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Signs of strain are emerging in Pennsylvania's economy as job growth slows, unemployment and underemployment rise among minority workers and high household costs continue to squeeze family budgets despite recent gains in real wages, according to a new report from the Keystone Research Center (KRC).
The report comes ahead of Labor Day -- a holiday honoring workers and the American labor movement -- offering a snapshot of the state's workforce and the economic pressures facing families.
The state added nearly 32,000 jobs between July 2025 and July 2026, but nonfarm employment fell by 7,600 jobs in July alone. Pennsylvania's unemployment rate stood at 3.9% in July, while the 18-month average rose to 4.2%, suggesting a gradual weakening in the labor market, according to Maisum Murtaza, a KRC research analyst and a co-author of the report.
"This increase becomes even more troubling when you break the rate down and analyze the impact of the lower unemployment rates on all workers within the labor market," Murtaza said. "When overall unemployment is extremely low or near the natural level of unemployment, workers who are the most vulnerable in labor markets ... have an easier time finding jobs and are also able to close the gaps of inequity."
Unemployment has risen particularly sharply among Black and Hispanic workers, reaching 6.5% and 8.7%, respectively. As recently as 2023, the unemployment rate for Black workers was 3.8% and at an historic low of 4.4% for Hispanic workers.
"The report mentions that increased immigration enforcement through ICE may lead to a decrease in employment," Murtaza said. "Pennsylvania has been a bit more insulated from that, only because we have a smaller share of immigrant workers than some of the other economies in the Northeast. But that's definitely a warning sign to look out for."
Pennsylvania's median hourly wage of $26.88 remains above the national median of $25.67, but significant wage gaps persist. Women in Pennsylvania earned about 81% of the median hourly wage earned by men, down from 86% in 2023, according to the report.
"That progress has largely reversed in recent years," Claire Kovach, KRC research director and report co-author, said.
Recent job gains have been concentrated in the leisure, hospitality, education and health sectors, while government and manufacturing have shed more than 9,000 jobs combined since January 2025.
The labor market also has become less favorable for workers.
The ratio of unemployed workers to available jobs doubled from 0.6 between May 2021 and September 2024 to 1.2 by December 2025, according to the report, indicating that workers have less leverage in the job market.
Cost of living
Pennsylvanians are facing an affordability crisis, with increasing grocery, gas and electricity costs putting further stress on families to make ends meet.
The report found that electricity prices in Pennsylvania rose 59% from January 2020 to June 2026, outpacing the national average. KRC attributes higher electricity costs to natural gas price increases following Russia's war on Ukraine and rising demand from data centers.
Potential policy recommendations from the report included expanding solar access in order to lower electricity costs and passing legislation to prevent companies from using customers' personal data to gouge prices.
Unionization
Union density in Pennsylvania fell slightly to 11.7% in 2025, down from 12.4% in 2024, even as national union density saw a minor increase.
"Intense employer opposition to unions makes it difficult for new unions to organize, and even more difficult for them to negotiate a first contract," Avery Spicka, KRC research analyst and report co-author, said. "Federal actions, including changes to administrative policies at the National Labor Relations Board and the firing of a board member that left the National Labor Relations Board without a quorum, have made it even more difficult for workers to unionize."
In January 2025, President Donald Trump fired Democratic National Labor Relations Board member Gwynne Wilcox and General Counsel Jennifer Abruzzo, leaving the five-member board with not enough active members to legally issue decisions on unfair labor practice and union representation cases. Without quorum, hundreds of union election petitions and complaints were placed on indefinite hold without a functioning board. Quorum was restored in December 2025 with the U.S. Senate confirmation of two new board members.
Economic development
The report recommends that Pennsylvania use a three-part test when evaluating new industries: whether they create good jobs, strengthen the state's economy and provide benefits that outweigh their costs. Using that framework, KRC urges Pennsylvania to compete for green steel while taking a more selective approach to data centers.
"Pennsylvania should aggressively compete for the next generation of steelmaking, while requiring data center projects to prove that they deliver real value before committing scarce energy, infrastructure and public resources," Bernie Gallagher, KRC executive director and report co-author, said. "We're not starting with whether an industry is good or bad. We're starting with a common economic development test ... Green steel and data centers are both consequential opportunities, but they present almost opposite problems."
The report recommends preparing sites, infrastructure and workers to attract next-generation steelmaking and tying public incentives to jobs and community benefits. Data centers, meanwhile, should demonstrate enough economic and public value to justify their demands on energy, water and infrastructure, including by adding capacity and covering their own costs.