Wednesday, August 12, 2009

A Hundred Billion Dollar Region

Total personal income in the Pittsburgh Region crossed the $100 Billion mark last year for the first time in the region’s history, according to data released last week by the U.S. Department of Commerce. Personal income here grew by 3.8% between 2007 and 2008, more than the 3.4% growth in the U.S. as a whole, and the 10th biggest rate of growth among the top 40 regions in the country.

These data provide further evidence of the relative strength of the Pittsburgh economy in the midst of the national recession. They’re an important complement to data about job changes in the region, because they give us a sense of how we’re doing (a) in the types of jobs that are growing and declining (even if we lose fewer jobs than other regions, if we lose higher-paying jobs, it could affect families’ spending power more significantly), and (b) in non-wage income, such as interest earnings, health benefits, etc. One of the reasons this recession has been particularly problematic is the combination of a dramatic loss of jobs and a dramatic loss of investment income, but these data tell us that on balance, Pittsburgh was doing better than most places on all of these counts, at least as of last year.

Moreover, as noted in previous posts, our region’s high percentage of seniors helps to keep income growing here through both Social Security payments and Medicare benefits. Although seniors’ Social Security is often referred to as a “fixed income,” the automatic cost-of-living adjustment every year in Social Security makes it more reliable for supporting a household than many jobs or investments have been.

On a per capita basis, Pittsburgh looks even better – it had the 2nd biggest growth in per capita personal income of any of the top 40 regions in the country. Pittsburgh’s per capita income growth is high relative to other regions because the Census estimates that its population (the denominator in per capita income) declined in 2008. However, one needs to be a little cautious about using changes in per capita measures because population estimates become increasingly inaccurate as one gets farther away from the last census year (i.e., 2000). Although Census estimates indicate that our region’s population has continued to decline, labor market data suggest that it may actually be growing given the relative strength of the economy here. We won’t know for sure until after the 2010 Census results are tabulated.

The region with the slowest income growth may surprise you. It’s not Detroit, but Silicon Valley. Although Detroit lost more jobs last year than any other region, many of those workers were receiving unemployment benefits, and so income in the region still increased between 2007 and 2008. On the other hand, entrepreneurs and the employees at startup businesses in Silicon Valley may still be working, but earning a lot less than before. Silicon Valley actually saw its per capita income decrease in 2008, as did Atlanta, Charlotte, Phoenix, and New Orleans.

Although the Pittsburgh Region is doing well, you may also be surprised to learn that our immediate neighbors are doing even better. Whereas per capita income in Pittsburgh increased by 3.9% between 2007 and 2008, it increased by 6.6% in the Weirton-Steubenville area, by 6.2% in the Wheeling area, by 5.5% in Morgantown, and by 4.5% in Johnstown.

The Pittsburgh Region’s relatively high growth in personal income is good news for retailers, arts and cultural facilities, and charities, which rely on the residents of the region to have income to spend or contribute. Although each of these sectors has suffered over the past year, the impacts could have been much greater had we experienced the kinds of reductions in jobs and income that other regions have.

Whether this same success will continue this year remains to be seen. We've seen much greater losses in manufacturing jobs -- our highest-paying sector -- in 2009 than in 2008, but even so, we haven't seen the kinds of losses many other regions have, and we've had continuing growth in our strong health care and higher education sectors.


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