But even the 2009 gap of “only” 25 percent — the difference between the $1.32 trillion earned by the top 1 percent and the $1.06 trillion earned by the bottom 50 percent — is pretty staggering.

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