Sunday, February 01, 2009

Which Region is Winning the Economic Competition?

All eyes in Pittsburgh and in much of the rest of the country will be watching to see who wins the Super Bowl tonight – the Steelers or the (Phoenix) Arizona Cardinals. But which of the two regions is winning on the economic playing field?

Back when Pittsburgh won its first four Super Bowls, Phoenix didn’t even have an NFL team. And up until 1992, the Pittsburgh Region was bigger – in both population and jobs – than Phoenix.

Over the past 16 years, however, the Phoenix metro area has almost doubled in population, and is now the 13th largest region in the country, while the Pittsburgh metro area has fallen from 18th to 22nd. A lot of the population growth in Phoenix was fueled by the kind of immigration that Pittsburgh has failed to attract. In 2007, 58% of Phoenix residents were born in another state, compared to only 13% in Pittsburgh, and 17% of Phoenicians were foreign-born, compared to only 3% of Pittsburghers.

Between December 1992 and December 2007, Phoenix had the second highest rate of job growth among the top 40 regions – an 84% increase in jobs – while Pittsburgh had the 4th lowest rate of job growth – only 10%. Phoenix skated through the 2001-2002 U.S. recession with almost no loss of jobs, while Pittsburgh lost 20,000 jobs and didn’t fully recover until last year. The job growth in Phoenix over the past two decades was diversified across a wide range of sectors – professional services, retail, construction, health care, tourism, and manufacturing.

But while Pittsburghers may have been envious of Phoenix’s boom economy in previous years, our slow and steady job growth looks pretty good right now. Over the past year, Phoenix has had the second largest rate of job loss among the top 40 regions. Whereas Pittsburgh lost 7,100 jobs between December 2007 and December 2008, Phoenix lost 87,000 jobs, almost 1 out of every 20 jobs in that region. While Phoenix still has far more jobs than we do, that’s little comfort to the tens of thousands of people there who have lost work in the past year.

Although Detroit’s job losses have received most of the attention nationally, the magnitude and rate of job loss in Phoenix is almost identical to Detroit. The reasons for the decline are different, though. While Detroit has lost nearly 29,000 manufacturing jobs, the leading job loser in Phoenix was the construction industry, which lost 35,000 jobs. A major reason for that is the collapse in the housing market: Arizona had the third-highest number of foreclosure filings in the country in 2008, and housing prices in Phoenix dropped by almost 17% in the past year, whereas they grew by 2% here. Phoenix has also lost over 23,000 jobs in Professional and Business Services in the past year, while Pittsburgh still has more jobs in that sector than a year ago. Clearly, a lot of the growth in Phoenix was built on a very shallow foundation.

As Pittsburghers well know, if you don’t have jobs, you can’t keep your residents. Last month, while Pittsburghers were reading that Toledo is now bigger than the City of Pittsburgh, The Arizona Republic reported that for the first time in modern history, the City of Phoenix’s population may be shrinking.

Whether Pittsburgh gets its sixth Super Bowl ring or Arizona gets its first, our focus needs to quickly shift to winning in the economic arena. We need to help our manufacturing firms stay competitive and find qualified workers, and we need to help our entrepreneurs get the financing and customers they need to ride out the recession.

Everyone can help by looking to see whether there are local products and local vendors that can meet their needs at a competitive price. In an era of internet shopping, it's all too easy to buy something from a vendor someplace else when a local vendor may have a superior product at a competitive price, but with a lower page ranking on Google (or no e-commerce site at all). Moreover, many of our local entrepreneurs complain that they have to find their first customers outside of the region, even though there are businesses here that could benefit from their product or service and would ultimately use them once they have a reputation built on sales elsewhere. If local companies are given the opportunity and successfully win the business, it will support jobs here, and the workers filling those jobs will also spend their money in the region, creating an economic multiplier effect. (Giving local companies a chance to compete is different from establishing rigid anti-competitive "buy American" types of rules that raise prices and engender retaliatory regulation. The goal should be to consider the full range of options and when all else is equal, to support the local economy.)

(A shorter version of this post was also published in the Sunday, February 1 Pittsburgh Post Gazette.)


Blogger Schultz said...

The Phoenix economy is hurting because they grew so much. We are not hurting that much because there wasn't much growth, so the housing and construction sectors didn't have nearly as far to fall. Even though Phoenix is hurting more than we are now, they have much lower taxes than we do. This has allowed them to build infrastructure, such as new roads and light rail, which are sorely needed to keep up with their growth. One advantage we have now that might not be realized for a few decades is our abundance of water. In ten or twenty years we may be able to say "Yes, you doubled in population again but we don't have to spend all of our money on importing water!"

Also - the folks I know in the Phoenix area do not actually live in the city. Phoenix suburbs such as Scottsdale, Tempe, and Chandler are some of the most popular places to live. Scottsdale and Chandler have populations around 250,000 and still have room to grow. Their potential for further growth is insane.

11:34 AM  
Anonymous Kamana Mathur said...

At a time of massive job cuts throughout the nation, Pittsburghers may not see their history of slow to stagnant economic growth and declining population as a serious problem. However, job creation is key to getting local talent to stick around and encourage migration to this region. The fact that only 3% of Pittsburgh's population is foreign born tells met that the city is not doing much to attract immigrants who, despite arguments to the contrary, give an impetus to business and enterprise. There are foreign investors willing and able to invest in businesses here in Pittsburgh and create jobs, but the city is doing little to attract them. The underutilized EB-5 Immigrant Investor category can go a long way to providing a much-needed infusion of capital and create jobs in our region. We should do whatever we can to attract investors and entrepreuners from other states and throughout the world if we want to stop the economic decline and eventual decay of this beautiful city.

8:39 PM  

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