Regional Insights: Lessons for a better future

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The new year will begin with the nation still suffering from the effects of a recession that began five years ago. It has been called the Great Recession because it was the longest and worst national economic downturn since the Great Depression in the 1930s.

However, longtime Pittsburghers know the real Great Recession actually happened 30 years ago. Between 1979 and 1983, the U.S. experienced two back-to-back recessions as a result of high energy prices and efforts to control inflation. In January 1983, the U.S. unemployment rate reached 11.4 percent, nearly a full point higher than the peak rate of 10.6 percent that was reached during the most recent recession.

No part of the country suffered more back then than Pittsburgh. Between 1979 and 1983, the Pittsburgh region lost more than 110,000 jobs, almost 9 percent of total employment at the time.

Not surprisingly, unemployment in the region skyrocketed. At its peak, the unemployment rate reached 18.2 percent in January 1983, with more than 212,000 southwestern Pennsylvanians unemployed. Perhaps even more devastating was the loss of thousands of young people who moved away in search of work. Between 1982 and 1987, 82,000 people left the region's labor force, a 7 percent reduction.

Although many people think the problem was caused solely by the collapse of the steel industry, there were job losses nationally across all manufacturing sectors, and nearly one-fourth of the jobs in Pittsburgh at the time were in some type of manufacturing, not just steel. When the recession hit, Pittsburgh lost more than 95,000 manufacturing jobs in less than four years, one-third of the total manufacturing jobs in the region at the time.

It took until 1989 for the number of jobs in the region to return to 1979 levels. Although more than 100,000 net new jobs were added in the six years after 1983, that merely brought job levels back to where they had been before the recessions started. Since Pittsburgh lost more jobs than most regions did, it took longer for it to catch up. While jobs in the U.S. grew by 20 percent during the decade of the 1980s, the Pittsburgh region had no net job growth at all.

Part of the reason for our slow recovery was that manufacturing job losses didn't stop when total jobs hit bottom in 1983. Between 1983 and 1987, another 37,000 manufacturing jobs disappeared. The region had to rely on growth in service sectors such as health care, education and tourism to make up the shortfall.

Fast forward to today.

It would appear that the restructuring of the region's economy over the past 30 years has made our economy more resilient than other regions'. The statistics you hear all the time seem to prove it: Pittsburgh had one of the smallest job losses of any region in the country during the recession; our unemployment rate was below the national average during a recession for the first time in history; and we're one of only a handful of regions that has more jobs today than before the recession began.

But a closer look suggests that we're really not doing all that well:

• There are still more than 80,000 southwestern Pennsylvanians who are unemployed. That's 30,000 more people looking for work than before the recession started. The region's unemployment rate in October 2012 was 6.6 percent, dramatically higher than the 3.9 percent rate in October 2007 before the recession began. The fact that the unemployment rate is below the national average is small consolation for the tens of thousands of people struggling to find jobs here.

• While it's true that Pittsburgh lost fewer jobs during the recession than other regions, that was mostly because the region had created so few new jobs before the recession began. In fact, there were fewer jobs in the Pittsburgh region in 2007 than in 2000, making it one of only a small number of major regions in the country that hadn't recovered from the previous recession before the most recent recession began.

• Although Pittsburgh was adding jobs faster than other regions immediately after the recession ended in 2009, that's no longer true. Between November 2011 and November 2012, Pittsburgh had the ninth-worst job growth among the 40 largest regions in the country.

• Local boosters were quick to quote a Brookings Institution report saying Pittsburgh was one of only three U.S. regions that had "fully recovered" from the recession, but they failed to point out that the same report showed Pittsburgh was worse than more than half of the regions in the world in terms of growth in employment and real GDP per capita from 2011 to 2012.

Prior to 1980, we had benefited from having a large number of high-paying manufacturing jobs, but we suffered more than others during the 1982 recession because we were so dependent on manufacturing. However, rather than learning from history, we're repeating the mistakes of the past. Instead of having a more diversified economy, we've simply become dependent on a different group of industries, namely health care and higher education. Although those sectors helped us get through the recession, they're a risky bet for the future, because the growing unaffordability of both health care and higher education makes it unlikely that the growth we've seen there in the past will continue. In contrast, Pittsburgh now has fewer high-paying manufacturing jobs than half of the major regions in the U.S.

So instead of patting ourselves on the back, let's make a New Year's resolution to encourage job growth in a wide range of sectors and to enable our region to succeed in an increasingly competitive global economy.

Let's resolve that Pittsburgh will be seen as one of the best places in the world for manufacturing firms to locate. To do that, we need to create a truly competitive state tax structure, prepare ready-to-go industrial sites all across the region, and educate our young people so they have both the skills and willingness to work in high-paying manufacturing jobs.

Let's resolve that Pittsburgh will also be seen as one of the best places in the world for entrepreneurs to start a new business. We need to ensure that there is sufficient startup capital available for every entrepreneur with an innovative idea and a solid business plan, and enough customers willing to try their innovative products and services.

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Harold D. Miller is president of Future Strategies LLC and adjunct professor of public policy and management at Carnegie Mellon University. He publishes, an Internet resource on regional economic and civic issues.


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