Unemployment in Pennsylvania fell by one-tenth of a percentage point to 7.5% in May, while non-farm payrolls fell by 9,200, according to a Friday report from the U.S. Bureau of Labor Statistics.
Data from the household survey painted an unambiguously positive picture for May: the labor force increased by 16,000, employment grew by just over 24,000, and the number of unemployed declined by 9,000.
Establishment survey data, on the other hand, presented an unambiguously negative story, with both the goods- and service-producing sectors shedding employment over the month.
The figure below presents the average monthly change in employment in the two surveys from February to May of each year since 2010. As you can see, it’s not uncommon for the two surveys to tell different stories about the labor market over very short periods of time.
Although the recent pattern of employment change from the establishment survey indicates the labor market is contracting, there is no reason to believe this pattern will hold up. Overall, the U.S. economy is continuing to grow and add jobs. The challenge remains that the pace of job growth is too slow in the U.S. and here in Pennsylvania. Public policy also continues to compound this problem, as evidenced by the loss of 15,900 public-sector jobs over the last 12 months in Pennsylvania.
The lackluster performance of the labor market is best seen when you consider the current deficit of jobs in Pennsylvania or the difference between the number of jobs Pennsylvania has and the number it needs to regain its pre-recession employment rate. That number now stands at 273,900, with just over 200,000 jobs needed to keep up with the 3.5% growth in the working-age population that has occurred since the recession hit in December 2007.
You may have heard that the Federal Reserve signaled last week that it expects sometime in the near future to scale back its own efforts to boost job growth. As Paul Krugman explains this morning, this move is premature given the state of the economy.
Since the Federal Reserve’s announcement, we have seen some upward movement in interest rates. If that means businesses will have to pay higher interest rates on loans to expand production, we will see some of those expansion plans delayed or cut back. And that means less job growth than we might otherwise expect.
This change in policy at the Federal Reserve means monetary policy authorities are now becoming as unhelpful as Congress in reducing unemployment.