Monday, September 21, 2009

State of Working PA

The State of Working Pennsylvania 2009, a report published by the Keystone Research Center, is now available. Here are a few items from the overview:

Just six months ago, the U.S. and Pennsylvania economies appeared to be plunging off a cliff, spiraling down at a rate unmatched since the 1930s. Now, these economies have pulled back from that cliff. Unemployment has stopped rising as rapidly and the number of jobs has stopped falling so fast.

The reason is simple: The actions by the federal government to stimulate the economy are working. That is one bottom line of this report: Whatever qualms you may have about the details of federal economic policy this year—and we have our share of qualms—decisive government action has slowed our economy’s free fall. Looked at through the lens of history, economic policy makers have taken to heart the failure of their counterparts—the Federal Reserve and the Hoover Administration—to act decisively to counter the collapse of the private sector economy at the beginning of the Great Depression. Both federal and state governments need to keep their feet on the economic accelerator at least this year and next, because it will take at least that long for private-sector demand to rebound.

The second theme of this report is that the government has not yet taken decisive action on a longer-run challenge that lies just below the surface of the current recession—the erosion of the middle class that helped trigger the economic crisis by leading families to finance their consumption through unsustainable debt (sometimes in the form of subprime mortgages). This report documents that wages for the broad middle class in Pennsylvania are now falling, in some cases quite rapidly. In the 1930s, in addition to stimulating the economy through increased public spending, the government took decisive action to build the middle class so that middle-class consumption could keep the economy growing for the long term. That second part of the New Deal, needed today to rebuild the middle class, is not yet on the radar screen. It needs to be.

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