Employment Growth in the Region Cools

Employment Growth in the Region Cools

The recently released January employment data for the Pittsburgh metropolitan statistical area (MSA) were not very encouraging.  After a reasonably strong 2011 and first half of 2012, data from the region’s employers show quite a slowdown in job additions for the latter half of 2012 with 2013 starting off just as sluggish. 

 

 Household data seems to confirm the slowing, as the area’s unemployment rate increased more than one-half of a percentage point from the same time last year. There was positive news in the form of a 2.5 percent jump in the labor force since January 2013 perhaps signaling more confidence among job seekers that the region has plenty of jobs to be filled.  But is this confidence warranted?

 

The employer payroll survey (which reports data unadjusted for seasonality) shows the MSA adding ten thousand total private jobs in January 2013 over the January 2012 level-a modest one percent increase.  By comparison January 2012 had 21,300 more jobs than its year earlier level which, in turn, had more than 24,500 jobs above the January 2010 reading. By looking at the levels compared to twelve months earlier, any seasonal effects are eliminated.  As mentioned, the growth in total private jobs was much stronger in 2011 and the beginning of 2012.  On average, the 2011 monthly year over year gains to total private jobs was 23,100.  The first half of 2012 averaged 22,100 more jobs compared to a year before, while the second half average fell to less than 13,200.  Nonetheless, despite the reduction by half in the rate of employment growth, it is a moderately positive sign that no month in the last two years had decreases in private sector jobs.

 

As was pointed out in previous Briefs, the Pittsburgh MSA has a major advantage created by the presence of the Marcellus Shale formation and is benefitting from a gas drilling boom. The number of jobs in the mining and logging sector surged in 2011 rising year over year by an average of 28 percent.  In the first quarter of 2012 the growth continued to top 22 percent before falling below 20 percent in April and then below nine percent from September through the close of the year.  This coincides with the fall in the average annual price of natural gas (as calculated for the State’s well impact fee) as it went from an average of just over $4.00/million BTUs in 2011 before falling to $2.79 in 2012-a decrease of 30 percent.  As the price falls, fewer wells will be drilled and growth will slow.  Even though it is very early in 2013, the average annual price has crept up to $3.40 and perhaps drilling activity may start to pick up. Another possibility to consider is that perhaps the pace of drilling new wells has already reached its apex in the region and additional drilling will be at a somewhat slower pace going forward. 

 

Other industries related to natural gas drilling seemed to follow suit, most specifically manufacturing and construction.  After years of decline, the manufacturing sector started to see positive year over year gains beginning in the second half of 2010.  While these gains were slight, anywhere from one to two percent from late 2010 through mid-2012, they turned negative in December 2012 and again in January 2013.  The construction sector followed a similar pattern of strong growth at the end of 2011 and through the first half of 2012 before weakening in the latter months of 2012 before posting a loss in January 2013. 

 

But these are relatively small sectors in the MSA and their slowdown cost the region around 2,500 jobs which is just a quarter of the cool down in the jobs market.  Marcellus Shale exploration and drilling propped up the region’s economy during the national recession and subsequent sluggish recovery, but it may be settling into more sustainable levels of activity.

 

Another sector that showed considerable slowing includes professional and business services.  This sector averaged a 7,700 monthly year over year increase to jobs for 2011.  That figure dropped to 5,200 in 2012 due to much slower gains in late 2012-the final quarter average was only 2,400.  While January 2013 had a year over year increase of 3,700, the torrid pace of 2011 through the first half of 2012 has not been sustained. 

 

So where is the good news? 

 

Keep in mind that the area gained more than 10,000 total private jobs year over year in January 2013 to settle in at more than 1.02 million-the highest January total since at least 1990 (as far back as the data go).  While the fast pace set coming out of the recession may have cooled off, the region is still moving forward.  And as we showed in a previous Policy Brief (Volume 13, Number 2) other sectors such as professional and technical services are emerging with substantial gains.  Likewise, the region’s healthcare subsector continues to grow albeit at a slower pace. Notwithstanding the moderately good performance of late, the region’s leaders cannot rest as there is plenty of work to be done to make the area more inviting to employers.