Who's Winning on the Economic Playing Field?

Everybody knows the Bengals beat the Steelers last Sunday. But Cincinnati also beat Pittsburgh in economic growth over the past year. The newest economic data released last week show that jobs in the Cincinnati region are growing nearly 50% faster than in Pittsburgh.

Employers in the Pittsburgh Region created 10,000 net new jobs between August 2005 and August 2006, an increase of 0.89%. That’s better than the previous year, when we only saw 7,800 new jobs, a 0.69% increase. However, even though Cincinnati is a smaller region, its employers created nearly 14,000 jobs last year, a 1.32% increase.

It wasn’t just Cincinnati that beat us. 31 of the top 40 regions did. For example, jobs in the Minneapolis region, a region similar to ours in many ways, grew by 2.68% in the past year, triple the rate in Pittsburgh. Seattle grew by 3.56%, quadruple the rate here.

As weak as job growth was here, we did manage to beat Silicon Valley, Columbus, and St. Louis, not to mention Cleveland, Indianapolis, and Detroit, which actually lost jobs over the past year. (The biggest loser of all was New Orleans, which lost 28% of its jobs in the past year, due to Hurricane Katrina.)

Why is our job growth so weak?

The health care sector is still our top job generator, but it’s not growing as fast as other regions, probably due to slow population growth here. Leisure and hospitality was our second biggest job generator over the past year, and we had faster growth there than most regions. The third biggest job generator here was state government, although that appears to be due to job growth in the state universities.

The real problem is that unlike other regions, Pittsburgh is not seeing strong job growth in sectors like Professional and Business Services (our job growth in that sector ranked 35th out of 40 regions) and Financial Services (ranking 31st). Most significantly, we are continuing to see significant net job losses in manufacturing. During the recession, we were losing fewer manufacturing jobs than other regions, but that has changed – over the past year, while we lost 3,400 more jobs, almost half of the top regions experienced job growth in manufacturing.

Is slow growth in Pittsburgh a local problem or a state problem? Pennsylvania’s job growth over the past year was 0.93%, only slightly better than Pittsburgh’s. Most of the other regions in Pennsylvania had job growth below the national average, as did the state as a whole. In fact, Pennsylvania ranked 36th out of the 50 states in job growth between 2005 and 2006. That’s worse than the previous year, when the state ranked 34th. Pennsylvania lost manufacturing jobs for the ninth year in a row, even though manufacturing jobs increased in almost half of the states over the past year.

If Pennsylvania is going to capture its fair share of national growth, it has to be competitive. For example, the state still has the worst corporate taxes of any major state, and cutting the corporate net income tax would send a strong positive signal to business investors.

And if the Pittsburgh Region is going to grow faster, it needs to do more to encourage the creation and growth of startup businesses, particularly in technology and manufacturing sectors.