October Payrolls Up Overall but Down in Mining, Logging and Schools

This morning the Bureau of Labor Statistics reported that the unemployment rate in Pennsylvania was down slightly to 5.1 percent, and nonfarm payrolls were up by 13,700 jobs last month, each from their respective September levels.

After two months of declines in nonfarm payrolls, the return to growth in October was  a welcome change.

Although the month-to-month numbers have been up and down recently, the overall pattern in both the surveys that track employment is positive, with resident employment as measured in the household survey up 60,000 jobs,  or 1 percent, over the last 12 months, and total nonfarm payrolls as measured in the establishment survey up by 48,600 jobs, an increase of 0.8 percent, over the same period. 

Of note, the household survey has registered a sustained increase in the labor force in the last 12 months (up 62,000), another sign that stronger job growth is probably pulling people into the labor force.

Changes of Note by Industry:

Over the past year, employment in mining and logging is down by 2,900 jobs, or 7.7 percent. Though it is interesting to note, the Pittsburgh metro area has bucked this trend, adding 1,100 jobs, an increase of 9 percent, in mining and logging over the same period.

The primary driver of employment change in mining and logging in the past several years has been natural gas extraction. The number of gas drilling rigs operating in Pennsylvania so far this November stands at 28. That’s down from an average of 56 rigs in 2014, and down from the peak of rig activity in 2011, when there were 110 rigs operating in the state. Drilling activity is the primary driver of employment change in this industry, so it is no surprise that as rig counts have fallen employment in mining and logging also has fallen.  Although drilling activity and employment are falling, natural gas production from June to August of this year was still up 9 percent over the same period last year (see the figure below).

As we have argued, the employment contribution of natural gas extraction is small relative to the overall economy.  It is true that new well development has slowed, but that process began in 2012 in response to falling natural gas prices.  Production, however, is still growing strong, signaling that the commonwealth continues to miss out on vital revenues that could fund our schools by not having its own severance tax on natural gas extraction.  When natural gas prices rise in the future, new drilling activity will pick up, and it will be important for the commonwealth to have a severance tax in place to fully capture the tax revenues that other states already collect from this activity.      

Another sector operating as a drag on employment is the public sector, which shed 4,800 jobs in the past year.  An examination of the more detailed, but not seasonally adjusted, data indicate that in the past 12 months all of the weakness in public employment has been concentrated in public schools, which are still retrenching as their classroom funding has yet to be fully restored. Assuming the budget framework currently being negotiated in Harrisburg becomes law, schools are set to receive an infusion of $350 million, which should reduce somewhat the need for further layoffs in that sector.

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