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.

It is important to remember that people continue to lose jobs each month, even though the economy is recovering. And because employment hasn’t fully recovered, those people who do lose their jobs face a long line of other people looking for work.

Fortunately for them and for the economy as a whole, workers today who lose a job for reasons beyond their control can rely on the unemployment insurance system to provide them with a modest lifeline to meet their very basic needs, like buying food and paying the rent or the mortgage bill. Unfortunately, the economic crisis has created an opportunity for the business lobby to push for changes in the state’s unemployment insurance system that will make the system less effective when the next recession hits. As Rick Bloomingdale of the Pennsylvania AFL-CIO explains, Governor Corbett and a lot of Pennsylvania lawmakers are supporting these very shortsighted reforms.

Since when did members of Pennsylvania’s General Assembly become so shortsighted that they think it’s good to pass legislation that harms the most vulnerable people? This would be the consequences of proposals to restore the solvency of our state’s unemployment compensation fund on the backs of unemployed persons.

These are the persons who have most suffered from the recent recession and for whom this unemployment insurance was established. Our national history reflects a legacy of helping those who need help, instead of saying, “sorry for your luck,” or “gee, too bad, if only you worked a few more weeks.” We must get back to the ideal that helping those who need help is the right thing.

The governor has already signed into law a bill that cut UI eligibility and reduced UI benefits for thousands of unemployed Pennsylvanians. Yet less than a year later, the administration urges more cuts that likely would deprive an additional 50,000 individuals of the unemployment insurance lifeline. When did we get so selfish and shortsighted?

It is easy to assume that trends in income inequality reflect rising top incomes on Wall Street alone, but as the Pittsburgh Post-Gazette reports this morning, outrageously high salaries are not limited to the masters of the universe who live in Manhattan. The reality is that those high Wall Street salaries end up creating room for compensation committees in other parts of the economy to reward executives and managers with higher and higher salaries. In this way, the growth in top incomes are more about keeping up with the Joneses than about merit.

The West Penn Allegheny Health System, which lost $75 million over the first three quarters of the current fiscal year, paid out $17.35 million two years ago to 12 administrators who have left the organization, including nearly $9 million in retirement and other deferred compensation, according to its recent tax filing….

Most prominent among the departed leaders is former WPAHS president and CEO Christopher Olivia, whose total reported compensation for 2010 amounted to $7.39 million, or nearly $1.5 million more than Jeffrey Romoff, president and CEO of the much larger UPMC. Of that $7.39 million, about $5.4 million was for retirement or deferred compensation.

Finally this morning, Catherine Rampell of The New York Times explores new data on mobility released by the Pew Center on the States.

While Rampell’s exploration is interesting, Travis Waldron at Think Progress does a better job illustrating the key findings and their implications.

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.

Income Concentration at the Top Rose in 2010The news gets even better for the 1% in 2010, as the Center on Budget and Policy Priorities’ Chad Stone explains in another Off the Charts post. After seeing a dip in income in 2009, the 1% was well on the road to recovery a year later, Stone writes, citing new data compiled by economists Thomas Piketty and Emmanuel Saez:

The Piketty-Saez data paint a clear picture of faster income growth and rising income concentration at the top over the past few decades. The dot-com collapse proved to be nothing more than a speed bump, and the financial crisis and Great Recession may turn out to have had similarly transitory effects.

With Tax Day approaching next week, maybe it’s time to call on lawmakers to take a page from the 1930s and 1940s and enact tax policies to slow down the growing income gap between the 1% and the rest of us that is so common today even in the worst of economic conditions.

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.

The rise in 90-day delinquencies in Pennsylvania during 2011 coincided with the end of the state’s highly touted Homeowners Emergency Mortgage Assistance Program (HEMAP), which provided loans to borrowers behind on their mortgages that were repaid either when their financial crises ended or within 24 months.

In 2010, 13,654 homeowners applied for the assistance, and 2,798 were approved, said John Dodds, director of the Philadelphia Unemployment Project.

“All of those who applied were informed of housing counseling, and many probably had their mortgage modified or were otherwise able to save their homes,” Dodds said Wednesday.

Funding for HEMAP, which began in 1983, ended in August, as did the Act 91 requirement that defaulting borrowers be sent notices by lenders informing them of the program and available counseling assistance, Dodds said.

For part of 2011, he said, the federal Emergency Homeowner Loan Program, which was modeled on HEMAP, funded these emergency loans. That Housing and Urban Development-funded program, which the Pennsylvania Housing Finance Agency administered, ended Sept. 30, after approving 3,056 homeowners for emergency help.

“Without these programs, the increase in foreclosures would have been greater, and since Sept. 30 no direct-aid program has been available in Pennsylvania,” Dodds said.

Last week, Gov. Corbett included no funding for HEMAP in his proposed 2012-13 budget.

The Inquirer goes on to note that a research brief published by the Reinvestment Fund found that HEMAP kept more than 6,100 homeowners out of foreclosure from 2008 to 2010. Without the program, the report said, “Pennsylvania’s foreclosure rate would have been higher and its rank among states several rungs worse.”

Again, The Inquirer:

Government estimates show that the costs of foreclosures are shared among lenders (64.6 percent), local government (24.7 percent), homeowners (9.2 percent), and neighbors, whose homes also lose value because of proximity to a bank repossession (1.9 percent).

By reducing Pennsylvania’s foreclosure rate by 6,100 homes, the report estimates, $480 million was saved – $170 million of that in Philadelphia and its four suburban counties.

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.

We are slowly getting details of a settlement of allegations of fraud by banks during the housing bubble. Dean Baker notes this morning that the deal is said to include immunity from prosecution for banking executives in exchange for mortgage relief paid for by investors (not the banks). It’s good to be a banker.

The Philadelphia Inquirer reports this morning that the association that represents construction contractors who mainly compete for work in the non-residential construction sector is expecting essentially no change in the number of workers they will employ in 2012. Non-residential construction makes up roughly two-thirds of all construction employment in Pennsylvania. Also of note in the article: 62% of Pennsylvania contractors surveyed reported relying on some stimulus-related work. Remember that factoid next time you hear someone claim stimulus spending had no effect on the economy.

Construction employment will go up – very slightly – in 2012, contractors predicted in a survey released Monday by the Associated General Contractors of America…

The survey notes that many contractors relied on stimulus-funding projects over the past years, but few expect to perform much stimulus-funded work in 2012.

In Pennsylvania, for example, 62 percent of those surveyed had stimulus work, with most of them assigning the majority of their workers to those projects. But in 2012, only one in five expects stimulus work.

More news of property tax hikes, teacher layoffs and larger class sizes – this time out of Dauphin County.

The Central Dauphin School Board Monday night approved a $155.4 million preliminary budget for 2012-13 that could mean higher taxes, larger class sizes or furloughs of as many as 50 district employees.

The Patriot-News Editorial Board notes that the asset tests for food stamps proposed by the Corbett administration are unwise and likely to punish many rural families.

Creating an asset test for food stamps in Pennsylvania is the wrong approach…

Given the economic woes many families are facing with at least one parent – sometimes both – out of a job, the car rule hardly makes sense. This is especially true in rural parts of the state. Reliable transportation is critical to achieving financial independence, and in many families that means parents having two decent cars to drive.

The other issue is the $2,000 limit in savings. Families struggling to get out of poverty are likely to be trying to save money, build up funds to help them pay off bills, make a security deposit on an apartment or catch up on mortgage payments. It makes no sense to compel people to potentially liquidate funds to be able to put food on the table.

Hunger is a problem in our state, and many people rely on food stamps to solve it.

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 social and economic costs associated with childhood poverty are a powerful argument for policymakers to develop poverty reduction campaigns at both the federal and state level. Several states have developed poverty reduction campaigns and some have implemented new anti-poverty policies. … In light of these numbers, poverty reduction should be viewed as a social investment that generates billions of dollars in returns to society in the form of increased economic productivity, reduced expenditures on health care and the criminal justice system, and improvements to multiple dimensions of children’s well-being.

The U.S. 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.

Jeff Immelt, CEO of General Electric (GE) and the head of the White House job creation task force, wants you all to root for GE. USA! [Multinational Corporations!] USA! [Multinational Corporations!] Building on Paul Krugman’s chart showing the divergence between corporate profits and employee compensation, we lay out below some of the awkward facts that may explain the lack of cheerleading for GE and U.S. multinationals generally. (The second chart shows U.S. multinationals have eliminated nearly 2 million jobs since 1998, while creating over 2.3 million overseas. Should that be “job destroyers”?)

The key Immelt quote is ‘I want you to root for me. Look, everyone in Germany roots for Siemens, everyone in Japan roots for Toshiba, everyone in China roots for China South Rail, I want you to say, win GE. I think this notion that it’s the population of the US against big companies is just wrong.’

Is that “go team,” or “thank you sir may I have another bowl of gruel”?

Hard Times In Pennsylvania and Debates About Higher Education

( – promoted by John Morgan)

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:

Over one in four Pennsylvania workers – and nearly one in three U.S. workers – have had less paid work than they want during the last 12 months. … National poll results reveal that, between 2009 and 2011, 43% of likely voters had been unemployed or someone in their family has been unemployed. Since likely voters are a significantly more educated, higher-income group than typical voters, the share of all workers that have been unemployed or had a family member unemployed almost certainly exceeds 50%.

The White House Jobs Council was in Pittsburgh last night and again today. A story in The Pittsburgh Post-Gazette closes with a quote from Penn State University’s Center for Global Business Studies.

One of the Jobs Council’s biggest challenges is to make sure workers are equipped to perform the technology-based jobs Seegrid and other companies are creating. ‘The problem is only 6 percent of our student body wants to get an engineering degree. That number is 15 percent in Germany and over 20 percent in India and China,’ said Fariborz Ghadar, director of Penn State University’s Center for Global Business Studies.

I have heard members of the business lobby in central Pennsylvania complain that too many college students are pursuing the wrong major, which the business lobby uses as an excuse to justify devoting fewer resources to higher education. Now we have a higher education official making the same claim but skillfully laying the blame on the student. The reality is, of course, more complex than either of those very naive views.

If you want students to have a specific set of skills, you have to direct resources to give students the incentive to choose those majors.

More importantly, there has to be real jobs when students graduate, not just marketing fluff about lots of demand for workers in certain fields. There are lots of claims of shortages in lots of different fields, and yet wages and incomes keep falling for most people. Real shortages in labor markets are accompanied by rising wages.

Now, what of the choices all those college kids have made? Are Engineering majors less likely to be unemployed than college graduates overall? No.

This story reminded me of an opinion piece that also appeared in the Post-Gazette over the weekend. Lifting the skills of the workforce requires more resources, not less, and it requires new pathways for workers, especially those not finishing college to get those skills. In that regard, Germany does have something to teach us.

While about 70 percent of U.S. high school graduates go on to study at a four-year college, the sad reality is that only about 60 percent of them actually complete a bachelor’s degree (or its equivalent) in any field even within six years of enrollment. That means a surprisingly high percentage of America’s young people is entering the labor force armed with only a high school diploma –  and little or no work experience. Not surprisingly, America’s youth unemployment is more than double the rate for the overall population. Meanwhile, in European countries like Germany, Austria and Sweden, youth unemployment is about half the U.S. rate. That is surprising since these countries, like the United States, were hit hard by the global financial crisis. Americans have traditionally viewed college as a must on the road to good jobs and financial security. Contrast that with Germany, where roughly two-thirds of people under the age of 22 choose to enter into apprenticeships, typically a three-year period of training at a firm. Along with related technical instruction at a vocational school, a young worker learns the skills required for a given occupation.

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:

Over one in four Pennsylvania workers – and nearly one in three U.S. workers – have had less paid work than they want during the last 12 months. … National poll results reveal that, between 2009 and 2011, 43% of likely voters had been unemployed or someone in their family has been unemployed. Since likely voters are a significantly more educated, higher-income group than typical voters, the share of all workers that have been unemployed or had a family member unemployed almost certainly exceeds 50%.

The White House Jobs Council was in Pittsburgh last night and again today. A story in The Pittsburgh Post-Gazette closes with a quote from Penn State University’s Center for Global Business Studies.

One of the Jobs Council’s biggest challenges is to make sure workers are equipped to perform the technology-based jobs Seegrid and other companies are creating. ‘The problem is only 6 percent of our student body wants to get an engineering degree. That number is 15 percent in Germany and over 20 percent in India and China,’ said Fariborz Ghadar, director of Penn State University’s Center for Global Business Studies.

I have heard members of the business lobby in central Pennsylvania complain that too many college students are pursuing the wrong major, which the business lobby uses as an excuse to justify devoting fewer resources to higher education. Now we have a higher education official making the same claim but skillfully laying the blame on the student. The reality is, of course, more complex than either of those very naive views.

If you want students to have a specific set of skills, you have to direct resources to give students the incentive to choose those majors.

More importantly, there has to be real jobs when students graduate, not just marketing fluff about lots of demand for workers in certain fields. There are lots of claims of shortages in lots of different fields, and yet wages and incomes keep falling for most people. Real shortages in labor markets are accompanied by rising wages.

Now, what of the choices all those college kids have made? Are Engineering majors less likely to be unemployed than college graduates overall? No.

This story reminded me of an opinion piece that also appeared in the Post-Gazette over the weekend. Lifting the skills of the workforce requires more resources, not less, and it requires new pathways for workers, especially those not finishing college to get those skills. In that regard, Germany does have something to teach us.

While about 70 percent of U.S. high school graduates go on to study at a four-year college, the sad reality is that only about 60 percent of them actually complete a bachelor’s degree (or its equivalent) in any field even within six years of enrollment. That means a surprisingly high percentage of America’s young people is entering the labor force armed with only a high school diploma –  and little or no work experience. Not surprisingly, America’s youth unemployment is more than double the rate for the overall population. Meanwhile, in European countries like Germany, Austria and Sweden, youth unemployment is about half the U.S. rate. That is surprising since these countries, like the United States, were hit hard by the global financial crisis. Americans have traditionally viewed college as a must on the road to good jobs and financial security. Contrast that with Germany, where roughly two-thirds of people under the age of 22 choose to enter into apprenticeships, typically a three-year period of training at a firm. Along with related technical instruction at a vocational school, a young worker learns the skills required for a given occupation.

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).

The ACS provides a larger sample size than the CPS, allowing us to drill down to the state and local level with more confidence. We have tables detailing poverty and uninsured rates by Pennsylvania metro area and county (with populations of 60,000 or more), as well as health insurance coverage by type and age range, at the Pennsylvania Budget and Policy Center’s web site.

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.

Dean Baker writes that it is encouraging to hear the President include work-sharing in his jobs agenda.

Over at The New York Times, Paul Krugman writes that the plan is significantly bolder and better than he expected.

Jared Bernstein shares some number crunching on the plan’s impact on GDP and jobs.

Finally, the folks at Macroeconomic Advisers LLC blog that the plan will be a significant boost to GDP and employment.