Sunday, April 07, 2013

Pittsburgh Worst in U.S. in Both Job Growth and Unemployment Reduction

Although Pittsburgh’s economy was doing better than most parts of the country during the early stages of recovery from the recession, that’s no longer true. In fact, Pittsburgh is now dead last in the country in job growth. The latest data from the U.S. Bureau of Labor Statistics show that jobs in the Pittsburgh Region grew by only 0.2% between February 2012 and February 2013, the slowest rate of job creation of any of the 40 largest metropolitan areas in the country. Most large regions grew ten times faster than Pittsburgh did over the past year.

A 0.2% growth rate means that the Pittsburgh Region added only 2,100 net new jobs last year. That’s fewer new jobs than any major region in the country except for Providence, Rhode Island, a region less than half our size. Other regions that are smaller than Pittsburgh created thousands more jobs than we did. For example, the Cleveland Region added 13,400 jobs over the past year, more than 6 times as many as Pittsburgh. Charlotte added 21,600 jobs, more than 10 times as many as southwestern Pennsylvania.

Not only is the Pittsburgh Region at the bottom in terms of job creation, it had the biggest increase in unemployment over the past year among the largest 40 regions in the country. That would be bad enough if unemployment were going up in all regions, as it was during the recession, but unemployment has been going down in most parts of the country over the past year. The Pittsburgh Region was one of only 11 major metropolitan regions in the country that saw its unemployment rate increase in the past year, and our unemployment rate was almost a full point higher in January than it was a year earlier (8.6% in January 2013 vs. 7.7% in January 2012), the largest increase by far of any major region.

The big increase in our unemployment rate means there are a lot more Pittsburghers unable to find work today than in the past. In January 2013, there were more than 108,000 people looking for work in the Pittsburgh Region, the largest number of people unemployed during January in over a quarter century. Even after adjusting for the fact that unemployment is typically higher in January than other months, there were nearly as many people unemployed at the beginning of this year as there were at the height of the recession three years ago. Pittsburgh now has the 13th highest unemployment rate among the top 40 regions in the country. Places like Baltimore, Boston, Cincinnati, Cleveland, Columbus, Kansas City, Milwaukee, Minneapolis, and St. Louis all have lower unemployment rates than we do.

If all of this is news to you, it shouldn’t be. Our job growth rate has been slipping and our unemployment rate has been increasing for almost a year. However, local civic boosters have ignored these troublesome statistics and instead celebrated the fact that the region’s labor force has been growing. The fact that the labor force grew last year would be indeed be good news except for the fact that job creation isn’t keeping up with the labor force growth. The 2,100 new jobs our region added last year didn’t come close to helping the more than 80,000 Pittsburghers who were looking for work throughout 2012, and adding 30,000 more people to the labor force only made it worse. Last fall, people were also touting the fact that we had a record high number of jobs, but that’s no longer true: there were 3,000 fewer jobs here in February 2013 than there were in February 2001, a dozen years ago.

Unemployment is continuing to increase because we’ve actually lost jobs over the past year in many of our biggest economic sectors. Our biggest loss of jobs last year was in government; we had 3,500 fewer government jobs in February 2013 than a year earlier, and 8,600 fewer than two years ago, a bigger percentage loss of government jobs than any other major region. But the problem isn’t just government jobs; we also had the third lowest growth rate of private sector jobs among the top 40 regions last year. We lost 2,600 jobs in the leisure and hospitality industry (one of only six of the top 40 regions to lose jobs in that sector over the past year); we lost 1,300 jobs in wholesale trade (the biggest percentage loss in that sector of any major region in the country); and we lost 500 manufacturing jobs (whereas most major regions added manufacturing jobs in 2012).

The two sectors that added the most jobs – professional and business services (4,000 jobs) and healthcare and social assistance (2,700 jobs) – both grew more slowly than in most other major regions. Our only economic sectors that added significant numbers of jobs and grew at a faster rate than other regions were financial services (1,700 jobs and a 2.4% growth rate) and mining (900 jobs and a 9.4% growth rate). The few sectors where we had growth barely created enough jobs to offset the losses in other sectors.

It’s time to stop pretending our economy is doing well or hoping that the next month’s job report will show that things have finally turned around. And we can’t blame federal policies when we’re doing worse than every other region in the country in almost all of our industries. The labor force will come to an abrupt end if those 100,000 unemployed Pittsburghers give up and move to one of the dozens of other regions that are adding thousands more jobs than we are. Our many cultural attractions and other amenities won’t mean much to people who can’t find work.

What do we need to do to jumpstart job growth?

Improve Pennsylvania’s Business Climate. Part of Pittsburgh’s problem is that it’s part of a state that’s also doing poorly economically. Over the past year, Pennsylvania had the 5th smallest growth in total jobs among the fifty states and the 6th smallest growth in private sector jobs. That’s not surprising since Pennsylvania has the second highest corporate income tax rate in the country and it’s the only state that taxes both business income and business assets. The Tax Foundation’s State Business Tax Climate Index ranks Pennsylvania as having the fifth worst corporate taxes in the country. To solve this, the Governor and General Assembly should eliminate the Capital Stock and Franchise Tax, reduce the Corporate Net Income Tax to 8.5% or less, and eliminate the cap on the Net Operating Loss Carryforward.

Improve Pittsburgh’s Business Climate. Pennsylvania is only part of Pittsburgh’s problem, however, since job growth in the Pittsburgh region is lower than almost any other region in the state. Since our biggest losses have been in manufacturing, that’s where our biggest economic development emphasis should be. We need to (1) make major investments in the infrastructure needed to support manufacturing firms, particularly ready-to-go industrial sites with easy access to airports, highways, railroads, and waterways; (2) create a workforce with the skills and willingness to work in manufacturing jobs; and (3) provide the capital entrepreneurs need to start and expand manufacturing businesses.

(A version of this post appeared as the Regional Insights column in the Sunday, April 7, 2013 edition of the Pittsburgh Post-Gazette.)


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