Job Health Not So Simple

If you read the daily newspaper, listen to news radio or watch the local TV news, you’ll get a report in the first week of every month on the latest Pittsburgh unemployment rate. It is a news tradition of decades. The data come from the state Dept. of Labor and Industry one month after the fact — May’s numbers in June, June’s in July, etc.

The state also provides the number of jobs gained and lost during the month in total and by classification. That doesn’t get the same attention, though. In fact, in many instances, it gets no attention at all, editors being content to “go with the unemployment number.” That’s too bad, not because the needs of the unemployed are insignificant — they are significant. It’s too bad because this region’s principal economic challenge is job creation. The subject needs more attention than it gets, and insofar as it is able, our regional indicator project, www.pittsburghtoday.org , is determined to provide it.

Some facts: Between 1996 and 2006 the United States added 13,478,000 additional jobs bringing the total Americans at work last year to 136,174,000, an increase of 10.97 percent. During the decade, the 15 benchmark cities with which Pittsburgh compares itself added an average of 82,090 jobs for an increase of 6.4 percent. Pittsburgh’s numbers for the last 10 years were soft any way you look at it: 44,100 new jobs for a total of 1,137,400, an increase of 4 percent.

There was quite a stir in April when the final jobs numbers for 2006 came out. The state reduced the year-over-year increase it had been predicting for 2006 by more than half. Again, Pittsburgh job growth (0.4 percent) had trailed the nation (1.8 percent), the benchmark city average (.89 percent) and all but two benchmark cities, Detroit (-2 percent) and Cleveland (.36 percent). The chorus of lament and explanation was predictable in all its parts.

I am going to pause here for a moment to stick my neck out: First, year-over-year and month-over-month numbers are important, but five years is a better measuring period for job growth and a decade even better than that.

Second, bemoaning “outsourcing,” “hamburger-flipper” jobs, the loss of one-wage earner families and a nuclear household (mom, dad and the kids) supported by a “living wage” is not a constructive use of social energy. There is no going back.

Third: Diversity and in-migration are not values in and of themselves, but an important by-product of job growth. We developed a skewed notion on this subject when Richard Florida, the CMU social scientist, pointed out that diversity is a characteristic of prosperous American cities. Look to communities with artists, gays, racial polyglots, Ph.D. candidates, if you want to find good economic times, he said. The description was apt, but not the dynamic. Diversity did not bring good times to Berkeley and Austin. The universities of California and Texas brought them, along with state and federal agencies and dozens of technology companies that provided the work. That work attracted people of talent in much the same way that steel and other metals drew people from around the world to Pittsburgh 120 years ago. Diversity followed; it did not lead.

Fourth: Be wary of the glib comparison and the one-size-fits-all explanation. Pittsburgh is in the center of the nation’s northeast quadrant, which has a unique industrial, climatic and demographic heritage. That reality is transcendent. (See the cities in the accompanying tables against which Pittsburgh is measured, some of which are in that quadrant and some not.) During the decade, one city, Charlotte, did very well, five did better than the nation (Denver, Indianapolis, Richmond, Baltimore and Minneapolis), three performed close to the national norm on jobs (Cincinnati, Philadelphia and Kansas City) and six were not in the national ballpark. These last are, in descending order, St. Louis, Boston, Pittsburgh, Milwaukee, Cleveland and Detroit. There are also charts for those cities during the past five years and for 2006 vs. 2005.

You will also notice that, though the general order holds true for the past five years and 2005 to 2006, there are some significant changes. Also, without exception, the last five years have been very much harder across the board, with so-called “hot” cities like Boston and Denver seeing job numbers more like Pittsburgh and Milwaukee than Richmond and Indianapolis. Finally, the most noteworthy move of the year was recorded by decade laggard St. Louis, which added 13,400 jobs for a 3.9 percent increase, highest of the 15 benchmark cities. The start of something? Come back in 2016.

The other shoe in these decade, five-year and year-to-year measures is wages. Unfortunately, when I wrote this in May, the numbers for 2006 were not available, but if you look at the chart at the beginning of this article, you will see that Pittsburgh’s average wage of $38,802 in 2005 was the lowest of 15 benchmark cities and $4,500 or 9.2 percent below the benchmark average. It was also almost $2,000 lower than the average national wage, which in 2005 was $40,671.

The pat rationalization for this disparity has been that the cost of living is low in Pittsburgh, though finding exceptions to challenge that explanation is easily accomplished. The law of supply and demand may illuminate the disparity as well; the price of Pittsburgh labor is low because a stay-at-home population and static growth define a market that is more than able to supply all its labor needs from within.

But what about jobs? What does Pittsburgh do about growing more jobs? I would leave the strategizing to others, but would certainly suggest that the best place to start might be where the region has had well-known success. Education and health services is the only sector of the local economy that has grown jobs year over year since 1995. Every other jobs category has had at least one year when it fell back. There were 223,600 people working in Pittsburgh’s health and educational institutions last year, 16,500 more than in 2005 and 39,400 more than 10 years ago, an increase of 21 percent for the decade.

How big a deal is that? Only more populous benchmark cities Boston, Detroit, Philadelphia and Minneapolis had more people employed last year in health and education. And no benchmark cities but those four and Baltimore added as many jobs last year in this category as did Pittsburgh. I know that caution and pessimism are so ingrained in the regional psyche that even to suggest that a strategy of building on what has been a clear positive is asking for trouble; to go so far as to suggest that universities and hospitals and other health institutions, rather than an edifice built on shifting sands, may be an exploitable and under-valued comparative advantage, is suicidal. But there it is.

The second place to look for opportunities is within the region’s largest jobs category —trade, transportation and utilities — which employed 226,500 in 2006. It has three principal components: retailing (132,200), wholesaling (48,800) and transportation and utilities (45,500). Retailing has been flat for a decade (+400) and wholesaling has had a slow but steady rise (+2,300), but both are in positive territory. Because of the USAir contretemps of the past decade, job totals in this category show a new loss of 1,900. If you remove the almost 10,000 job losses related to USAir from the equation, transportation and utilities looks like fertile territory.

The third-largest jobs category and another area of opportunity is what was once Pittsburgh’s bedrock: goods-producing jobs. Manufacturing at 100,100 jobs is this category’s largest component, with natural resources, mining and construction accounting for all but a scattering of the remainder. Because manufacturing continues to shrink, (15,000 jobs lost in the last four years, 19 percent lost for the decade), it gets less attention than it should. But 100,000 of the region’s best-paying jobs matter, particularly when you add to them the growing sector of mining, construction and natural resources, where the region enjoys a unique advantage because of its geology. Many of what we know as high-tech jobs also fall under manufacturing.

The most recent data provide three other insights. First, leisure and hospitality (105,800) has shown increases for a decade, trailing only education and health services when it comes to steady year-over-year growth. Second, the other big service categories, professional and business services and financial activities, have been growing, and, given the historic importance of the law and banking in the regional economy, have always been an important source of work. But over the decade they have grown at a more uneven pace than some other sectors — leisure, 13.8 percent; business services, 12.6 percent, finance, 7.3 percent.

Lastly, trash government if you will, but it is an important generator of work in all major U.S. cities including Austin and Berkeley, but not in Pittsburgh. There were 127,400 jobs in the government sector in 2006 vs. 127,700 10 years ago. No other benchmark city experienced a loss; all grew, most substantially. The benchmark average was 179,900 jobs in 2006, an increase of 9.2 percent for the decade. Even Cleveland, which experienced a similar but slightly more severe contraction than Pittsburgh, can look to government as a decade bright spot — up 4,800 jobs to 139,400.

As with wages, there is a glib explanation: It’s demographics, stupid! Schools account for most government jobs and they are shrinking like mad. Again, I would very strongly suggest that if you look at those benchmark cities, Pittsburgh is not alone in having a shrinking school-age population, only in ignoring opportunities for work that serve most of the nation well.