09/01/2011 04:16 pm ET Updated Nov 01, 2011

Report predicts disaster in Pennsylvania without job growth

By Dave Warner

PHILADELPHIA (Reuters) - Pennsylvania's economy is in "deep trouble" and needs dramatic job growth to help its residents, one in four of whom do not have enough work, a study by a Pennsylvania think tank showed on Thursday.

The Keystone Research Center said the state needed to add 300,000 jobs to replace those lost in the recession and match the growth in the working age population. It warned that a lack of job growth could produce an "unmitigated disaster."

"One of the key findings of the report is that just over one in four Pennsylvania workers had less paid work than they wanted over the last 12 months," said Mark Price, one of the report's authors, in a conference call with reporters.

In its "State of Working Pennsylvania" report, the Harrisburg-based group laid out a plan for job growth that called for the federal government to create subsidized jobs and extend jobless benefits.

The liberal-leaning organization also hoped the government would not extend tax cuts for those earning more than $250,000 a year. The resulting revenue, it said, could be used for an ambitious jobs program.

The report comes days ahead of a highly anticipated address to a joint session of Congress by President Barack Obama, scheduled for September 8, when he is expected to unveil proposals to create new jobs.

Pennsylvania's Labor and Industry Department spokesman Sean Yeakle took issue with the Keystone findings, saying he disagreed with the assertion that more government spending would create more jobs.

"The government cannot create jobs. It can create the conditions that enable businesses to grow and create jobs," he said.

Keystone said if policymakers did nothing to create jobs, the state unemployment rate would remain above 7 percent until 2014. Pennsylvania's July unemployment rate was 7.8 percent, below a nationwide average of 9.1 percent.

The report praised bailout efforts of both the George W. Bush and Obama administrations as well as steps taken by the Federal Reserve. It said those moves forestalled a "free fall in the U.S. economy."

But it said: "We have reached a moment of truth."

"Anything less than stellar employment growth over the next several years will be an unmitigated disaster for hundreds of thousands of Pennsylvania families."

(Editing by Ellen Wulfhorst and Cynthia Johnston)