Sunday, August 17, 2008

Keeping Our (Economy’s) Head Above Water

July was a bad month for the U.S. economy, but a surprisingly good one for the Pittsburgh Region, at least in relative terms. For the second month in a row, the U.S. economy had fewer jobs than the previous year, and the rate of job loss nearly doubled from June to July. But in Pittsburgh, the exact opposite happened –we had 4,300 more jobs in July 2008 than in July 2007, and the 12-month rate of job growth here doubled from 0.2% in June to 0.4% in July.

Although we're clearly feeling the effects of the recession -- Pittsburgh’s rate of job growth in July was well below the growth rates we experienced earlier in the year -- our region is doing better than most large regions in the country. Pittsburgh had a higher rate of job growth between July 2007 and July 2008 than 24 of the top 40 regions in the country, and seventeen of those regions actually lost jobs during that period of time. For example, Silicon Valley lost 1,400 jobs, Cleveland lost 2,100 jobs, Milwaukee lost 3,700 jobs, and Phoenix lost over 28,000 jobs.

What’s enabling our economy to swim so strongly against the recessionary undertow? The biggest factor continues to be the Education and Health Services sector, which created 5,300 new jobs in the last 12 months. People continue to need health care even in a recession, and there is a tendency for people to go back to school when the economy is weak. Our Education and Health Services sector isn’t outperforming other regions (job growth only ranks 23rd among the top 40 regions), but because Pittsburgh has the second highest proportion of its jobs in education and health care of any of the top 40 regions, even average growth in education and health care means that the overall Pittsburgh economy will tend to outperform other regions.

But the increase in the rate of job growth in July compared to June wasn’t due to education and health care, it came from nearly 2,800 new jobs in two sectors: Administrative and Support Services, and Leisure and Hospitality.

The Administrative and Support Services sector created 4,000 jobs between July 2007 and July 2008, an increase of 1,700 over the June job growth total. The data aren’t detailed enough to determine exactly which subsectors created these jobs, but the biggest categories of jobs in this sector are in employment services, call centers, security services, and janitorial services. Employment services experienced a temporary dip of about 1,000 jobs in June, and the rebound from that contributed to the better performance in the overall regional economy in July. Pittsburgh had the 5th highest job growth in this sector of any of the top 40 regions.

The Leisure and Hospitality sector created 1,900 new jobs compared to the prior year, a jump of 1,100 compared to June. A little more than half of the growth in jobs occurred in the arts and entertainment sector, and the remainder were in both hotels and restaurants. Pittsburgh’s job growth in Leisure and Hospitality was the 16th highest among the top 40 regions, and the increase between June and July was the 5th highest. It may be that the recession and high oil prices have kept many vacationers and tourists closer to home and Pittsburgh's strong arts and entertainment sector is attracting them here.

Although it’s good news that total jobs have continued to grow, many of the sectors where jobs have been growing do not pay high wages. In contrast, the manufacturing sector, which is the biggest contributor to regional income because of the high wages it pays, is not only declining, but is losing jobs at an accelerating rate. We had 1,900 fewer manufacturing jobs in July than 12 months ago, whereas we had only lost about 1,200 in the early part of the year. Moreover, our performance is slipping relative to other regions. In May, only 14 of the top 40 regions were doing better in retaining manufacturing jobs than we were, but in July, 20 regions were out-performing us. Since many other jobs in the service sector depend on manufacturing businesses and jobs, these decreases may have a ripple effect throughout the rest of the economy in future months.

So while the summer travel season seems to be helping us, if the manufacturing sector continues to decline, we could start experiencing more serious problems in our region’s economy than we have so far. The state’s uncompetitive business tax structure makes it particularly difficult for our region to retain manufacturing jobs and attract new ones.


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