Sunday, April 05, 2009

Losing Almost a Decade of Job Growth in a Few Short Months

Until recently, the Pittsburgh Region seemed almost immune to the national recession. Although the U.S. economy started losing jobs last May, our regional economy kept adding jobs all the way through October. Even when we started losing jobs in November, the job losses here paled in comparison to the tens of thousands of jobs lost in regions as disparate as Detroit and Phoenix.

Unfortunately, our economic immunity has begun to wear off in the face of tight credit markets and weak consumer demand worldwide. The latest job statistics show that between February 2008 and February 2009, the Pittsburgh Region lost 19,200 jobs. That’s the largest loss of jobs in a 12-month period that we’ve experienced in the past 20 years. Even at the height of the last recession, in February 2002, the region had only lost 16,900 jobs over the prior year. The big job loss resulted in the biggest annual increase in the unemployment rate since 1983.

The good news is that the rate of job loss here is still well below the U.S. as a whole and most other large regions. For example, Detroit and Phoenix have each lost about 140,000 jobs in the past year, Charlotte has lost 48,000 jobs, and Cleveland lost 40,000 jobs.

The bad news is that the rate of job loss here has accelerated rapidly. Between January and February, the Pittsburgh Region had the third largest increase in the rate of job loss among the top 40 regions.

What caused the sudden jump in job losses here? The single biggest factor was manufacturing – we’ve lost over 6,000 manufacturing jobs in the past year, and over 3,000 of those were lost in the last month. We have now experienced a higher rate of loss in manufacturing jobs than 22 of the top 40 regions. Since manufacturing jobs have very high wages, these job losses will likely have negative ripple effects in the retail and service sectors in the months ahead.

The second biggest factor was in temporary employment services. After holding steady throughout 2008, it suddenly fell 2,300 jobs into the negative column in February, a faster one-month drop than any other major region in the U.S. It’s not surprising that when cutbacks have to be made, businesses will eliminate temporary employees before their permanent staff.

The region’s Leisure and Hospitality sector, which includes sports and cultural facilities, hotels, restaurants, and bars, has lost 5,300 jobs in the past year, the second highest number of job losses after manufacturing. For reasons that aren’t clear, we’ve had the 5th highest percentage loss of leisure and hospitality jobs among the top 40 regions. More than one out of every 20 jobs in that sector has disappeared in the past year.

Only a few subsectors have continued to add jobs despite the recession – health care and social services (2,600), higher education (2,000), company headquarters (700), mining (400), and local government (300). But recent news reports suggest that layoffs in health care and higher education may be coming, meaning that overall job losses for the region will likely increase.

The past few months have made it clear why the region’s “slow and steady” job growth over the past decade wasn’t good enough. The job losses of the past three months have wiped out all of the small amount of job growth our region had experienced since the last recession. The Pittsburgh Region now has fewer jobs than in the year 2000, whereas most of the major regions of the country, despite having higher job losses during the recession than we did, still have more jobs today than in the year 2000.

Although it is understandable that everyone’s primary focus now is on getting through the recession, we also need to position ourselves for job growth when the national recovery finally arrives, through actions such as expanding cutting-edge research at our universities, supporting the creation and growth of startup firms, and creating a more competitive business climate.

(A shorter version of this post appeared as the Regional Insights column in the Sunday, April 5, 2009 Pittsburgh Post-Gazette.)


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