Have We Turned the Corner?
The recession of 2007-2009: I am sticking my neck way out… but I bet that when we look back 10 years from now, the last two years will be seen as the tipping point for the Pittsburgh region, a time when we finally got four decades of negative history behind us. The national recession, which still has us in its grip like the rest of the nation, has masked significant underlying change.
How and why do I say this? I was dead wrong 25 years ago when writing about a “Second Pittsburgh Renaissance” that proved to be more like the façade of an old Western town than it was tangible evidence that regional contraction had ended. And let us not gild the lily: the most recent news on jobs and unemployment is still very negative. Employment in February was 6,300 lower than it was in February 1997, and population figures for the larger region last year were down 3.4 percent from 2008. So what else is new?
The first piece of evidence that prompts me is to be found in figure 1. The regional labor force is made up of the people working or looking for work, and the total in February was 1,229,616. This was an increase of 13,145 from 2009, with no city recording a more positive number in these recessionary times. To understand why this is important, have a look at figure 2. It documents a labor force turnaround that began in 2006 after an up-and-down decade.It’s a change for the better that got lost in bad news in early 2008, when the national recession started to be felt in Pittsburgh.
Could both numbers be another tease? Sure, they could. At the end of the day, global trends will be determinative. But have a look at figure 3. It groups five different regional indicators that characterize Pittsburgh today and set it apart (as least in relative terms) in the midst of the worst recession since the 1930s.
Percentage job growth in the most recent 12 months: Pittsburgh is second among benchmark regions. Percentage job growth in the past 10 years: Pittsburgh is first among benchmark regions. Bankruptcy filings in the most recent year: Pittsburgh is lowest among benchmark regions. One-year housing price appreciation rate through 4Q 2009: Pittsburgh is first among benchmark regions. 20-year housing appreciation rate through 4Q 2009: Pittsburgh is at the mean among benchmark regions. Foreclosures as a percentage of total housing stock: Pittsburgh is lowest among benchmark regions. These data obviously indicate beyond argument that the recession has hit Pittsburgh hard. Here are record lows, all recorded in the last six months—33,000 job losses in November; 97,2300 people out of work in August; unemployment at 9.5 percent in February. But, as with all the press attention last summer on the eve of the G20 Summit, Pittsburgh is still looking good in the context of national and global economic trauma. If you examine www.pittsburghtoday, you will find other information that will give pause:
Housing prices in Pittsburgh are low and long have been; average weekly wages and average annual wages are low and long have been; air service options have been contracting significantly for 10 years; air and water quality are improving but remain poor by benchmark standards; the cost of living is relatively low because of very low housing costs; energy prices are high and, because road conditions are not good by national or benchmark standards, the additional cost of owning a car in Pittsburgh is also high. These remain significant challenges.
And there are others, with the most significant being the disconnect between how our assets, both public and private, are allocated and where they should be deployed if we are to capitalize on our opportunities. This is the Braddock Hospital and Pittsburgh pension debt syndrome—the giant hangover from an industrial past discussed in the Spring 2010 edition of Pittsburgh Quarterly. Close behind is another insight that is a product of the recent recession: a renewed appreciation that service jobs are not the be-all and end-all; that nurturing traditional enterprise greatly matters as well.
As economist Harold Miller has pointed out, manufacturing remains determinative, despite contraction, as a percentage of regional employment: “Two-thirds (6,800) of all manufacturing job losses, and nearly one-fourth of all the jobs lost in the recession, were in five traditional sub-sectors—primary metals, fabricated metal products, machine manufacturing, chemicals and non-metallic minerals (glass and cement/concrete)…These traditional sectors represent 46,000 jobs, more than half of all manufacturing jobs here, so the losses had a disproportionate effect on the overall economy. Pittsburgh has a higher concentration of manufacturing jobs in these five sectors than any large region in the country except Houston.”
Ours remains a steel town in many ways. We need to remember that.
Now have a look at figure 4. The latest demographic data on the region tell a story very similar to the workforce data. In the month of February, for the first time in 19 years and in the face of all the negatives mentioned above, the region saw population gains. This is not, I would suggest, a product of a Marcellus shale boom, but the cumulative effect of a great many different positives collectively tipping the balance.
All those people in Atlanta, Las Vegas and Phoenix who have lost jobs read the same favorable comparisons in Forbes and USAToday that we did last summer, and more of them might have joined our labor force in the last year if they had been able to dump their houses.
Even the historic bugaboo of being older than everyone else does not have the bite it once did. As members of my adult education class at Pitt keep telling me: “Don’t overlook us when you are inventorying assets, John. We may no longer be members of the Creative Class, but we have money, and we have relocated here or stayed here for a number of good reasons besides being close to our kids.”
If you were to summarize the evidence, Pittsburgh today is a steady Eddie; nothing to knock your socks off, but no longer vulnerable as it once was. But what next?
I would argue that the growing local consensus has it about right. Pittsburgh needs more of the same: Continued cleanup and development of its rivers for both commerce and recreation, and emphasis on education and health service, the employment category that has led the way for 20 years, particularly our institutions of higher learning. We should continue to develop our manufacturing of high-technology products, which today account for less than 20 percent of manufacturing jobs. Particularly, we should focus on nuclear energy, electrical equipment and supplies, medical equipment, information technology and life sciences—because these businesses are already here. We also could benefit significantly by drawing West Virginia University and the other institutions of the West Virginia panhandle and eastern Ohio into the center of regional life.
This may surprise you, but we also enjoy a comparative advantage in tourism and leisure that is exploitable. I leave to another article and time further subjects for remediation, of which there are many. We will be better able to determine a year from now where attention is needed and whether, in fact, there will be no turning back.