Sunday, May 03, 2009

Has the Economy Ever Been This Bad?

Over the past several months, job losses in the Pittsburgh Region have accelerated rapidly as the U.S. economy has continued to slide deeper into recession. Many people wonder: Has it ever been this bad before?

This is clearly the worst recession the U.S. economy has experienced in a half-century. Over the past twelve months, nearly 5 million jobs have been lost in the U.S., or 3.6% of national employment. That’s almost twice as many jobs in one year as in the entire 2001-2003 recession, when over two years, 2.5 million jobs (1.9% of the total) were lost nationally.

The last time the U.S. economy lost this large a percentage of jobs was over 50 years ago, when jobs dropped by 3.7% in March, 1958. Even though the percentage loss was slightly higher then, the U.S. economy was less than half as big, so the loss of 2 million jobs then still pales compared to the 5 million lost today.

So most people across the country have never experienced an economic downturn this bad. But it turns out that Pittsburghers have seen much worse, and many times.

Over the past twelve months (March 2008 to March 2009), the Pittsburgh Region has lost over 20,000 jobs, or 1.8% of our employment. Although that’s the largest one-year loss of jobs we’ve experienced in two decades, it’s still smaller than the total number of jobs we lost in the most recent recession. Between March 2001 and 2003, the Pittsburgh Region lost over 28,000 jobs, or 2.5% of its employment.

Of course, depending on how long the U.S. recession continues, job losses here could continue to grow and exceed the 2001-2003 total. But it’s hard to imagine that it could get as bad here as it was when the steel industry collapsed 25 years ago.

Between March 1980 and 1983, the Pittsburgh Region lost over 85,000 jobs – almost 1 out of every 10 jobs that existed at the time. More than half of that occurred in a single year; in March 1983, the region lost 45,000 jobs, or 5.2% of what was already a diminished job base in 1982. That was more than double the rate of job loss nationally that year.

Although you may not be surprised to hear that things were worse in the mid-1980s, it may be news that we’ve had worse economic problems than 2009 at least 4 other times in the past half-century. The Pittsburgh Region lost a higher percentage of jobs in 1971 (1.9%) than it has this year, and despite having a smaller economy, the region lost a much larger number of jobs during the 1961 recession (66,000 jobs at the peak), the 1958 recession (69,000 jobs at the peak), and the 1954 recession (76,000 jobs at the peak) than in the past year. (Although the Pittsburgh Region also lost jobs in the 1975 recession, it’s difficult to calculate the exact number because of changes in the way data were tabulated that year.)

A particularly troublesome aspect of the current recession in Pittsburgh is the significant loss of manufacturing jobs. In the past 12 months, the region has lost 7,400 manufacturing jobs, or 7.5% of our manufacturing job base. Yet even that is a smaller percentage loss of manufacturing jobs than what we experienced in 2002, 1983, 1982, 1961, 1958, and 1954.

All of this reflects a dramatic change in the Pittsburgh Region’s economy. In the past, national recessions hit the Pittsburgh Region much harder than the U.S. as a whole, but during the 2001-2003 recession, the rate of job loss in the Pittsburgh Region was just slightly higher than the U.S., and during the current recession, our rate of job loss (1.8%) is only half the national rate (3.6%).

Although losing fewer jobs than other regions in a recession is a good thing, it would be far better if we could also grow more jobs than other regions when the economy is strong. That will require a much stronger focus on encouraging business startups and expansions in the region. For more detail on what to do, see "The Road to the Economic Super Bowl."

(A version of this post appeared as the Regional Insights column in the May 3 Pittsburgh Post-Gazette.)


Anonymous Tony Macklin said...

Harold - thanks as always for keeping our eyes on the long view and big picture. And, Amen on job growth through business expansion & creation.

12:06 PM  

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