Unheralded Source of Jobs Strength in the Pittsburgh Region

There’s a new jobs producing hero in town.  Actually it has been around for a while but has stepped to the front of late. 

 

 

Professional and Technical Services now lays claim to being the biggest jobs producing sector even though at 76,600 in total employment it represents just under 8 percent of all private sector jobs. Over the last twelve months, this sector grew by 6.2 percent adding 4,500 jobs and accounting for nearly half of the total private employment gain during the period.  To put this in perspective consider that the once mighty private Education and Health Services sector saw a contraction in employment over the twelve months ending in November.  Eds and Meds as they are known were for many months during the long economic slowdown that began in 2008 the major source of jobs stability in the region.

 

Professional and Technical Services are made up of some high fliers and some also-rans. For example, the Architectural and Engineering Service component posted employment growth of 5 percent while Scientific Research and Development jobs climbed 4.6 percent. Unfortunately, those are the only two sub-component sectors reported for the Pittsburgh MSA and they account for only a fourth of the total Professional and Technical service employment pickup. So, what else could be driving the strong gains in the sector?

 

Because the Professional and Technical Services sector has been a major contributor to employment gains in Pennsylvania and the nation over the twelve months ending last November, it is reasonable to assume that the faster growing components of the sector in the state and nation are also enjoying stronger gains in the Pittsburgh region.

 

For example, nationally Computer and System Design employment has been moving up rapidly in recent years, gaining 5 percent over the twelve months ending last November and is up almost 15 percent since 2009. This sector, which represents about 1.5 percent of all establishment payroll jobs, has increased its jobs count by over 200,000 since 2009 continuing a phenomenal period of growth leading up to the recession. And during the recession it saw only one year of decline (2008). That drop was erased dramatically in 2009 and the sector has been moving up rapidly since.  Thus, it seems very plausible that Computer and Systems Design employment is a significant contributor to gains in the region’s private sector employment.

 

Similarly, Management and Technical Consulting services have enjoyed tremendous jobs growth nationally for the past decade and in Pennsylvania the pace has quickened since the recession. Thus, this subsector would appear to be a logical candidate to explain some of the strong rebound in jobs in Professional and Technical Services in the Pittsburgh MSA.  Meanwhile, Accounting, Bookkeeping and Tax Preparation have rebounded from recession declines to reach levels above the pre-recession high points.  This subsector has enjoyed solid gains through most of the last decade except for the sharp recession pullback. In all likelihood, this relatively small subsector has played a solid role in lifting regional jobs in the Professional category.

 

On the other hand, and perhaps somewhat surprisingly, based on the Pennsylvania numbers and the long term trend in the national data, Legal Services do not seem to be a reasonable explanation for job gains in the Professional category. In both the state and the nation Legal Services employment is virtually unchanged from the decade earlier levels after rising slightly to a peak in 2007-08.

 

For quite some time the Pittsburgh MSA jobs story has been focused on the robust growth in the Education and Health Services sector and the substantial and broad ranging impact of the Marcellus shale activities. We have commented on the earlier strength in trucking and warehousing as a likely consequence of the buildup of gas drilling and producing activity. Likewise accommodations and food services undoubtedly experienced a boost in sales and employment as a result of the surge in Marcellus Shale activity. Recently, however, the strongest increases in jobs have been in the Professional and Business Services and Financial Services. It is noteworthy that Financial Services until very recently had been a no growth sector for the last decade.

 

This shift in sector momentum is quite remarkable and will bear watching to see if it represents a fundamental change or if there is just some catching up by some sectors as others take a breather. If it is a permanent shift, it will become important to assess the implications as to the effects on income growth and possibly the impact on the geographic distribution of the new jobs.  

Recession Retains its Grip on Pittsburgh

While many economists and politicians are claiming the recession that has been gripping the nation is starting to lessen, its hold on the Pittsburgh area remains firm. The latest jobs numbers for July 2009 bear this out. When comparing the year-over-year jobs totals for July 2008 and July 2009, the region lost 30,800 total private jobs, slightly better than the June-over-June totals of -30,900. The Pittsburgh region’s loss to total private jobs (-3 percent) for July are much better than the national average (-5 percent), but as we’ve pointed out countless times before, the region never "boomed", so it really couldn’t "bust".

Nearly all major sectors experienced year-over-year job losses-the lone exception being, once again, education and health services. But even there, the job gains were not as pronounced as they had been. The sector’s July year-over-year gains were only 2,800 jobs whereas the year-over-year gains for May (3,200), June (3,400) were slightly higher. As we pointed out in a previous Policy Brief (Vol. 9, No. 41), growth to this sector, particularly the social assistance sub-sector which counts for most of the growth, is actually as sign of weakness as these jobs are often low-paying and rely on public dollars for their existence.

The manufacturing sector continues to be the hardest hit sector as it lost 10,800 jobs or nearly 11 percent of its employment count. Construction jobs also continue to post losses (-3,400) as did the retail sector (-3,300), the professional and business services sector (-5,500) and the leisure and hospitality sector (-5,000). This latest employment report did not have much to cheer about for many of the sectors of Pittsburgh’s economy.

The recession’s grip on Pittsburgh will not begin to abate until it also loosens on the country as a whole. However, steps can be taken to expedite, rather than prolong, the process. Efforts to raise taxes at the state and local levels must be resisted. The Governor’s plan to increase taxes, either the sales or income tax, will have a markedly negative effect on the local economy. Instead, state and local officials need to cut onerous government spending as well as taxes. They also need to tackle burdensome regulations, such as mandated wages, that are stifling business growth. Only when these measures are enacted will the Pittsburgh economy reverse the trend of job losses and possibly experience an economic boom.