The Outlook for the
Pennsylvania Economy
Mark A. Price
Labor Economist
Keystone Research Center
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The Great Slump of 1930
The world has been slow to realize that we are living this year in the
shadow of one of the greatest economic catastrophes of modern history.
…This is a nightmare, which will pass away with the morning. For the
resources of nature and men’s devices are just as fertile and productive
as they were. The rate of our progress towards solving the material
problems of life is not less rapid. We are as capable as before of
affording for everyone a high standard of life—high, I mean, compared
with, say, twenty years ago—and will soon learn to afford a standard
higher still. We were not previously deceived. But to-day we have
involved ourselves in a colossal muddle, having blundered in the
control of a delicate machine, the working of which we do not
understand. The result is that our possibilities of wealth may run to
waste for a time—perhaps for a long time.
--John Maynard Keynes
Although Housing Prices Did Grow Much Faster Than Inflation in
Pennsylvania They Did Lag Behind the Growth in Housing Prices In
Other Parts of the Country
Harrisburg-Carlisle, PA
180
Inflation-Ajdusted Purchase Only Housing Price index Pennsylvania , HarrisburgCarlisle, Los Angeles 1990 to 2008 (1990, QT1=100)
160
Percent Change in Housing Prices
Percent Change in Housing Prices
Harrisburg-Carlisle,
PA
Harrisburg-Carlisle,
PA
2000-1 to 2007-1
28.4%
PA
2007-3 to 2008-3
-5.0%
140
120
2000-1 to 2007-1
2007-3 to 2008-3
28.4%
-5.0%
Los Angeles-Long
Beach-Glendale, CA
(MSAD)
45.7%
-6.9%
127.9%
-23.9%
100
80
60
1990-1
1991-3
1993-1
1994-3
1996-1
1997-3
1999-1
2000-3
2002-1
2003-3
2005-1
2006-3
2008-1
Note. Data are for sales and refinance transactions. Inflation-Adjustment based on the CPI-U-All Items Less Shelter. Data for 2008 is through
the 3rd quarter.
Source. Keystone Research Center estimates based on data from the Office of Federal Housing Enterprise Oversight (OFHEO)
Although Housing Prices Did Grow Much Faster Than Inflation in
Pennsylvania They Did Lag Behind the Growth in Housing Prices In
Other Parts of the Country
Harrisburg-Carlisle, PA
PA
180
Inflation-Ajdusted Purchase Only Housing Price index Pennsylvania , HarrisburgCarlisle, Los Angeles 1990 to 2008 (1990, QT1=100)
160
Percent Change in Housing Prices
HarrisburgCarlisle, PA
140
2000-1 to 2007-1
2007-3 to 2008-3
28.4%
-5.0%
PA
45.7%
-6.9%
120
100
80
60
1990-1
1991-3
1993-1
1994-3
1996-1
1997-3
1999-1
2000-3
2002-1
2003-3
2005-1
2006-3
2008-1
Note. Data are for sales and refinance transactions. Inflation-Adjustment based on the CPI-U-All Items Less Shelter. Data for 2008 is through
the 3rd quarter.
Source. Keystone Research Center estimates based on data from the Office of Federal Housing Enterprise Oversight (OFHEO)
Although Housing Prices Did Grow Much Faster Than Inflation in
Pennsylvania They Did Lag Behind the Growth in Housing Prices In
Other Parts of the Country
Harrisburg-Carlisle, PA
PA
Los Angeles-Long Beach-Glendale, CA (MSAD)
180
Inflation-Ajdusted Purchase Only Housing Price index Pennsylvania , HarrisburgCarlisle, Los Angeles 1990 to 2008 (1990, QT1=100)
160
Percent Change in Housing Prices
Los Angeles-Long
HarrisburgPA
Beach-Glendale, CA
Carlisle, PA
(MSAD)
2000-1 to 2007-1
28.4%
45.7%
127.9%
2007-3 to 2008-3
-5.0%
-6.9%
-23.9%
140
120
100
80
60
1990-1
1991-3
1993-1
1994-3
1996-1
1997-3
1999-1
2000-3
2002-1
2003-3
2005-1
2006-3
2008-1
Note. Data are for sales and refinance transactions. Inflation-Adjustment based on the CPI-U-All Items Less Shelter. Data for 2008 is through
the 3rd quarter.
Source. Keystone Research Center estimates based on data from the Office of Federal Housing Enterprise Oversight (OFHEO)
Monthly unemployment rate (%) in Pennsylvania, California and
Michigan 1976 to 2008
14
12
10
Pennsylvania
8
6
4
2
Source. Keystone Research Center analysis of Bureau of Labor Statistics and Center for Workforce Information and Analysis data.
Monthly unemployment rate (%) in Pennsylvania, California and
Michigan 1976 to 2008
14
12
10
California
Pennsylvania
8
6
4
2
Source. Keystone Research Center analysis of Bureau of Labor Statistics and Center for Workforce Information and Analysis data.
Monthly unemployment rate (%) in Pennsylvania, California and
Michigan 1976 to 2008
18
16
14
California
Pennsylvania
Michigan
12
10
8
6
4
2
Source. Keystone Research Center analysis of Bureau of Labor Statistics and Center for Workforce Information and Analysis data.
It’s Official the Economy Peaked in
December 2007

Since December

Pennsylvania has shed 24,300 jobs.

Losses so far are concentrated in Manufacturing,
Retail Trade and Construction
Continued Unemployment Claims in Pennsylvania Were 32%
Higher Than In October of Last Year. Biggest Year Over Year
Increase Since February 2002.
90%
Percent Change in Unemployment Claims From the Same Month Last Year 2000-1 to 2008-10
Initial Claims
Continued Claims
60%
30%
0%
-30%
Source. Keystone Research Center analysis of U.S. Department of Labor, Employment and Training Administration Weekly Unemployment Claims Data
While Official Recessions Are Typically Short, Their
Impact on Labor Markets Last Much Longer
Table 1. Recessions and the Pennsylvania Labor Market
1980-1982 1990-1991
2001
Official (NBER) Recession Dates
Peak
Jan 1980
Jul 1990 Mar 2001
Trough
Nov 1982 Mar 1991
Nov 2001
Length in Months
24 months
9 months 7 Months
Labor Market
Peak
1979
1989
2000
Trough
1983
1992
2003
Unemployment Rate (%)
Peak
6.8
4.7
4.2
Year 1
7.9
5.4
4.8
Year 2
8.4
6.9
5.6
Year 3
11.3
7.7
5.7
Year 4
11.6
7.1
5.4
Year 5
9.1
6.3
5.0
Note. NBER is the National Bureau of Economic Research. See http://www.nber.org/
for complete description of NBER recession dating procedures. The period between
1980 and 1982 is official two recessions but is treated here as a single event. Labor
market peaks and troughs are in bold.
Source. Keystone Research Center analysis of Center for Workforce Information and
Analysis data
After adjusting for inflation wages in 2007 were lower
than in 2001 for most workers in Pennsylvania
Percentiles
Pennsylvania
% Change
2001
2007
10th
$8.03
$7.87
-2.0%
20th
$9.70
$9.62
-0.8%
30th
$11.50
$11.15
-3.0%
40th
$13.12
$13.05
-0.5%
50th
$15.36
$15.11
-1.6%
60th
$17.83
$17.64
-1.1%
70th
$21.01
$20.51
-2.4%
80th
$25.11
$24.99
-0.5%
90th
$33.10
$33.35
0.8%
95th
$41.20
$41.02
-0.4%
Source. Economic Policy Institute (EPI) analysis of CPS
data
If the Past Can be a Guide, A Mild Recession Will Lead
to an Unemployment Rate of 6.7%, Severe Recession
Could Increase the Unemployment Rate to 9.2%
Table 2. Project Impact of Recession on Labor-Market Outcomes in Pennsylvania 2008-2011
Projected Recession
Most recent
year
2007
4.4
61.7
Unemployment rate (%)
Employment rate (%)
Change in real median
$48,437
household income (p.p.a)
Povert rate (%)
10.4
Source. Keystone Research Center
Mild to Moderate
Severe
2008
5.2
61.4
2009
5.9
61.1
2010
6.7
60.8
2008
5.6
61.1
2009
6.8
60.5
2010
8.0
59.8
2011
9.2
59.2
-1.9
10.9
-1.9
11.5
-1.9
12.1
12.0
13.6
15.3
16.9
The Lost Decade?
Table 3. Pennsylvania's Lost Decade (Assuming a Mild Recession)
2000
2010
Median Household Income
$50,778
$45,703
Unemployment Rate
4.2
6.7
Employment Rate
61.4
60.8
Poverty Rate
8.6
12.1
Source. Keystone Research Center