Sunday, September 04, 2011

The Mismatch Between Jobs and Skills in the Recovery

It’s now been over three years since the national recession began, and although job losses bottomed out two years ago, unemployment remains high, and there are growing concerns that we’re facing a “double-dip” recession.

If you look at the statistics on jobs, the Pittsburgh Region looks like it’s doing pretty well. After losing over 35,000 jobs during the recession (July 2008 – July 2009), the region has added 27,800 jobs over the past two years (July 2009 – July 2011), i.e., we’ve gained back about 80% of the total number of jobs we lost during the recession. Although that’s been a slow recovery, it’s actually better than most regions have done; over the past two years, we’ve had the 9th highest rate of job growth of any of the 40 largest regions in the country. In contrast, seven major regions, including places like Atlanta, Indianapolis, and Kansas City, have continued to lose jobs in each of the last two years.

But if you look at the statistics on unemployment, you see a very different picture. The seasonally adjusted unemployment rate here in July was 7.4%, hardly changed from the 7.6% rate in July 2009 when job losses were near their peak. There are still more than 92,000 southwestern Pennsylvanians who are unemployed, 27,000 more than before the recession started.

If the region has been adding thousands of new jobs, why has unemployment remained so stubbornly high? A major reason is that we have not been creating jobs in the same sectors where we lost them. During the recession, our biggest job losses were in manufacturing (11,600 net jobs lost just in the 12 months between July 2008 and July 2009), in professional and business services (8,900 jobs lost), in construction (6,100 jobs lost), and in retail (3,900 jobs lost). Since then, the professional and business services sector has restored all of the 8,900 jobs it lost, but only 2,100 manufacturing jobs have been added (18% of the total number lost during the recession), only 1,400 retail jobs have been created (36% of the total number lost), and there has been no net gain at all in construction jobs since 2009.

Two of our other sectors lost jobs during the recovery instead of adding them. The information sector (which includes everything from newspapers to telephones) has shed 1,600 jobs over the past two years on top of the 1,000 it lost during the recession, and we have 1,100 fewer government jobs now than we did three years ago.

Most of the job growth we’ve experienced during the recovery has been in a different set of industries, some of which experienced no net loss of jobs at all during the recession. Over the past two years, our health care and social services sector has added 5,800 jobs on top of the 1,500 jobs it created during the recession for total three-year growth of 7,300 jobs; higher education has added 400 jobs on top of the 2,700 jobs it created from 2008 to 2009; and the mining industry has added a total of 2,800 jobs over the past three years. In addition, the leisure and hospitality industry added 3,900 jobs over the past two years, more than replacing the 2,300 it lost in 2009, for net three-year growth of 1,600 jobs.

So if you look just at the construction, government, information, manufacturing, retail trade, and other services sectors, there are still 23,000 fewer jobs here today than there were three years ago. In the total job count for the region, that is offset by the fact that there are 14,000 more jobs in finance, health care and social assistance, higher education, and mining. But most of the jobs in those latter four sectors require special training or experience that most construction, production, and retail workers aren’t likely to have. Consequently, many of the people who lost their jobs during the recession may still be unemployed simply because the kind of work they do hasn’t come back to the region.

To solve this mismatch, our primary focus should be on rebuilding our manufacturing base. We still have almost 10,000 fewer manufacturing jobs than we did just three years ago, a bigger job loss by far than in any other sector. Although it’s good news that we’ve added 1,500 manufacturing jobs over the past year, fourteen other regions have experienced faster growth in manufacturing than we have, and manufacturing jobs have grown twice as fast over the past year in regions like Cincinnati, Milwaukee, Seattle, and St. Louis as they have in Pittsburgh. Even Detroit has regained over 50% of the manufacturing jobs it lost during the recession, while Pittsburgh has recovered fewer than 20%.

Some might argue that we should simply retrain unemployed manufacturing workers for jobs in health care, since that’s where we’ve experienced our largest and most consistent job growth in recent years. However, national and local efforts to control healthcare spending make it unlikely that the healthcare sector will keep creating jobs the way it has in recent years. In fact, because so many of Pittsburgh’s current jobs are in healthcare (the second highest percentage of any region), slower growth in healthcare will have a disproportionately negative impact on our region, making it all the more important to encourage more growth in manufacturing and other industries.

How can we increase the number of manufacturing jobs? By helping manufacturing firms access capital (both business loans and startup investments), developing ready-to-use industrial sites and buildings, encouraging more high school students to pursue manufacturing careers (some of our manufacturers have jobs available but can’t find qualified workers), helping small firms access international markets, and creating a more supportive tax and regulatory climate.

Growth in manufacturing will not only bring money into the region from around the world, it will also help create jobs in the construction industry and other struggling sectors of our economy.

(A version of this post appeared as the Regional Insights column in the Sunday, September 4, 2011 Pittsburgh Post-Gazette.)


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