Since the spread of COVID-19 accelerated in mid-March of this year, the sharp decline in U.S. economic growth has been faster than at any previous time in recorded economic history—even the Great Depression. The first part of this decline was, in large part, deliberate—stopping non-essential work so that people could social distance at home and stem rising infection rates. The length, and now the depth, of the crisis are increasingly self-inflicted wounds—the consequence of the lack of clear and effective national policies to contain the virus and now the failure to extend the economic relief families need to pay rent, put food on the table, and cover other essentials. A central message of this report is that it matters a great deal to working people in Pennsylvania that now, and over the next several years, the nation and state adopt policies that promote a strong and just economic recovery.
In the first quarter of 2020, U.S. Gross Domestic Product (GDP) plunged 9.5%, an annual rate of decline of nearly a third. (State GDP data for the second quarter are not yet available.)
Pennsylvania’s economy shrank faster than the nation’s, then partially recovered. Jobs and unemployment data show that Pennsylvania’s economy shrank more quickly than the nation’s at first, but our job growth then improved relative to the nation’s in June and July.
- From February to April, Pennsylvania lost 1.1 million jobs, 18% of the February total. The U.S. lost 22 million jobs, 15% of the February total. By July, Pennsylvania had regained nearly half (48%) of the jobs it lost from February to April versus 42% in the United States.
- The Pennsylvania unemployment rate climbed to 16.1% in April versus 14.7% in the U.S. The U.S. unemployment rate has since fallen to 10.2% versus 13.7% in Pennsylvania.
- The Pennsylvania employment rate—jobs as a share of the population aged 16 and over—is a better measure of overall joblessness than unemployment because unemployment does not include large numbers of jobless and underemployed. The Pennsylvania employment rate plummeted from 59% in February to 49% in April, then rebounded to 54%. The national rate declined from 59% to 50%, then also rebounded to 54%.
Our state’s rapid economic decline and then more rapid job growth may reflect Governor Wolf’s success in shutting down the economy and the start of a payoff for declining infection rates. If more businesses feel safe to reopen and more people feel they can safely return to work, the economy can grow more quickly.
This recession has brought with it a cruel, triple whammy that harms many vulnerable workers, including low-wage workers, women, and people of color.
- The industries forced to shut down to allow social distancing—restaurants, bars, and in-store retail—disproportionately employ women and people of color.
- The essential workers that have endured increased health risks on the job because of the importance of their industries to the general population—such as health care, grocery stores, and distribution—are nearly two-thirds female. These workers are 50% more likely to be Black and slightly more likely to be Hispanic than the Pennsylvania workforce as a whole.
- Many immigrants, despite risking their lives for the rest of us as essential workers, have been denied access to pandemic social benefits.
Within Pennsylvania, unlike prior recessions, unemployment rates have not increased more in rural than urban areas. Instead, on average, unemployment has risen more where COVID infection rates are higher. This underscores the importance of reining in the virus so that businesses and people feel safe restarting the economy.
While most of this report uses data available at least quarterly, the penultimate section examines annual wage data through 2019, shortly before the COVID-19 outbreak.
- Inflation-adjusted wages in the bottom half of the Pennsylvania wage distribution only reached their 2006 level in 2015-17. The recession now threatens to reduce wages below 2006 levels.
- At the low end of the earnings distribution, Pennsylvania workers have experienced lower recent wage gains than workers in neighboring states. From 2018 to 2019, wages of Pennsylvania low-wage workers declined slightly. Their neighboring state peers enjoyed gains of 3.5% to 5%.
- The reason for this divergent experience is blindingly simple: state minimum wage policies. In neighboring states, lawmakers have increased their state-level minimum wage above the federal $7.25 per hour, sometimes by a lot. Pennsylvania lawmakers have not.
In sum, the COVID crash has made more visible what “The State of Working Pennsylvania” has documented since 1996. Working people in the United States and in Pennsylvania have taken it on the chin for 40 years. With incomes stagnant, many families live paycheck to paycheck, especially Black, Latinx, and female-headed households. These families desperately need a quick and just recovery, one that addresses the immediate deprivation from COVID and long-term inequality.
Given how our economy works, we won’t get a strong recovery without a just recovery. Since workers’ buying power drives the economy forward, when their incomes stagnate so does the economy. In the short run, to avoid a downward spiral of the economy into depression, we need another injection of federal relief that puts money in the pockets of people who will spend it, including:
- Extension of the $600-per-week boost in federal unemployment benefits. As a result of our early, rapid rise in unemployment, Pennsylvanians received $10 billion (over $800 million per week) in extra unemployment benefits from the federal CARES Act by the end of June—6.6% of total national benefits. Removing that income and buying power from Pennsylvania’s economy could make the slow job growth associated with Governor Corbett’s $1 billion cut in education funding in 2011 seem like a picnic.
- More relief for state and local government. Without this, deep cuts in government jobs and a collapse in the buying power of public employees will drag the economy into deeper recession.
- A federal stimulus that invests in infrastructure and reducing carbon emissions, work performed outside and with less risk of triggering further upticks in COVID-19 cases.
- Put the state’s minimum wage on a path to $15 per hour as three of our neighbors have already done.
- Take additional state actions necessary to prevent an eviction tsunami to complement the Centers for Disease Control extension of the federal eviction moratorium on public health grounds
- Identify shovel-ready infrastructure and green growth projects that could absorb federal stimulus investments, including in universal, high-quality broadband.
- Capitalize on federal subsidies to expand work sharing—reduced work hours and partial unemployment benefits. Work sharing reduces workers’ income losses, helps businesses bounce back when the economy kicks into gear, and can lower unemployment in future recessions.
Long-term, the minimal wage gains from 2006 to 2019 remind us that the policies in place today—rigged heavily against working people—result in rising inequality, including based on race. Achieving shared prosperity that can end low growth due to slowly growing incomes requires structural changes that rebalance the scales between workers and corporations. State and federal lawmakers’ top priority should be enacting policies that raise wages and strengthen workers’ rights so that we can achieve the economy we want—an economy that works for all—not the economy we’ve had.SWP_2020