recession

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.

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.

End of Mortgage Assistance Could Undermine Economic Recovery

A blog post by Mark Price, originally published at Third and State.

Economic forecasters predicting strong economic growth in the next several years rest those hopes on a robust recovery in residential construction. In light of that, The Philadelphia Inquirer has some troubling news this morning in a story about a surge in foreclosure filings over the last 12 months.

The rise in foreclosure filings may be the result of lenders moving forward with long planned foreclosures rather than a worsening of economic conditions. More troubling is the rise in 90-day delinquencies, which could be the result of the end of Pennsylvania's Homeowners Emergency Mortgage Assistance Program (HEMAP). The permanent end to HEMAP also means rising costs for future taxpayers.

Must Reads: State of The Union, Stimulus and Austerity Economics PA Style

A blog post by Mark Price, originally published at Third and State.

Tonight President Obama will deliver his State of the Union Address to Congress. We are expecting the President to recommend an extension through the end of 2012 of extended unemployment insurance benefits and the payroll tax credit. It looks as though a major theme in the address — besides the catch phrase “built to last” — will be conventional policies aimed at reducing inequality, such as increased spending/tax credits for education and training.

Education and training are important and fruitful means of reducing inequality, but they fall well short of what's needed to reduce the degree of inequality we now face.  A more forceful step in the direction of reducing inequality would include raising the minimum wage and making it easier for workers to form and join unions. We don't expect to hear the President call for either of those changes.

The President will propose paying for his new initiatives with higher taxes on wealthy households. As with education and training, restoring some sense of fairness to the tax code is a laudable goal but longer-lasting reductions in inequality will only come from policies that allow the pre-tax wages of more Americans to rise as the size and wealth of our economy grows.

Manufacturing, energy, job training and middle-class growth will be the cornerstones of President Barack Obama's speech tonight as he takes to the nation's grandest political stage for the annual address on the state of the union, according to senior advisers.

How Much Does Child Poverty Cost the Economy?

A blog post by Chris Lilienthal, originally published at Third and State.

At a conference this week, a presenter posed an important question that doesn't get asked very often: How much does child poverty cost our economy?

Based on an analysis of the U.S. Census Bureau's 2006 American Community Survey data, researchers estimated that child poverty costs the nation $500 billion annually in foregone earnings, involvement in crime, and the costs associated with poor health outcomes. In Pennsylvania, the cost is $17.5 billion annually, based on the 2006 data showing 465,000 (or 17%) of children living in poverty.

In effect, this is money that would accrue to the U.S. and Pennsylvania economies if we took steps now to end child poverty once and for all, such as investing in education, health care and other vital family needs. And with poverty rates higher today in the wake of the recession, the benefits of doing so would be that much greater.

We have long grappled with the social costs of poverty and what it means for families across Pennsylvania and the nation. It's also critical to look at poverty as a huge economic and jobs issue.

Lori Pfingst of the Washington State Budget and Policy Center, who took the national data and broke it down by state, explains:

The Senate Chooses to Do Nothing About the Economy and You Should Root for GE

A blog post by Mark Price, originally published at Third and State.

The economic news this morning makes you feel like you are watching Major Kong (from the movie Dr. Strangelove — the picture on the left) ride the bomb like a mechanical bull to our mutual total economic destruction. But our economic situation is more similar to that of Otto (played by Kevin Kline in A Fish Called Wanda — on the right).  At first we are amused with the idea of being run down by a steamroller moving 2 miles per hour. But then we realize that we have stepped in wet cement and are thus destined to be run down by the U.S. Senate a one-eyed man with ketchup stains round his nostrils.

In short, our problem is a lack of aggregate demand and the solution is well within our grasp, but our politics are paralyzed and millions are destined to be run down by years of needless misery.

Hard Times In Pennsylvania and Debates About Higher Education

A blog post by Mark Price, originally published at Third and State.

The Mercyhurst College Center for Applied Politics has released to The Philadelphia Inquirer the results of a poll asking Pennsylvanians about the impact of the economy on their lives.

The poll found that one in four Pennsylvania residents has had someone living in his or her household lose a job or be laid off in the last 12 months — and two out of three had close friends or family members who were put out of work in that time. More than three out of every four Pennsylvanians said they knew individuals or families who struggle every month to afford basic needs such as rent, utilities, health care, clothes, or food. 'The poverty question was startling,' said Joseph Morris, a professor and director of the college's Center for Applied Politics, which conducted the poll, 'as was the fact that a strong majority of Pennsylvanians have had to make lifestyle changes because of the economy.'

The Mercyhurst College Center findings mirror those of the State of Working Pennsylvania 2011:

Recessions Drive Up Poverty Rates

A blog post by Chris Lilienthal, originally published at Third and State.

This will come as a little or no surprise to most people, but poverty rates rise following recessions. The economists at the Keystone Research Center recently put together this chart to make that point, using poverty data from the U.S. Census Bureau's Current Population Survey (CPS), going back to 1980.

Recessions Drive Up Poverty Rates in PA and the U.S.

(Click on the chart to make it larger.)

The Census also released data from its American Community Survey (ACS), which we highlighted last week and fellow blogger Stephen Herzenberg discussed recently on Radio Smart Talk (skip ahead to the 40-minute mark for Steve's segment).

Obama Jobs Plan a Step Toward Boosting Economy

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

President Obama delivered a much anticipated address on jobs and the economy before a joint session of Congress Thursday evening. I put out the following media statement in response:

There is no question that we need a jobs policy to meet the vast challenges our economy faces today. The President has put forth some good ideas, including an extension of unemployment benefits that will help families in rural and urban communities where jobless rates are particularly high. This plan should be the start of a broader discussion about how we can invest in people and local communities across the nation to repair our broken economy. Doing nothing is not an option.

If you're looking for some more analysis on the President's plan, check out these:

The team at the Economic Policy Institute has a quartet of blog posts, including Heidi Shierholz's look at the jobs gap, John Irons' analysis of the jobs impact of the President's plan, Ross Eisenbrey's take that the plan is mostly on the mark, and Lawrence Mishel's analysis of how effective the plan is.

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.

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.

Inquirer editorial on the need for a homeowner rescue fund

The Inquirer today has an editorial calling for help for struggling homeowners. It mentions a rescue fund that Rep. Dwight Evans and Rep. Pete Daley called for here in Philadelphia back on May 11th. I testified on behalf of PUP on the need for such a fund at a hearing that same morning.

Status report from the editorial. Basically, still at Square One:

The Homeowner's Equity Recovery Opportunity (HERO) program, is intended to help homeowners in the direst situations, including where, because of inflated appraisals by lenders or a fall in housing values, the amount of the mortgage is larger than the value of the house.

Brian Hudson, who heads the Pennsylvania Housing Finance Agency, which created HERO and a separate "refinance fund," still hopes to receive state money.

For now, he is dipping into PHFA's reserve funds and reaching out to individual municipalities and foundations to come up with enough money to get things going. PHFA needs the start-up money to back bonds it would issue to pay for the HERO program.

So why should you care? First of all, if banks and lenders don't get paid back, credit is going to become more expensive. The money supply will be lower. That's basic economics.

Here in Philadelphia, though, it's a much bigger deal. I think we need rescue funds and that the Commonwealth should step up, but there's also some commonsense steps that the lenders themselves could take, and stay in the black in the bargain.

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