Sunday, December 01, 2013

Regional Job Growth Increasing, But Not Enough

The Pittsburgh Region’s economy has been on a bit of roller coaster ride over the past five years. The most recent data on jobs suggest that our economy may be on the upswing again, but our growth rate is still slower than we need it to be, and we’ve continued to fall behind the rest of the country in manufacturing.

It was exactly five years ago, in November, 2008, that the Pittsburgh Region first started losing jobs as the recession swept across the country. By October 2009, southwestern Pennsylvania had 35,000 fewer jobs, and we had a total of 88,000 people looking for work, the highest number in over 20 years.

It took two years until the total number of jobs in the Pittsburgh Region returned to the levels reached just before the recession hit. Pittsburgh attracted a lot of national attention in the initial recovery period because our job growth rate was significantly faster than the U.S. as a whole and because we had lost fewer jobs during the recession than most regions.

However, despite the growth in jobs, unemployment in the Pittsburgh Region remained high because the jobs being created were in different sectors than where they were lost. In particular, the region lost 10,900 manufacturing jobs during the recession (nearly 1/3 of the total jobs lost in 2009), but there were only 2,200 new manufacturing jobs among the total 35,600 jobs created in the region from 2009-2011. The majority (20,000) of new jobs were in the professional and business services and leisure and hospitality industries.

Then, last fall, job growth in Pittsburgh began to stagnate. Our rate of job growth dropped by 30% from 2011 to 2012, even as the rate of job growth in the U.S. accelerated, and the region’s job growth was the third-lowest among the top 40 regions between October 2011 and October 2012. The stagnation persisted well into this year. In the first six months of 2013, Pittsburgh’s job growth was the seventh slowest among the top 40 regions.

The good news is that in the past few months, job creation in the region has accelerated significantly. In October 2013, the U.S. Bureau of Labor Statistics reports that there were 20,200 more jobs in the region than a year earlier (October 2012). That’s the second-biggest 12-month increase in jobs in October in the past 20 years (both in absolute and percentage terms), and it’s almost as big as the previous record for October, the 20,400 jobs added between 1999 and 2000. Job growth in July, August, and September of 2013 was also among the highest experienced in those months in the past two decades.

The bad news is that even 20,000 net new jobs in a twelve-month period still falls far short of where we need to be:

• 20,000 new jobs in a year is less than we need merely to ensure the region’s high school graduates can find work. High schools in the Pittsburgh metropolitan area have been graduating between 23,000 and 25,000 students each year since the recession began, for a total of nearly 120,000 new workers over the past 5 years. Yet we only have 28,700 more jobs today than five years ago, which is barely enough for the 27,000 high school grads who said they were going directly into the workforce over the past 5 years, much less the more than 90,000 others who will be looking for jobs after completing college.

• There were still over 90,000 southwestern Pennsylvanians unemployed in August (the most recent data available). Even if the region continues to create 20,000 net new jobs per year and even if unemployed workers could qualify for all of those jobs, it would still take at least two years just to reduce unemployment to pre-recession levels.

Perhaps the worst news of all is that hidden within the increase in total jobs is the fact that one of our most important economic sectors – manufacturing – lost 1,200 jobs over the past year, a significant setback for the thousands of unemployed manufacturing workers who are still trying to find work. In contrast, 19 of the top 40 metropolitan regions added manufacturing jobs over the past year, and only 5 other major regions had bigger losses of manufacturing jobs than Pittsburgh.

Moreover, we aren’t just losing manufacturing jobs, we’re losing entire manufacturing businesses. The Bureau of Labor Statistics reports that as of the first quarter of 2013 (the most recent data available), there were 237 fewer manufacturing firms in the Pittsburgh Region than five years earlier, a more than 8% reduction. Losing manufacturing firms will make it even harder to grow new manufacturing jobs in the future. 

Although the region continues to experience strong job growth in other sectors such as professional services, higher education, healthcare, and finance, we can’t assume that will continue. In particular, the growing pressure to reduce healthcare costs, the increasing unaffordability of higher education, and federal cutbacks in research funding mean that slower growth or even reductions in our “eds and meds” sectors are on the horizon.

If we’re going to have a truly diverse and robust economy, we need to strengthen our manufacturing sector. Even in its weakened state, manufacturing still provides nearly 9% of worker earnings in our region, the third highest amount after business services, healthcare, and government. Further losses in manufacturing businesses and jobs will have a significant negative ripple effect on the rest of our economy. To truly revitalize our manufacturing sector, we should focus on three key things:

• The Governor and General Assembly must create an attractive business climate for manufacturing firms through competitive taxes and regulations, ready-to-go industrial sites, and well-maintained highways and bridges;

• Our public schools must ensure the region’s high school graduates are proficient in basic skills and encourage them to consider careers in manufacturing; and

• Regional economic development agencies must continue to encourage entrepreneurs to start and grow new manufacturing firms here by providing the startup capital, mentoring, and initial customers they need to be successful.

A version of this post appeared as the Regional Insights column in the December 1, 2013 edition of the Pittsburgh Post-Gazette



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