Updated: 04/23/2020
On April 16, the U.S. Department of Labor reported “hard” numbers on the economic impact of the COVID-19 virus for the last two weeks of March and first two weeks of April. These figures were stunning, even more so in Pennsylvania than nationally. On a seasonally adjusted basis, 22 million U.S. workers filed initial claims for unemployment benefits in the four weeks ending April 11, far and away the most since these numbers were first reported in 1970. In Pennsylvania alone, 1.3 million filed initial claims, 5.9 percent of the national total or about one-and-a-half times Pennsylvania’s share of U.S. jobs. (Note: the state numbers are not seasonally adjusted.) Why is the Pennsylvania increase in initial claims for unemployment so high relative to our share of jobs? Contributing explanations could include:
- Pennsylvania does not have state paid sick leave and paid family leave laws as do CA, NY, and some other hard-hit states. (Philadelphia and Pittsburgh do have paid sick leave but make up less than a sixth of the state’s population.) A high share of Pennsylvania’s newly unemployed have therefore applied for unemployment benefits to replace some of their lost wages and salaries.
- Pennsylvania’s unemployment insurance covers a larger share of the unemployed population—40% in 2016, the eighth highest share in the nation, compared to 27% nationally.
- Pennsylvanians are older and may be culturally more risk-averse—and, in this case, wiser—than typical Americans, social distancing themselves by staying home with some becoming jobless as a result.
- Pennsylvania’s figures may be more accurate than other states. States facing the highest concentration of COVID-19 cases are likely more overwhelmed and not focused on capturing the unprecedented spike in filings.
- The private sector is a larger share of Pennsylvania’s economy—88 out of 100 jobs—than the U.S. economy at 85 of 100 jobs. This contributes a small amount to Pennsylvania having a more cyclical economy (i.e., public sector jobs make the economy more stable).
On April 1, the Economic Policy Institute (EPI) projected a loss of 19.8 million jobs nationally “by summer” taking into account the $2.2 trillion stimulus passed into law last week). EPI allocated the 19.8 million in national lay-offs or furloughs to states using two alternate methods: based on the state’s share of U.S. private-sector jobs (Pennsylvania ranks fifth) and based on the state’s share of employment in the hardest hit sectors—leisure, hospitality, and retail. Pennsylvania has a lower share of employment in these sectors than any other state (22.1%) but its share is only three percentage points below the U.S. average (25.1%) and the state ranks sixth for this share. The chart below shows the average job loss for each state using the two methods. Pennsylvania again ranks sixth with a projected 777,550 lay-offs.
One way to gauge the magnitude of EPI’s estimated job losses is to consider their impact on the state’s unemployment rate. In January 2020, Pennsylvania had an estimated 306,614 unemployed workers and an unemployment rate of 4.7% (compared to 3.6% nationally). If another 777,550 workers are furloughed or laid-off and all of them count as unemployed, the unemployment rate will jump to 16.6%. Pennsylvania’s peak unemployment rate in and after the Great Recession was 8.8%. In sum, while EPI’s state-level job loss numbers do not show Pennsylvania as facing an outsized impact from the COVID crash relative to other states, they do still project a devastating impact.
EPI’s focus on the leisure, hospitality, and retail sectors also highlights that a unique feature of this economic collapse is that it is singling out low-wage workers more than past downturns did. Across the entire economy, only an estimated 29% of people can work from home, and a high share of low-wage jobs require significant in-person social interaction. Among these jobs are the six lowest wage occupations in Pennsylvania: shampooers, dining room attendants/ bartender helpers, movie projectionists, lifeguards and recreational protective service workers, cooks and fast food workers, cafeteria/ food concession workers, and food preparation/serving workers.
While the $2.2 trillion federal stimulus will mitigate job loss and families’ (and states’) financial struggles, we anticipate Congress will need to pass at least one more large stimulus to get the economy back on its feet. While states can’t deficit spend, they too need to lean hard against the economy’s decline—not into that decline as Pennsylvania state government did in 2011-12 through austerity policies and a cut in state education funding of $1 billion. After 2011, that injudicious combination helped plunge depending on the period examined). Instead of repeating that mistake, PBPC outlines state policies that Pennsylvania should adopt—some of which, we are pleased to report, it is already adopting.