Pa.'s jobless rate falls drastically, but there's a catch

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The announcement of a steep drop in the state unemployment rate Friday from the Pennsylvania Department of Labor and Industry noted that the decline -- from 7.3 percent in November to 6.9 percent in December -- represented the largest decrease since July 1983.

Then, as now, the jobless rate drop was driven in part by workers giving up on the labor force.

In 1983, things were worse coming off the 1981 recession. That July, unemployment fell from 12.5 percent to 10.9 percent as 66,000 people dropped out of the labor market.

Last month's much smaller decline of four-tenths of a percentage point occurred as 15,000 people stopped trying to participate in the labor market while another 12,000 who had been unemployed found work. December's numbers continue the trend of a declining labor market, which has been shrinking for the last five months.

The state unemployment rate has fallen from 7.5 percent in July to 6.9 percent in December, even as 86,000 workers have left the labor market and 37,000 fewer state residents report that they have work. Those numbers are seasonally adjusted to take out regular spikes and dips from the holiday and summer vacation hiring.

Just why people are giving up is open to debate.

"We are finding people are not dropping out because they are discouraged," said Sara Goulet, the spokeswoman for the state Department of Labor and Industry. "A lot are dropping out because they are going back to school or staying home for family reasons."

She added that there has been an increase in the number of people who would take a job if one were available but said those people aren't sitting out because they are discouraged.

That reasoning didn't sound right to Mark Price, an economist with the Keystone Research Center in Harrisburg, who noted that Labor Secretary Julia K. Hearthway spent part of 2012 touting the growing labor force in the state. Pennsylvania added 110,000 workers from December 2011 to December 2012, when the state's unemployment rate was 7.9 percent.

Over the next year, 92,000 workers dropped out of the labor force.

"These are the people who were saying people were entering the labor force in 2012 because they were so optimistic, but now they are dropping out for family reasons?" Mr. Price asked.

While the Pennsylvania labor force is shrinking in part because workers are getting older and retiring, the participation rate of people in their prime working years -- ages 25-54 -- is also down over the last year.

The overall employment picture is measured by two separate surveys, one of households that measures the labor force and determines the unemployment rate, and the other a survey of employers that calculates how many jobs are created or lost.

Results from the two December surveys didn't exactly sync. While businesses reported that they cut 11,400 jobs, 12,000 more people were reported to have jobs than in November. At the same time, there was an outflow of 15,000 people from the labor force.

On a year-over-year basis, the household survey showed the number of people who had jobs was down by 16,000 from December 2012. In the survey of employers, the number of jobs rose by 19,000. Nearly all of those gains reported by employers over the last year were in service industries.

Construction lost 7,600 jobs over the last 12 months and manufacturing was down by 1,100 jobs. Mining and logging were the only goods-producing industries that added jobs, with 500 added since December 2012.

In the service industries, leisure and hospitality that includes restaurants and hotels cut 300 jobs from November to December but had a net gain of 13,200 jobs over the year.

Professional and business services, which includes architects, engineers, office cleaners and waste disposal, lost 1,800 jobs from November to December but was up 11,900 jobs from December 2012.

Government added 1,400 jobs in December, but was still down by 9,200 jobs since December 2012.

Ann Belser: or 412-263-1699.

Ann Belser:: or 412-263-1699. First Published January 24, 2014 10:31 AM

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