Saturday, June 19, 2010

Two Steps Forward, Then One Step Back

May statistics on jobs throw a bit of cold water on hopes that a strong economic recovery is underway in the Pittsburgh Region. After two straight months of improvement in March and April, including #1-in-the-nation growth in April, job creation in the Pittsburgh Region retreated in May.

The fact that May represented bad economic news for the region won’t be immediately obvious from the way the state releases job information or the way that the news media typically report statistics. What you’ll likely hear trumpeted is the fact that there were 10,000 more jobs in the region in May than there were in April. However, there are always about that many more jobs in May than in April due to seasonal factors, particularly hiring in the construction and leisure and hospitality sectors. Even last year, in the depths of the recession, the Pittsburgh region added 9,000 jobs in May.

So even though the Pittsburgh region added 10,000 jobs this year between April and May, compared to pre-recession job levels, the region was actually worse off in May than in April. In March 2010, our region had 35,600 fewer jobs (3.1%) than in March 2008; in April 2010, we had 32,200 fewer jobs (2.8%) than in April 2008 (i.e., an improvement); but in May 2010, we fell back to having 33,800 fewer jobs (2.9%) than in May 2008.

You might think this was just a minor setback until you learn that over 25% of the jobs added in May were 2,800 temporary Federal jobs with the Census. In fact, the last time the region saw a large increase in Federal jobs in the spring was in May, 2000, i.e., during the last Census.

If you take out government jobs and just look at private sector jobs, 2010 had the smallest increase in private sector jobs between April and May since 2001, and the fifth smallest May job growth in the last 20 years. In percentage terms, we’re further behind 2008 than we were in January.

Why compare jobs in 2010 to 2008 rather than 2009? Because what we really want to know is the extent to which we’ve recovered the jobs we lost during the recession (which started in 2008), not just whether we’re doing better than we were in the depths of the recession (in 2009). If you compare the 12 month change in jobs in May vs. April, it looks like we’re doing better – in May 2010, we had 0.7% fewer private sector jobs than in May 2009, compared to 1.4% fewer private sector jobs in March 2010 vs. March 2009. But that doesn’t mean job growth was twice as high in May as in March; most of that difference is due to the fact that we were losing jobs between March 2008 and May 2010, i.e., the denominator decreased, rather than the numerator improving. You can always make yourself look better if you compare yourself to a point when you were doing particularly badly.

So how does Pittsburgh’s weak performance in May compare to other regions? In April, we were #1 in the country in month-to-month job growth. In May, we were only 14th among the top 40 regions. We weren't alone in that; many regions with high rates of job growth in April relative to their peers slowed down considerably in May, and many of those with low job growth rates in April improved considerably. In part, this demonstrates that month-to-month changes can be highly volatile and very dependent on local conditions.

If one looks over a multi-month period, Pittsburgh is doing above average among other regions. Between January and May, total jobs in the Pittsburgh Region increased by 3.35%, the fifth highest growth among the top 40 regions, and private sector jobs in the Pittsburgh Region increased by 3.1%, the sixth highest growth among the top 40 regions.

In fact, in almost all subsectors of the economy, the Pittsburgh Region has outperformed other regions on average so far this year. The only exceptions are manufacturing, the information sector (which consists of businesses such as newspapers, television and radio stations, internet providers, etc.), education and health services, and “other services.”

The biggest gap in terms of absolute numbers of jobs is in education and health services. Jobs in these sectors increased by only 0.2% (one-fifth of one percent) in the Pittsburgh Region between January and May, whereas they grew by an average of 1.6% -- 8 times as fast – in the other top 40 regions. If these sectors had grown here at the average rate they grew in other regions, we would have had over 3,000 more jobs here in May than we actually did.

This gap is a combination of two things. First, job growth in the health care sector here was modest compared to other regions – an 0.8% increase in jobs, compared to job growth that was more than twice as large in regions as diverse as Cincinnati, Dallas, and Denver. Second, the Pittsburgh Region actually lost jobs in the private education sector between January and May, one of only 3 regions to do so among the 21 regions that report job counts for this sector. This included a loss of 1800 jobs in colleges, universities, and professional schools.

These gaps help to make clear that some of the economic characteristics that helped the region lose fewer jobs during the recession could actually slow its recovery. The health care sector was the only sector that consistently added significant numbers of jobs nationally during the recession, and because so many of our region’s jobs are in health care, that “recession-proof” quality meant that we lost a smaller proportion of our total jobs than other regions. However, growth in the national economy after the recession does not automatically translate into larger growth in healthcare, particularly in a region that is not adding new residents.

Significant job creation in the post-recession economy is more likely to occur through growth in other sectors, particularly manufacturing. Consequently, supporting the manufacturing sector should remain a top priority for the region and the state if we are to going to recover all of the jobs we lost during the recession and add net new jobs to attract new residents.


Post a Comment

<< Home