Recession hit region lightly but recovery not as upbeat

Pittsburgh region's economy 8th-strongest of top 100 U.S. metro areas during recession

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Perhaps rather than calling it the Great Recession, Pittsburghers would be better to refer to this last economic dip as the Middling Recession.

That's because while Pittsburgh did feel the reverberations from the recession, the dominant influence of education and health care on the local economy cushioned the region as the economy fell. But since those sectors are not huge growth engines, that means the region is also experiencing a tepid recovery.

When ranking the top 100 metro areas and how they fared in the recession, the Brookings Institution's Metropolitan Policy Program determined that overall, Pittsburgh's economy was the eighth-strongest performing throughout this recession.

"That's because it was hit relatively lightly by the recession, and its recovery has been relatively decent," said Howard Wial, an economist at the Brookings Institution.

The high rank was not given because of a strong recovery, but because the Pittsburgh area was the third least hard hit by the economic troubles that accompanied the collapse of the housing bubble and the Wall Street failures.

This region suffered only a 3.4 percent loss of employment, which is a lot but not when you consider that New Orleans experienced a 28.9 percent decline in the number of jobs before it hit bottom.

A combination of circumstances protected the Pittsburgh region from taking a big hit during the recession that began in December 2007. One of the big reasons for Pittsburgh's stability was its industries. The local economy is not dependent on auto manufacturing, like Detroit and Youngstown, Ohio, which were heavily affected.

"In general, Pittsburgh had a more stable economy because of the dominance of higher education and health care," Mr. Wial said.

As the national unemployment rate hit 10.1 percent after the financial collapse, the Pittsburgh metropolitan statistical area topped out at 8.8 percent unemployment, which means a higher percentage of the labor force had jobs and therefore could continue to put money into the local economy.

"Layoffs never really took hold of the Pittsburgh economy and its major industries," said Kurt Rankin, an economist with PNC Financial Services, based here.

The Brookings report shows that Pittsburgh, however lightly hit, has not rebounded as well as other areas.

In a study that examined that issue, the Brookings researchers looked at the top 100 metropolitan areas and how they were doing three years after the first quarter of four recessions: 1981, 1990, 2001 and 2007.

When compared to other metropolitan areas in the recovery on the jobs factor, Pittsburgh's ranking was 27th. Pittsburgh has recovered 97.7 percent of the jobs it lost during the recession.

Pittsburgh's real Great Recession may have been in 1981 when even three years out, the region had recovered only 92.7 percent of its jobs. At that time, the nation as a whole had seen growth over and above the start of the recession, with the nation recovering 103.8 percent of the jobs lost in the recession.

This time Pittsburgh is doing slightly better than the rest of the nation, which is still suffering a jobs deficit and has recovered just 94.8 percent of the jobs lost in the recession. Those jobs that are still missing create a bigger deficit than it sounds like because of natural population growth.

Heidi Shierholz, an economist at the Economic Policy Institute in Washington, D.C., has calculated the job hole that the country is in with the benchmark of getting back to the level of unemployment before the recession. She said the combination of lost jobs and natural population growth means that the nation needs 11.3 million jobs to get back to where it was in 2007.

Another savior for Pittsburgh was that it was only lightly affected by the housing bust.

The Brookings study found that homes in the Pittsburgh region lost 5 percent of their value from the peak of housing prices to the trough, placing the region fourth in the country.

The worst place to own a house during the bust was Modesto, Calif., where homes lost 60.3 percent of their value when that bubble burst. Las Vegas, which is the city best known for its homes losing value in the bust, saw housing prices drop 57.6 percent, giving it the rank of 98 out of the largest 100 metros.

Mr. Rankin said falling housing prices affect not just the real estate market. Instead, he said housing prices affect how much people will spend because when they lose value in their homes, they lose wealth and that leads to reducing their spending.

The loss of wealth, even if they have the same amount of disposable income, leads to a recession mentality, Mr. Rankin said. The scrimping that goes along with that hits the locally owned businesses the hardest.

"Those regions that are able to drag the mentality out of the recession mentality have the economies that are going to do the best," he said.

Ann Belser: or 412-263-1699.


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