Despite the apparent good news in the Pittsburgh MSA's unemployment rate drop to 7.3 percent in March, mirroring the state and national monthly declines, the region's labor market picture is not a rosy one.

 

Seasonally adjusted household survey data show the labor force fell by 5,400 in March while the number of people employed declined by 2,300 resulting in a drop in unemployment of over 3,100 (3,200 rounded to nearest 100).  Thus, the unemployment rate slid by 0.2 percentage points because labor force fell faster than employment, not because the number of people working rose.

 

At the same time, the establishment survey of payroll employment, which is not seasonally adjusted, showed the 12 month growth in nonfarm jobs to be a very slow 2,400 while private sector employment managed only an anemic 4,900 rise. The February increase from a year earlier was 5,300. In late 2011 and the first half of 2012 job gains on a year over year basis were in the 20,000 to 30,000 range. The recent six month performance represents a major departure from those heady gains.

 

By important sector, mining and logging continues to post modest gains, construction enjoyed a slight pickup and manufacturing lost jobs compared to 12 months ago.  Trade, transportation and utilities lost 3,600 jobs, led by combined drop of 3,100 in wholesale and retail. On the positive side, financial activities and professional and business services are continuing their recent pattern of exceptional job growth with finance up 2,100 jobs over the last 12 months and business services rising 4,200, propelled by 5,300 more jobs in the professional and technical area. Health services continues to do well but has slowed somewhat posting an increase of 2,400 since March of 2012.

 

Interestingly, private education, which had been a mainstay of job growth during the lean recession years, saw a decline of 1,000 in employment compared to March a year ago. Similarly, leisure and hospitality, a fast growing sector just a few months ago, experienced a drop of 1,300 jobs compared to last March.

 

Government employment tumbled by 2,500.

 

In sum, the overall labor market has slowed dramatically in the first few months of 2013.  Still, it is encouraging to see the professional and business sector and financial services sector providing growth while other formerly faster growing sectors have weakened considerably. From here much will depend on the national economy and polices over which the local community has little control. But, an effort to reduce the power and influence of public sector unions would certainly be helpful, as would lowering the State's corporate profit tax rate.

 

Harrisburg is reportedly close to executing a deal on its finances, its incinerator, and some publicly owned assets that might allow an avoidance of Chapter 9 municipal bankruptcy.  We wrote about Harrisburg's predicament as an entrant into Act 47 and the mention of bankruptcy at several points (here, here, here, and here for example) but it looks like the City has a willing buyer for its incinerator and a private manager for its parking garages and some convincing to do for parties it is in debt to.   Plenty of additional cuts and a tax increase (which would require approval of the court to continue) are part of the mix.

 

The state obviously prefers to avoid a bankruptcy filing, particularly in the state capital, and that is why there were changes to the Act 47 statute that were made to prevent such an occurrence in Harrisburg. 

 

A column over the weekend pointed out that while state law spells out what has to happen to tax rates after an assessment in Allegheny County and its municipalities, along with school districts in Allegheny County and across the state, it is ultimately going to fall on the citizens-possibly with the help of elected officials that watch the public purse such as county and city controllers, the Auditor General's office, etc.-to pay attention to what has happened to their millage rates thus far and what will happen soon as school budgets are adopted for the coming fiscal year. 

 

The primary sponsor of the law that pertains to Allegheny County and its municipalities, Act 71 of 2005, noted "There's nothing in law that says [local officials who don't follow procedures] get thrown in jail...The whole purpose was not to let them hide behind these windfalls".

 

To reiterate, any non-school taxing body in Allegheny County would have to set their millage rate at a revenue neutral level, and then, in a separate action-which contrasts with the previous law-could take a vote to raise millage so that the taxing body could get up to 5% more in revenue.  If they wanted more, they could petition the courts, which happened in Monroeville. 

 

To the point of the column, we wrote about the question of "what happens if someone violates the law" in the February 2012 Brief mentioned above.  We did note that "A serious shortcoming of the laws is that they don't spell out who is in charge of ensuring that taxing bodies follow the requirement, nor specify what, if any, punishment should be imposed for refusal to follow statutory requirements...Clearly, refusal by elected officials to comply with state laws ought to be grounds for severe punishment, including possible removal from office".   

 

 

When we wrote our recent Brief on the pending reassessment in Washington County we noted that legislation had passed both chambers of the General Assembly that would make significant changes to the state-level oversight and guidance of property reassessments carried out by counties.  The Governor has signed that legislation and it now becomes known as Act 2 of 2013. 

 

The press release on the Governor's action does not say much but we did note that the most significant changes would bring some degree of uniformity to the process by creating a manual, training, and outlining best practices, but no changes to how often a reassessment has to be conducted or giving counties a tool to inform them to get ready for a reassessment. 

 

If it is April, it must be time for the American Lung Association to slander Pittsburgh with the claim that it has filthy air. And yes, it is the same old story. Virtually the entire southwest region of Pennsylvania is labeled as having high particulate pollution based on two monitoring locations, both just downwind from factories with relatively high particle releases. But monitors in the rest of the region continue to show the air to be perfectly acceptable. Indeed, counties with no monitors are deemed polluted because they happen to fall in the EPA's western Pennsylvania district that contains the two offending monitors.

 

For several years the fallacies in the American Lung Association's annual report on Pittsburgh have been pointed out so vociferously that almost no one who has bothered to look at what they are doing assigns any credibility to their asininity.

 

As we noted in a Policy Brief dated May 1 last year, the mortality rates for every age group in polluted southern California are lower than the rates in Laramie, Wyoming which consistently ranks among the cleanest air cities in the nation.  We asked the Lung Association to explain this and to determine to what extent air quality plays a role in determining age specific mortality rates and why the discrepancy in their implicit predictions of what will happen and what is actually happening with death rates is so large. We are still waiting for those answers.

 

Revenue collected by the local one percent sales tax in Allegheny County fell by 5.4 percent in February compared to a year earlier. That means overall sales taxes fell by 5.4 percent as well since the same items are taxed at both the normal 6 percent rate and the one percent add on.

 

Revenue at the Regional Asset District (RAD) was $6.2 million, down $357,000 compared to February of 2012. Since RAD gets half of the one percent revenue that means the County gets one fourth of the $12.4 million total collected and the other municipalities divide the remaining fourth, each of which will see a 5.4 percent drop as well. The state coffers also took a hit of $4 million dollars from Allegheny County sources due to the sales decline here.

 

What does this mean? Well, certainly it means that taxable sales were off by 5.4 percent, that's a given. The larger questions are why were sales off and was the sales decline widespread across the region and state?  Obviously, a drop in sales tax revenue of 5.4 percent at the state level would be a large number indeed. Continued for any length of time such a series of monthly declines would begin to put the fiscal year collections at risk of not hitting the budgeted amount.

 

The sales decline could have been weather related; there was a lot of bad winter weather. In that case we should see a rebound in the next month or two. On the other hand, if the sales decline is tied to the re-imposition of the 2 percent contribution requirement for social security, the rise in the top tax rate on personal income, the recent abrupt slowing in employment growth and the likely effects of Obamacare on household and business spending, then the sales slowdown can be expected to continue for a while. An eventuality certain to force even harder decisions by government officials as regards dealing with budget shortfalls. Because not only will sales tax revenue remain below budget projections but so will income tax revenue and other revenues that are lowered when economic activity slows, such as fuel taxes.

 

Let's hope the weather explanation is correct. But the jury is still out and the other explanation is certainly plausible.

 

March's employment news for the Commonwealth was quite unwelcome. Both the household survey and the establishment payroll survey brought signs of marked weakness in employment. People reporting themselves as working fell by 14,000 in March after a 6,200 decline in February and a slight 1,000 drop in January. In short, the entire first quarter exhibited a pattern of continual weakening in the number of people working.  Meanwhile, Private payroll employment at establishments fell by 6,500 in March, sliding below the January level and up by a mere 1,000 compared to a March 2012. Indeed, private payroll jobs are still 40,000 below the March 2008 number, the high watermark for a March figure and just before the effects of the national recession pummeled the state's labor market.

 

Misguidedly, the headline about the labor market reports was the unemployment rate dip from 8.1 percent in February to 7.9 percent in March. But in light of the fact that the number of people working tumbled by 14,000, it is reasonable to ask; how could the unemployment rate fall?  It fell because the labor force plunged by 33,000. That is to say, an additional 33,000 people in the non-institutional population old enough to work chose not to seek work. While this is a startling number it does mirror the massive half million decline in the nation's labor force in March. As a result of the 33,000 not looking for work the number of unemployed went down 19,000 lowering the percentage unemployed.  In sum, the apparent good news of an unemployment rate decline hid the bad news of a significant drop in the number working along with a substantial decrease in the labor force.

 

Why the recent Pennsylvania weakness?  Based on the national employment situation in March, there has been a similar abrupt slowing countrywide.   Apparently, the state has not been able to sidestep the impacts of the forces restraining the national economy-Obamacare effects, the tax hike in January and the regulatory onslaught coming from the DC governing apparatus intent on remaking America. 

 

Officials in Nashville are mad.  They just saw the most recent ranking from moving company U-Haul that ranks "growth cities" which are "...determined by calculating the percentage of inbound moves vs. outbound moves for each area."  The Music City has been dethroned by the Steel City, with the company noting Pittsburgh had a 9% rate in 2012. 

Actually there has been no news out of Nashville (it finished 8^th in 2012) because of a phenomenon noted in a 2007 Brief we did when Pittsburgh was named "America's Most Livable City": when a city-to-city or metro-to-metro list or ranking of "most" or "best" is put together it is often dubious.  The London Times stated "the publication of the Almanac sets off a round of preening from mayors of winning cities and huffing and puffing from the losers."  One has to wonder if losers or runners up even bother to fume at all. 

The company has produced the ranking at least as far back as 2008 and if patterns hold taking first place as a growth city is fairly volatile: only Santa Monica has repeated as a first place finisher (in 2009 and 2010); Nashville appeared in 9^th place in 2008, disappeared from the top ten in 2009 and 2010, and then finished first last year; 2008's winner Wichita has not been in the top ten since that year.  A handful of cities-Austin, New York City, San Francisco, and Oakland-have appeared more than once in the top ten.  (The company also produces a destination city ranking based on a person making a move to a city of more than 50 miles away from the origination point and does not take into consideration the percentage of inbound and outbound moves like the growth city methodology, and Houston has finished first in 2009, 2010, 2011, and 2012).

We also pointed out in 2007 the best measure of the attractiveness of a place is whether people stay or leave.  Recent numbers show that the metro area and Allegheny County are seeing a small uptick in population (0.2 in the metro, 0.5 in the County from April 2010 through July 2012).  When the net domestic migration as a proportion of total population for the 25 largest metros was measured from July 2011 to July 2012 the region did better that Philadelphia, Chicago, Detroit and seven others but rose slower than fourteen other regions including Tampa, Seattle, and San Antonio. 

 

"PITG's commitment to the community included a $1 million contribution per year for three years to a neighborhood redevelopment project in Pittsburgh's Hill District, a $7.5 million contribution per year for 30 years toward the funding of a new arena in Pittsburgh and a $1 million per year contribution for three years to the Northside Leadership Conference"-Adjudication of the Gaming Control Board, 2008.

 

We won't know if the Rivers Casino lived up to its obligation for the hockey arena until the Penguins' star center is the ripe old age of 53, but the time is up on the three year community redevelopment agreements, and it does not look like the casino is looking to extend what was agreed to by the original winner of the slots license.  It noted in a prepared statement that "Rivers will continue supporting Pittsburgh's neighborhoods through its ongoing community outreach programs."  It has met its commitment, and there have been projects undertaken with the money from the agreement, and it should not be expected to do more.

 

That's not going to stop the beneficiaries of the agreement from making the case for more and, one could argue, they are free to make an appeal to the casino the same way they would the state, the Federal government, the URA, the County Redevelopment Authority, etc. that their good and noble work needs to continue.  One official stated "What they said is not a surprise. That doesn't mean to our minds that that's the end of the conversation. That doesn't preclude future plans. So we're happy to talk to them about the future".  But it is fair to ask if community groups could become addicted to gaming money-if so, do we need to start "Redevelopers Anonymous?"

 

Taxpayers living in Monroeville have to be upset.  Consider that at the end of 2011 Allegheny County raised property taxes 20%.  As reassessed values were being finalized the municipality decided to end a two-decade streak of no tax increases by taking one that allowed them 5% of the previous year's revenue and then got permission from the courts to levy a higher rate.  Now comes word that the Gateway School District, which encompasses Monroeville and Pitcarin, might raise its tax rate.  Based on the millage rates tabulated on the County Treasurer's website, school tax increases in the District occurred in 2003, 2004, 2005, 2010, and 2012. 

 

The District will have to adjust millage rates under Act 1, the same law that governs the degree of annual school tax increases, provides exceptions for going above the index, and even provides for voter referenda because of the countywide reassessment.  But homes that saw a big jump in value well ahead of average changes in countywide, municipal, and/or school district aggregate changes could be in for a significant cumulative hike. 

 

The District is grappling with declining enrollment and last year decided to furlough 17 teachers, but 16 of them returned to the District at the start of the school year under a recall agreement and came with the tax hike of 0.83 mills.  So what has come up for discussion going into the next fiscal year? Personnel cuts, of course.