Allegheny Institute: Recession Deepened in April

Recession Deepened in April

April employment numbers show a significant deepening of the recession in the Pittsburgh metro area. April data continued a disturbing trend of losses to private sector payrolls dating back to the last quarter of 2008. And while job losses grab headlines, the decline in hours worked by those who still have jobs point to the struggle companies are having keeping their heads above water. Falling employment and shorter work weeks suggest lowered incomes and further consumption spending cutbacks. Ironically, the Governor has just proposed a big hike in the state’s personal income tax, exactly the wrong prescription to cure what ails this economy.

The Pittsburgh Metropolitan Statistical Area (MSA) lost nearly 27,000 private sector jobs from April 2008 to April 2009. This twelve-month decline was the metro area’s largest in at least two decades. The previous record for the past two decades was set just one month earlier when jobs fell over 19,000 between March 2008 and March 2009. Job losses have been widespread with almost every major category sustaining significant reductions.

Once again the manufacturing sector led the employment shedding with 7,700 fewer people on payrolls in April 2009 compared to a year earlier. With fewer than 91,000 employees and the count still falling, the manufacturing sector continues to post levels not seen in decades. Other sectors also sustaining heavy year-over-year losses include leisure and hospitality (-6,400), professional and business services (-4,300) and retail trade (-3,200). Employment reductions in leisure and hospitality as well as in retailing are undoubtedly exacerbated by the drop in disposable income in the local economy.

The only major sector to add jobs was health and education (4,600). While any increase to employment is welcome news, this sector makes up only 22 percent of total private jobs in the Pittsburgh MSA. This gain was led by the increase in the health care and social assistance sub sector (3,100) with social assistance accounting for a third of the gain. In fact, since 2000 social assistance job growth has outpaced private education employment by a ratio of two to one. Unfortunately, social assistance jobs are typically fairly low paying, rely heavily on taxpayer funding and grow because of more problems in society. In short, social assistance employment growth is not an indicator of an improving economy—more likely it is the reverse.

This recession is also being felt statewide as job losses in the Commonwealth mirror the pattern of the Pittsburgh MSA with private sector employment slumping 171,000 between April 2008 and April 2009. Indeed, just as for the Pittsburgh area, the latest year-to-year drop was the largest for the Commonwealth in over two decades. Then too, the previous record twelve- month decline for the last two decades occurred in March 2009 when employment fell by 136,700 compared to March 2008.

To compound Pennsylvania’s problem the number of hours worked by those who still have jobs are falling as well. Manufacturing workers saw their workweek slide by three hours in April 2009 compared to April 2008. Durable goods employees led the way with a drop of four hours over the last year suggesting very strongly that overtime is way down to go along with the 10 percent decline in the average work week—very bad for take home pay and discretionary spending by folks working in the states durable goods factories.

Governor Rendell’s plan to increase the state’s personal income tax in the wake of the tremendous recent job losses in Pennsylvania and especially in the Pittsburgh MSA is exactly the wrong prescription for this ailing economy. Taking more money away from already beleaguered workers will only depress disposable income even further. It will manifest itself in the reduction of even more jobs in service sectors like retail and full service restaurants. Instead the Governor should embrace a program of meaningful reductions in spending and ask all public sector workers, union or not, to forego contractually agreed upon salary increases until the economy rebounds.

Pennsylvanians deserve lower taxes, not higher. Raising taxes and refusing to go after substantial budget cuts now will worsen the state’s already poor relative economic competitiveness for years to come.
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Frank Gamrat, Ph.D., Sr. Research Assoc. Jake Haulk, Ph.D., President
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