Economic Update: PA Economic Health Approaches Pre-Pandemic Levels on the Back of Sustained Relief, but Actions to Make Jobs Worth Taking Are Still Crucial

Maisum Murtaza |

Economic Update—PA Needs Action to Sustain Demand and Make Jobs Worth Taking to Achieve Economic Health Beyond Pre-Pandemic Levels

For two years, the COVID pandemic has shaped many aspects of Americans’ lives including the health of our economy. Each new variant, and the resulting peaks then valleys of caseloads, leave an unmistakable mark on the labor market and its recovery from the pandemic recession. With the release of the February 2022 job numbers for Pennsylvania, this blog provides an update on key economic indicators.

Pennsylvania’s Unemployment Rate Approaches Pre-COVID Level

Pennsylvania’s unemployment rate in February 2022 was 5.1%, 0.1% higher than February 2020. After hovering around 6.5% from September 2020 to summer 2021 and is no longer stagnant as it was for several months back in early 2021.

Figure 1.


As explained previously , the unemployment rate is an imperfect measure of the economy because many jobless people do not count as unemployed. We therefore rely on the total number of non-farm jobs to better gauge economic strength compared to pre-pandemic. Pennsylvania gained over 34,000 jobs in February and 58,000 jobs over the first two months of 2022. The state, however, remained over 200,000 jobs—202,000—shy of the February 2020 level in February 2022.

Figure 2.


Another indicator of the job market is the Pennsylvania labor force participation rate—i.e., as defined by the Bureau of Labor Statistics, the share of the civilian noninstitutional population 16 and older that is working or actively looking for work. Like the number of non-farm jobs, this remains well short of Feb. 2020 levels: 61.0% in January 2022 down from 63.5%.


Impact on Employment by Industry

Figure 3 shows the jobs deficit compared to pre-pandemic in specific industries. The low-wage leisure hospitality industry was far and away the hardest-hit industry in Pennsylvania. Rapid job growth in the Pennsylvania leisure and hospitality industry in October gave way to slower job growth in November and December as virus caseloads rose again. Pennsylvania leisure and hospitality remains 71,000 jobs short of the February 2020 level.


The education and health services and construction industries are now the industries with the second and third percent drop off in jobs since pre-pandemic.

Since April 2021, there has been a decline of about 8,000 construction jobs in Pennsylvania on a seasonally adjusted basis, over 3%. This could partly reflect supply chain problems, building materials and worker shortages, as this U.S. Chamber article noted last September. With infrastructure dollars likely to start flowing on non-residential construction soon, Pennsylvania needs a real plan to expand the pipeline of recruitment and training for construction jobs. Anticipated construction demand combined with retirements among the current workforce create an unprecedented opportunity to provide lower-wage and diverse workers without a college degree in Pennsylvania with a pathway to high-paid union construction jobs.

While trade, Transportation, utilities and Manufacturing have seen a percent change above their pre-pandemic levels, several industries shown below continue to face a deficit despite Opportunity Insights Economic Tracker data stating that Pennsylvanian small businesses are open at levels near or slightly above pre-pandemic levels with their revenue reflecting that data. The small businesses open in Pennsylvania saw an increase of almost 6% above January 2020 numbers with small business revenue also being almost 5% higher than January 2020. While businesses are opening, Pennsylvania still faces a jobs deficit indicating that the labor market still needs assistance in recovering fully particularly in Leisure Hospitality and Education and health services. indicating that the labor market still needs assistance in recovering fully.


Figure 3.

As before, high-wage financial services—in which working from home is an option for many workers—remains one of the industries with employment closest to pre-pandemic levels. The industries with employment higher than pre-pandemic levels are trade, transportation, utilities and manufacturing. This likely reflects the expansion of distribution linked with online retail—Amazon and the like.

Professional and business services (another industry where wages are comparatively higher on average than construction or education and health services) is just about at its pre-pandemic employment level.


Sustain Demand, Improve Jobs

February’s job numbers make clear that the economy remains short of the pre-pandemic level of activity. This partly reflects the dogged persistence of the COVID virus, which keeps some businesses closed or only partly open and leads many workers to have to stay home because of lack of childcare and/or fear of increased infection on the job. While some effects of COVID still linger, for the extent and speed of our recovery stems from federal relief that matched the scale of the COVID economic crisis. Recent increases in small business revenues and the faster recovery in employment than after the 2008 Great Recession both show that federal relief is working.

Even though the impact of the virus on the economy is finally receding, two other factors threaten economic progress. First, much of the assistance for families from the American Rescue Plan has run out (e.g., expanded unemployment benefits in September 2021, the child tax credit, rental assistance in some communities). State action to invest the $7.5 billion in American Rescue Plan dollars—e.g., in education, assistance for small business, and support for low-income families—could help avoid flagging demand as we move forward further in 2022. In addition, improving jobs could make it worthwhile for more workers to return to the job market. The obvious place to start a big increase in the Pennsylvania minimum wage.