Unemployment rate in Pennsylvania hits record low of 3.9%, but Duquesne prof says that comes with a caveat

Pennsylvania’s unemployment rate fell to a record low in December, dropping below 4% for the first time since record-keeping began, according to figures released Friday.

Payrolls and the workforce grew but remain below pre-pandemic record levels.

The rate fell one-tenth of a percentage point to 3.9% from November’s rate, the state Department of Labor and Industry said in a news release.

However, Risa Kumazawa, associate professor of economics at Duquesne University, said things are not quite as rosy as they appear.

“When you calculate the unemployment rate, it’s a ratio of individuals who are unemployed divided by those who are in the labor force,” Kumazawa said. “Those who are in the labor force are people who are employed or unemployed, that’s the denominator.

“I mention this because a lot of people dropped out of the labor force, so they are out of the denominator. So, it’s going to sound rosier than it is because we’re not accounting for those people who had dropped out of the labor force and hadn’t come back, including early retirements.”

Kumazawa also points out that Pennsylvania is lagging behind some other states in the number of jobs recovered since the worst part of the covid-19 pandemic, including the lockdowns.

“I know that nationally you’ll see that the numbers indicate that we’ve gotten back more than 100% of the jobs that we lost. But Pennsylvania is still at having about 95% of the jobs back that we had lost during those terrible times,” she said.

“So, we’re not doing as well as some of the other states. I think it’s just human nature to say that (a 3.9% unemployment rate) is so much smaller over the time frame that you’re looking at. But with this (report), you have to be careful because there’s an obvious explanation why the unemployment rates themselves are smaller.”

The national rate was 3.5% in December, as the number of people seeking unemployment benefits in the U.S. reached a four-month low last week.

That’s taken as a sign that employers are holding on to their workers despite the Federal Reserve’s efforts to tamp down inflation.

In a survey of Pennsylvania households, the labor force grew by 9,000 to above 6.4 million, as the number of employed grew and the number of unemployed fell.

“It’s always a good thing when you hear these economic indicators are doing better every month,” Kumazawa said. “But all I’m saying is there are some things that you need to consider. You have to remember that some people haven’t come back to the labor force.”

The state’s labor force continues to rebound after falling during the covid-19 pandemic. It hit a record high of almost 6.6 million just before the pandemic hit, and still remains below 2020’s levels.

In a separate survey of employers, non-farm payrolls in Pennsylvania grew in December by 17,000, driven primarily by hiring in construction and professional and business services.

At just above 6 million, payrolls continue to rebound after hitting a record high of nearly 6.1 million just before the pandemic, according to state figures.