Tuesday, July 22, 2008

Teetering on the Brink

In June, the U.S. economy lost jobs (on a year-over-year basis) for the first time since November 2003. Compared to June of 2007, there were 170,000 fewer jobs in the U.S. economy, a pretty strong sign that we’re in a recession.

In contrast, the Pittsburgh Region still had more jobs in June than it did the prior year, although not by much – we had 700 more jobs in June 2008 than in June of 2007, a mere 6/10 of a percent increase. In contrast, in April, the region’s economy was ahead by 8,400 jobs over the prior year. Each month has brought the Pittsburgh Region closer and closer to the point where we could start losing some of the job gains we’ve waited so long to see.

Although that may sound grim, we’re still doing a lot better than many other parts of the country, not only our “rust belt” neighbors, but places in the sunbelt, too. Although the 700 new jobs here may not sound like much, 16 of the top 40 regions would have been happy to have them, since they lost jobs between June 2007 and June 2008. Providence, Rhode Island lost 13,000 jobs, or more than 2% of its total employment base. Tampa lost 23,000 jobs. Phoenix lost 26,000 jobs. San Diego lost 4,900 jobs. So we’re doing pretty well compared to a lot of sunbelt regions.

If you dig behind the totals, you can find some even better news. Private sector jobs in the Pittsburgh Region increased by 1,400 in June. In percentage terms, that’s the 18th best performance out of the top 40 regions. In contrast, Silicon Valley only created 100 private sector jobs (fewer than 1/10 as many as we did) during the same period. The economies in most other regions are being supported by growth in government jobs, whereas ours is actually being slowed by losses in government jobs. The Pittsburgh Region had a net loss of 800 government jobs from June 2007 to June 2008, one of only nine of the top 40 regions to actually lose government jobs. (As noted in previous articles, although we have a lot of different government entities here, they don’t collectively add up to the size of government in other places, and our population losses mean that we don’t need more schools, more police, etc. the way other regions do.)

The biggest contributor to our economy continues to be health care; health care and social services added 3,600 jobs over the past year. However, it’s not that our health care sector is growing unusually rapidly; in fact, our job growth in health care was about average among the top 40 regions. But as explained in previous articles, health care represents an unusually large share of our economy, and so even moderate growth there has an strong stabilizing effect on our economy.

Our professional and business services sector wasn’t far behind health care in terms of job creation; we had 2,300 more jobs there in June than a year ago. But in contrast to health care, our professional and business services sector is a powerhouse relative to other regions – we had the 10th highest growth rate in that sector among the top 40 regions. Our region created professional and business services at double the rate that Chicago, Minneapolis, Philadelphia did, and more than 5 times the rate of growth in San Diego and Silicon Valley.

On the other side of the ledger, our biggest job losses occurred in manufacturing (1,900 fewer jobs than a year ago), retail (1,700 fewer jobs), and transportation and warehousing (1,300 jobs). We’ve also lost hundreds of jobs in the publishing and information sector (800 jobs), government (700 jobs), and the financial sector (400 jobs).

But here again, good news and bad news can be relative. Although the loss of manufacturing jobs will have serious ripple effects throughout our economy, all but 5 of the other large regions in the country lost manufacturing jobs, too. We were fortunate that our losses were much smaller than many other places – 11 regions lost 2-3 times as many of their manufacturing jobs (in percentage terms) as we did.

Recent news stories have pointed out that, thanks to good management at local banks like PNC, we haven’t experienced the kinds of problems in the financial sector as other regions have, and the job statistics prove that – although our region lost 400 jobs in the financial sector over the past year, in percentage terms that was actually the 13th best performance among the top 40 regions. As a comparison, Miami, Phoenix, and San Diego each lost 5,000 jobs in the financial sector in the past year.

So in terms of net job growth, although we’re teetering on the brink, we’re holding our own for now. We have several large, important economic sectors that are outperforming most other regions, and if that keeps up, it could help to keep our regional economy’s head above water, even as the U.S. as a whole takes a temporary dive.


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