Friday, November 9, 2012

Despite Gas Boom, Pennsylvania's Unemployment Rate Increases Sharply From May 2011 To September 2012

The data is astonishing.  But it is official United States Bureau of Labor Statistics numbers in the state and regional unemployment section. In terms of unemployment rate trends, Pennsylvania is among the three worst performing states in the nation since May 2011.

Unemployment has jumped in the Commonwealth from 7.4% to 8.2% from May 2011 to September 2012 (the October data will be available in about 2 weeks). During that period, only New York and New Hampshire saw their unemployment rates go up more, and New Hampshire's 5.7% unemployment rate is still below the national unemployment rate.

Pennsylvania is fast becoming a lesson in how state policymakers can fail to maximize the advantages offered by a globally significant energy bonanza and make other policy and budget mistakes that more than offset the twin advantages of the gas boom and declining national unemployment. 

While Pennsylvania's unemployment rate jumps up from 7.4% to 8.2%, the national unemployment rate fell from 9.0% in May 2011 to 7.8% in September, 2012. 

While Pennsylvania's unemployment rate jumps up from May 2011 to September 2012, the unemployment rate falls in 43 other states.

Here's the rest of the ugly economic story.

Pennsylvania's unemployment rate fell from 8.9% in October 2009, when the national unemployment rate hit its double-digit peak, to 7.4% in May 2011.  All through that period, Pennsylvania's unemployment rate was well below the national unemployment rate. But no more.

Pennsylvania's economy is big and needs about 6.5 million jobs for full employment.  And certainly gas is a significant boost and has cut the unemployment rate greatly in some counties.

But given the size of our economy and our 12 million population, gas alone will never make all Pennsylvanians or the whole of Pennsylvania prosperous, even if policymakers maximize its benefits and avoid mistakes that more than offset the benefit of gas.

Most unfortunately, policymakers have made a series of mistakes--massive education cuts being Exhibit A--that have more than offset the benefits of gas that include thousands of jobs and consumer savings of as much as $1,500 per year.  And so, the ugly fact is that unemployment in Pennsylvania since May 2011 has increased substantially, making the Commonwealth the third worst performing state in the nation.

The ugly fact is that Pennsylvania's unemployment during September was higher than the national rate for the first time in a decade and is up from 7.4% to 8.2%, despite the falling national unemployment rate and the gas boom.


  1. You are shilling for the STATUS QUO. Government is an unproductive leech on society. Collecting tribute from citizens taking their large cut and delivering inferior services compared to the free market.

    "When people find that they can vote themselves money that will herald the end of the republic." Benjamin Franklin

    1. Your use of pure ideology to ignore the facts of the post is a perfectly illustration of how terrible decisions happen. So what fact is wrong in the post? Facts are indeed stubborn things that ideologues will always stubbornly resist. But ultimately reality intrudes.

    2. I didn't question your facts. I simply stated that your stated priority of bigger public education expenditure is a misguided attempt to prop up employment through a demonstrated failed system. If there is a need for more teachers and educational spending the private sector is most efficient and effective at providing it.

      "Man will occasionally stumble over the truth, but usually manages to pick himself up, walk over or around it, and carry on." Benjamin Franklin

    3. And here I was thinking that universal free primary education _ available to all regardless of individual family circumstance _ was part of America's beacon to the world.

      So some want to toss that relic of the Enlightenment over the side and turn it all over to private enterprise, eh?

      (By the way, private charter schools in New York State get their money though a per-student cut from the public school districts, which get their money from ... wait for it .. taxpayers.)

      The private sector will profit on educating those who can afford to pay, and has no obligation to the rest.

      And what of the rest? Are there no prisons? Are there no workhouses? Perhaps they can die, and decrease the surplus population.

      During this holiday season, God bless us every one.

  2. John Hanger's Facts of the Day: DEP uses Suite 942 like it's going out of style.

  3. John, you really should note that the "gas boom" doesn't have quite the same profile this year vs. last.

    "Pennsylvania had 63 rigs operating last week, down from 111 a year ago, according to Baker Hughes Inc. That was the lowest number of operating rigs in the state in three years."

    This no doubt has some effect on employment, even though production has continued to increase "because an individual drilling crew is able to accomplish more now than when exploration first began in the Marcellus."

    You should also note, John, that counties with the most drilling activity still generally maintain unemployment rates significantly below the state and national average.

    1. Good points. But the gas industry alone cannot bring prosperity to all of Pennsylvania. It also cannot compensate or erase other terrible mistakes that drive up unemployment.

  4. I don't disagree with you. But it's helping in parts of NY adjacent to drilling, even when they don't have it themselves.

  5. Mr. Hanger,

    Could you provide a more detailed explanation on why you believe the Corbett administration's policies have led to the increase in unemployment? Also, what would you do instead?

    I'm no fan of Governor Corbett, but without more information, I'm not convinced he's entirely to blame.


    1. Mike:

      First point is that since January 2011, the US national unemployment rate has declined from 9.0 to 7.7. If PA had simply followed the US declines, PA would have an unemployment rate below 7.0 now. Second point, PA has had the advantage of an historic gas boom and yet we now have an unemployment rate above the national average for the first time in essentially 6 years.

      The Governor's budget choices have featured massive cuts to education that have destroyed directly 19,000 education positions and close to a total of 30,000 jobs directly and indirectly. His education policies have also caused local school tax increases that also have killed still more jobs.

      The Governor mistakenly thinks that the shale gas boom alone can create economic prosperity. He does not have an economic development strategy that leverages advantages in medicine, agriculture, tourism, manufacturing.

      He has failed to make key investments in transportation and other infrastructure that would create tens of thousands of jobs.

      The above is part of the explanation why PA has underperformed since the Governor took office.

  6. Secretary Hanger,

    I have noticed that unemployment rates, by month, are notoriously uneven in many instances. For example, while you list the rate at 8.2 for September '12, it is now listed for October '12 at 7.4%. It seems to get especially tricky when you compare months during different seasons, as you do (May, 2011 compared to Sept. 2012). Perhaps it would have been better to compare Sept. 2011 to Sept. 2012? In any case, it seems to have dipped radically from 8.2% as you stated, to 7.4% in October, 2012.

    Having written the above, I've been following this for a number of years, as it related to Counties with shale gas extraction, and my County, Wayne, which has thus far, successfully kept production out. Wayne, with no wells in production, has kept a relatively steady unemployment rate throughout the past recession. As of October, 2012, the BLS lists it at 6.4%. Bradford County, despite 1,019 Marcellus wells drilled as of July, 2012 is currently at 6.3%. Susquehanna, despite 491 wells, is at 6.6% as of October.

    I last kept track of wells drilled by year, and unemployment rates for the counties, this past August, and I found it interesting that Bradford, despite 520 wells drilled from January 2011 through July 2012, saw unemployment rise from 6.1% to 6.4% when those months were compared.
    Susquehanna, with 329 wells during that period, saw a flat rate of 7.3% unemployment when those months compared. Tioga, despite 361 wells drilled during that period, went from 7.4% to 7.8% unemployment rate. Thus, even in the middle of a boom, as I describe above, it seems the shale gas economies hit a peak impact, then flattened, or worsened. Wayne, in that same comparison period, went from 6.9% to 6.8%.

    This pattern is clearly duplicated in Arkansas, which has had shale gas extraction going on longer.

    These statistics can be approached from many angles, but, I just don't see the "gas boom" as much of a stimulus, even in counties where the number of wells are the most. Also, whatever stimulus it provided, is short lived, as we are seeing now, as it will dip even further, for however long the gas market stays low.

    As a further note of reference, before the recession officially "hit", in October of 2008, Bradford was listed as 5.1% unemployment, Tioga at 4.9%. Where did those jobs, where did that economy go? What part of an economy gets displaced by a "gas boom"?

    Thank You,

    James Barth

    1. As you point out below the data you used in this post was not seasonally adjusted. Table 3 in the BLS data is the best table for making accurate comparisons.

  7. My goodness, I just wrote as involved a post as above, then lost it through Google. It must have been meant to be...

    I'll rephrase it quickly. Secretary Hanger, you referred to rates that are seasonally adjusted, while the ones I presented are not seasonally adjusted. According to the BLS time line for seasonally adjusted rates though, you quoted May of 2011 as 7.4%, when it was actually 8%. May of 2012 was listed as 7.4%, so the seasonally adjusted unemployment rate for PA has risen from 7.4% to 8.1% (October, 2012) over the past 5 months. During the timeline that you present, it has effectively remained flat, from 8% to 8.1% over those 17 months.

    When you were appointed Secretary of PADEP, the seasonally adjusted rate for PA was 5.6%. By December of 2010, Governor Rendell's, and your, last month in office, it was 8.1%.

    What is shown above, is that the seasonally adjusted unemployment rate from 09/08 through 10/12 (4 years) rose 2.5% during the first two years of that period, and remained effectively flat for the last two years of what you describe in your post as a "gas boom". During that period, probably more than 3,000 Marcellus wells were drilled.

    These seasonally adjusted rates parallel the not seasonally adjusted rates I presented in the earlier post.

    James Barth

    1. The country nearly went into a Depression as of September 15, 2008 with the Lehman Bros. bankruptcy. National Unemployment rate peaked at 10% in October 2009. PA unemployment hit 9.6% in 2009. From October 2009 to January 2011, national unemployment rate trended down from 10% to 9% and state unemployment fell from 9.6% to 8%. The PA rate was below the national average when Governor Rendell left office in January 2011 and had fallen significantly from the 2009 peak. Since Governor Corbett took office, the PA rate is now above the national unemployment rate and has not fallen. In fact since May of this year, the PA rate has risen.

      Corbett's education, energy, and economic development policies have caused the nearly unique problems in PA. Again the national unemployment rate has continued to improve. But not here in the Commonwealth.

  8. John Hanger is still talking about a gas boom. Where is the boom? Lycoming county's unemployment rate has ticked up and is now at the state average of 8.2%. A year ago there were 113 rigs in PA, this last week there were only 70. Last year there were 66 rigs operating in northeastern PA, now 29. The Barnett Shale in Texas had 199 rigs working at the high point of their play, they are down to 42 rigs.

    These plays are not lasting a hundred years, the Barnett is about 12 years old and past its prime and almost every other shale area is either declining or plateaued.

    Hanger points out the labor market in PA is over 6 million. The gas industry has brought in 20,000 jobs, a good portion of them out-of-staters and called it a game changer.

    1. National gas production set a record in 2011 and will likely set another all time record in 2012. That's two boom years, despite low gas prices caused by a supply glut. Rigs have been redeployed to wet gas and oil. But rigs in 2012 are each more productive in 2012 than they were in 2010 and even in 2011. PA gas production is still rising and is about 2 trillion cubic feet per year at this point. A huge number.

  9. It also occurs to me that Pennsylvania will ultimately experience outmigration, as residents living in industrial sacrifice zones realize that to protect - or to recover - their health, they need to live in an area where gas drilling and processing is not going on. I personally know of families who have suffered neurological damage from living in too close proximity to compressor stations and frac pits. I personally know of people and their pets who are suffering from kidney and liver damage, who also live very close to drilling and processing sites. Pennsylvania will ultimately experience outmigration, AND a brain drain, as anyone with any ability for critical thinking at all will realize that this is no longer a safe place to live, and no amount of industry spin or PR will change that.

    1. It is important to examine medically all cases. But to date, populations are increasing in areas of gas drilling. And in some areas, prior to gas drilling, they had been losing population for decades and young people in particular left because no jobs or not enough good jobs existed in the mainly rural areas where gas drilling is now taking place.

  10. I subscribe to skytruth and every few days I see a long list of frack permits in PA and pray no accidents ...."mistakes that more than offset the twin advantages of the gas boom and declining national unemployment”....that is what you meant? As long as no spills or accidents....?
    Last night at the Sunset Review public hearing for our Pulic Utilities Commission and the entity that oversees oil and gas in Texas, one speaker, Gary Hougan, I believe said that only two jobs are created per gas well and that the industry likes to overstate jobs by calling each phase (drilling phase, fracking, phase, flowback phase) a new is it 2 new jobs on average per well or is it 6 jobs per well? This morning I read that Jena LA is opening a new machine shop to work on pipeline compressors and that is new jobs...