Keystone Research Center: Unemployment Would Be 16% Without Stimulus – Philadelphia Business Journal

By Athena D. Merritt, Staff
Thursday, September 2, 2010

Unemployment would be above 14 percent in Pennsylvania and approaching 16 percent nationally if not for the American Recovery and Reinvestment Act and other federal action taken in the wake of the recession, according to a new report released by the Keystone Research Center Thursday.

But still more needs to be done, said the Harrisburg-based think tank in its annual “State of Working Pennsylvania” report.

“Our economy is a product of conscious policy choices,” Mark Price, labor economist for the center, said. “Federal policy stopped the economic free fall. And policy choices at the national and state level will powerfully shape the future health of the economy for middle-class families.”

Actions taken by the Federal Reserve, Bush and Obama administrations, and Congress have all helped curb unemployment, Price said. Early last year, before passage of the federal Recovery Act, Pennsylvania was losing nearly 30,000 jobs each month. The state by contrast has added 64,000 jobs during the first half of this year. Pennsylvania also benefited from Congress’ recent extension of federal Medicaid assistance to states and additional school funding to preserve teacher jobs, which kept the state from losing as many as 12,000 more jobs.

But Pennsylvania needs to add about 300,000 jobs to replace those lost since the recession began. The state’s unemployment rate, which as of July was 9.3 percent, is expected to be at 7.2 percent in 2014 — a full seven years after the recession began. The state’s job deficit and a deficit in the buying power of the middle class are both greater threats than closing the federal deficit, according to Stephen Herzenberg, center economist and executive director.

“The federal deficit is the wrong enemy,” Herzenberg said. “Our economy will recover only when we put Americans back to work and pay them a fair wage.”

Several recommendations were made in the report, including: Extending resources for Pennsylvania’s Way to Work Program set to expire Sept. 30, access to capital for small business, extension of unemployment insurance benefits as long as unemployment remains so high that it is impossible for many jobless workers to find jobs and allowing the Bush tax cuts to expire and repurposing the funds to other areas to create jobs.

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