Sunday, September 02, 2012

Pittsburgh's Job Growth Isn’t Helping the Unemployed

In January 2012, it looked as though Southwestern Pennsylvania was poised to be a national leader in job creation. The Pittsburgh Region’s 2.1% job growth in 2011 was nearly double the 1.1% national rate and the 8th highest rate of growth among the largest 40 metropolitan areas in the country.

By Labor Day 2012, however, things no longer look quite so rosy. According to U.S. Bureau of Labor Statistics data, the rate of job growth in Pittsburgh Region has slowed, while job growth in most other regions has accelerated. Our 12-month rate of private sector job creation fell from 2.4% in July 2011 (the 11th fastest growth among the top 40 regions) to 1.9% in July 2012 (ranking only 21st out of 40). Regions like Boston, Cincinnati, Columbus, Detroit, and Indianapolis all created jobs at significantly higher rates than Pittsburgh over the past year.

The fact that Pittsburgh lost fewer jobs during the recession than other regions means that even with slower job growth, Pittsburgh is still ahead of other regions compared to the immediate pre-recession days. Indeed, Pittsburgh is one of only 8 major regions with more jobs today than in July 2008. (The only other regions that have seen positive net job growth over the past four years are Austin, Boston, Dallas, Houston, New Orleans, San Antonio, and Washington DC.)

But having more jobs today than before the recession started is not the same thing as saying that we’ve recovered all of the jobs we lost during the recession. In fact, the increase in total jobs here continues to mask the fact that in many important industries, there are still significantly fewer jobs in our region today than before the recession began. For example, in July 2012, we have 9,800 fewer manufacturing jobs, 8,400 fewer construction jobs, 2,400 fewer jobs in the information sector, and 700 fewer retail jobs than we did in July 2008.

Our biggest loss of jobs during the recession was in the manufacturing sector. In the 12 months between July 2008 and July 2009, we lost 11,600 manufacturing jobs, 12% of the total manufacturing jobs in the region. In the last 36 months (July 2009-July 2012), only 1,800 manufacturing jobs (16% of what we lost) have returned. In contrast, regions like Cincinnati, Detroit, Milwaukee, and Seattle have recovered 50%-100% of the manufacturing jobs they lost during the recession.

Most of the recent job growth we’ve experienced has been in industries other than those which lost the bulk of the jobs during the recession. Our two biggest job creators over the past three years have been the professional and business services industry and the leisure and hospitality industry; those two sectors created more than half of our net new jobs since 2009.

But when jobs are created in different industries than where they were lost, many of the people who lost jobs will have serious problems finding work. Jobs in law firms and accounting firms require different training and skills than jobs in manufacturing and construction, so new jobs in the former don’t necessarily reduce unemployment in the latter. This is not just a Pittsburgh problem, but a national problem. The U.S. Bureau of Labor Statistics looked at long-tenured workers (those who had worked for an employer for more than three years) who had been laid off during the recession, and determined that only 56% had found work by January 2012. Of those who had, 14% were only working part time, and another 21% were earning 80% or less of what they made in their previous job.

So while it’s true that in June, the Pittsburgh Region had more jobs than at any time in its history, it’s unfortunately also true that we had more people unemployed than at any time in the past quarter-century. In July 2012, there were 97,200 people unemployed in the Pittsburgh Region, over 30,000 more than in July 2008 when the recession began. Except for July 2010, when the number of unemployed was just slightly higher (97,500), that’s the largest number of people unemployed in any July since 1985. And it’s getting worse, not better: the number of unemployed people here has increased for three months in row.

Unemployment in Pittsburgh remains high not only because jobs haven’t returned to the industries where layoffs occurred, but because the region’s labor force has been growing. For years we lamented the fact that people were leaving the region and the population was declining. That’s now changed – the region’s labor force grew by over 57,000 in the past seven years. Our new problem is that the rate of job creation in the region isn’t keeping up with the growth in the labor force. Over the past two years, even though employment increased by 37,700, the labor force increased by almost as much (37,400), which means that unemployment only decreased by 300.

What do we need to do?

First of all, regional economic development efforts need to concentrate on manufacturing, where most of our jobs were lost during the recession. Although manufacturing has been one of the leaders in national growth, it has lagged behind in Pittsburgh. We won’t make up this gap with one or two new plants; we need to encourage more entrepreneurship and help our existing manufacturing firms to expand by creating a more competitive business climate and ensuring manufacturing businesses can get the capital they need for growth.

Second, job training efforts need to focus on preparing individuals for jobs in sectors where job growth is likely to occur. In many manufacturing firms, jobs aren’t increasing simply because there aren’t qualified workers to fill them. We can’t count on higher education and health care continuing to drive our economy, because the unaffordably high costs of both will likely result in slower growth or even cutbacks over the next few years. In fact, many high school graduates would be better off pursuing careers in manufacturing than immediately going off to college.

Although it’s great that Pittsburgh continues to get high national rankings for quality of life, it doesn’t mean much if people who want to live here can’t find good jobs. Regional leaders should commit themselves to getting the unemployment rate back down to pre-recession levels by Labor Day 2013.

(A version of this post appeared as the "Regional Insights" column in the Sunday, September 2, 2012 Pittsburgh Post-Gazette.)


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