Jobs surpass pre-pandemic, but inflation persists

In its mid-year economic update, the Independent Fiscal Office found the Pennsylvania economy steady and mostly unsurprising.

Though the forecast for real GDP was revised down from the June 2023 estimate, the state’s economy has more jobs now than before the pandemic. A tight labor market has meant a dramatically low unemployment rate, though Pennsylvania’s labor force participation rate has declined as well.

Payroll jobs grew by 85,000 compared to a year ago, with similarly strong numbers for all jobs (which includes the self-employed).

“Both these numbers are very solid,” IFO Director Matthew Knittel said. “Eighty-five thousand’s a good number; usually, before COVID, that was about 50,000-60,000, so the labor market is still doing very well.”

Wages and salary growth has started to slow after dramatic increases during the pandemic. After a 7.7% boost in 2022, wages grew by almost 5% in 2023 and the IFO expects growth to be at 3.6% and 3.8%, respectively, in 2024 and 2025.

Inflation, too, has started to slow. The Philadelphia CPI-U hit 7.9% in 2022, then fell to 4.4% in 2023. The IFO expects that trend to continue, with inflation running at 3.1% in 2024 and 2.4% in 2025.

Housing costs, however, have remained “elevated,” Knittel noted, which will keep inflation an issue until those drop. Much of the inflation reduction has been driven by energy and durable goods, which are not expected to dramatically decline further.

Since the pandemic, inflation has been up 19%, but wages have run ahead of inflation. American checking and saving accounts have been up 32%. Most of these benefits, however, have gone to the middle- and upper-class, rather than the working class.

“The latest data that we have data for suggests that the top 20%, their checking and saving account balances are up 40%, for the middle 20% they’re up 22%, and for the bottom 20%, they are down 12%,” Knittel said. “There’s clearly some pressure on the lower end for lower-income consumers, but for middle-income and upper-income consumers, they’re still doing quite well — especially if you’re a homeowner.”

For fiscal year 2024-25, the IFO estimates that general fund revenues will grow modestly — at 0.6%, a $250 million increase.


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