Sunday, December 20, 2009

The Regional Economy Finally Turns the Corner

After several months of small ups and downs in regional job growth, November showed the first sign of a significant recovery in jobs for the region. Job losses declined by 5,600 between October and November. (This does not mean that total jobs increased in the region, but simply that the losses were smaller; in October, we had lost 32,200 jobs over the prior 12 months, but in November, we had only lost 26,600 jobs, comparable to where we were back in April.) The improvement parallels a similar turnaround in job losses nationally.

Improvements occurred in virtually every economic sector. Only two sectors did worse in November than in October – one was the health care sector, the other was wholesale trade. Healthcare and Social Assistance is still the only sector that has more jobs today than it did a year ago, so “doing worse” simply means smaller job growth, whereas in the other sectors, “doing better” means fewer job losses than in prior months.

Another piece of good news is that the improvement in jobs in the Pittsburgh Region was as good or better than the improvement nationally. In past recessions, our regional economy recovered more slowly than the U.S. as a whole; so far, that is not happening this time, but it’s still very early to make that judgment.

Moreover, our recovery in November was stronger than most of the large regions in the country. We had the 12th smallest loss of jobs between November 2008 and November 2009 among the top 40 regions in the country, and the 12th best improvement between October and November.

But simply comparing November 2009 to November 2008 is misleading, because we first started to lose jobs last November, when most regions had been losing them for six months prior to that. If you compare November 2009 to November 2007 (a 24 month period), the Pittsburgh Region had the 10th smallest job loss among the top 40 regions. We lost 32,300 jobs over the past two years, whereas Detroit has lost 228,000 jobs, Phoenix has lost 211,000 jobs, Cleveland has lost 71,000 jobs, and Charlotte has lost 63,000 jobs.

Nonetheless, despite the improvements over the past two months. we have a long way to go to recover the 32,000 jobs we’ve lost over the past two years and get back on track for economic growth. How long will that take?

One way to look at it is in comparison to the 2001-2003 recession. It took almost three years for our region to stop losing jobs and five years to begin growing jobs at even a modest rate; in fact, our rate of job growth in the post-recession period was so slow, we never recovered all of the jobs we lost before the current recession hit. The current recession hit us with job losses twice as great as the last recession, so it could take even longer for us to recover than last time.

Another way to look at it is that the fastest job growth the region has experienced in recent years was between 1999 and 2000, when jobs increased by 1.8%. Even if we could match that rate beginning immediately, it would take us nearly 2 years to get back to where we were before the current recession hit. If we grow at the average growth rate we experienced in the 1990s (about 1.3%), it will take us over 2 years to get back to where we were. And if we grow at the growth rate we experienced between 2005 and 2007 (only 0.5%), it will take us five years just to get back to where we were in 2007.

All of this makes it clear that we can’t take economic recovery for granted; aggressive efforts to attract entrepreneurs, create new businesses, provide investment capital for those businesses, and help existing businesses grow are critical to the region’s future.


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