Commentary: Region like a glass: Both half full and half empty
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If you're confused about whether the Pittsburgh economy is doing well or poorly, it's not surprising. It seems as though every week there is a new report saying either that our region is one of the best-performing in the country or that we are lagging behind other communities on some issue.
In many ways, the region's economy is like the proverbial glass of water -- you can see it as either half full or half empty, depending on your perspective.
In the half-full category, the Pittsburgh region's economy has outperformed most parts of the country during the recent recession. As it turns out, we did even better than has previously been reported; the federal government announced in March that statistics reported during the fall significantly underestimated the amount of job creation which had occurred in Pittsburgh and many other regions. While the earlier figures led us to believe that southwestern Pennsylvania employers had added only 7,000 jobs in the second half of 2010 compared with 2009, the revised figures indicate that nearly twice as many net new jobs -- 13,800 in total -- were created. That's the fifth highest annual rate of job creation our region has experienced in the last two decades.
The revised data show the Pittsburgh region did better than most regions both going into the recession and in the initial stages of recovery. Between the fall of 2007 and the fall of 2009 when national job losses were peaking, only Austin, Texas; Houston; New Orleans; San Antonio; and Washington, D.C., had smaller percentage losses of jobs than Pittsburgh. Between the fall of 2009 and the fall of 2010, we had the fifth largest growth in jobs among the top 40 regions, behind only Nashville, Tenn., and the Texas regions of Austin, Dallas and Houston. As of the fall, we had recovered about 40 percent of the jobs we lost during the recession, the fifth best performance in the country on that measure, too.
What is the source of this recent job growth? Jobs were added in most of the economic sectors in the region between the fall of 2009 and the fall of 2010. Professional and business services added more than 5,000 jobs (a 3.3 percent increase), leisure and hospitality created 2,400 new jobs (a 2.2 percent increase), and even our manufacturing sector added 1,100 jobs (a 1.3 percent increase). Mining added 1,600 new jobs, a whopping 29 percent increase, which is likely due to the Marcellus Shale drilling. Many of the new jobs in professional and business services may also be related to the Marcellus Shale, since that sector includes the business headquarters and the professional and technical support services for drilling companies.
So if Pittsburgh has done so well recently, why is the glass also half empty? One reason is that our biggest job losses during the recession were in some of our highest-wage sectors, particularly manufacturing and construction. Over one-third of the job losses in southwestern Pennsylvania were in manufacturing, a higher percentage than almost any other region in the country. Although we gained more than 1,000 manufacturing jobs last year, that's fewer than 10 percent of the manufacturing jobs we lost during the recession. In the construction industry, we lost more than 1,000 jobs last year, on top of 6,300 construction jobs lost between 2007 and 2009. While the job growth in other sectors such as hospitality and retail will help many people, wages in those sectors are only one-third to one-half the wages in manufacturing and construction.
Moreover, part of the reason the Pittsburgh region lost relatively fewer jobs during the recession was that it had done so poorly in creating jobs before the recession. Between 2003 and 2007, the Pittsburgh region had the fifth-lowest rate of job growth among the top 40 regions in the country. In effect, the Pittsburgh region lost fewer jobs during the recession than other regions because it had fewer jobs to lose in the first place.
Indeed, unlike almost every other region of the country, we never regained all the jobs we lost in the 2002 recession before the 2008 recession hit. And despite the job gains last year, we still have not recovered the majority of jobs lost during the most recent recession. As a result, the Pittsburgh region had fewer jobs at the end of 2010 than it did in 1999, whereas most large regions have more.
Take Charlotte, N.C., as an example. During the recession, Charlotte lost 66,000 jobs, twice as many as the 33,000 jobs lost in Pittsburgh, and last year it regained only a few hundred of those jobs, whereas we regained nearly 14,000. But prior to the recession, Charlotte had created nearly 100,000 jobs in the space of four years, whereas Pittsburgh only created only 12,000. As a result, despite its poor performance during the recession, Charlotte still had 60,000 more jobs at the end of 2010 than it did 11 years earlier in 1999, whereas Pittsburgh had 3,000 fewer jobs. And the average worker in Charlotte earns 16 percent more than the average worker in Pittsburgh, even though the cost of living in Charlotte is roughly the same.
The important question facing us is not what has happened in the past, but what the future will hold. What can we do to ensure strong post-recession growth?
Since more than a third of the jobs we lost during the recession were in manufacturing, a critical focus for regional economic strategy must be rebuilding our diverse manufacturing base, which includes everything from our traditional steel industry to high-tech medical device firms. Manufacturing jobs bring money into the region from around the world, which in turn stimulates job creation in other sectors. We need to help existing manufacturing firms expand and help entrepreneurs start new manufacturing firms by providing access to capital (both business loans and startup investments) and a supportive tax and regulatory climate.
Growing the manufacturing sector can also help another of our struggling sectors -- the construction industry. In fact, state and local governments could jump-start both the construction industry and the manufacturing sector by aggressively investing in the development of additional industrial sites around the region as well as improving infrastructure at existing sites. (See "Regional Insights: Give Me Lots of Land for Manufacturing Jobs," Post-Gazette, Feb. 6, 2011.)
We also need to ensure that residents of the region are prepared for the jobs of the future. Many manufacturing firms report they have jobs available but cannot fill them because of a lack of qualified applicants. That's not surprising when more than one-fourth of the region's 11th-graders can't read adequately and more than one-third aren't proficient in mathematics. (See "Regional Insights: Our Children Aren't Ready for Jobs of the Future," Post-Gazette, Nov. 7, 2010.) We need better performance from our schools and we need more training programs focused on the specific needs of manufacturing firms.
Our glass will never be more than half full if Pittsburgh is merely the most livable region in the country. We also need to make the Pittsburgh region one of the best places to find a good job. The combination of job opportunities and a high quality of life will attract the new residents we need to finally reverse four decades of population loss.
First Published March 22, 2011 12:00 am