Pittsburgh MSA Out of Sync with U.S. Labor Market Performance

Summary: The April jobs numbers were released for the Pittsburgh Metropolitan Statistical Area (MSA) and the results are not too encouraging.  While growth was positive, it does not keep pace with the nation overall and underscores just how much work needs to be done to boost the area’s economy.

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Recently released labor force and employment data for the seven-county Pittsburgh metro area show the region trailing the nation for the April 2017 to April 2018 period.  In April 2018, the Labor Department survey of households show the region’s labor force tumbled by 17,600 (1.5 percent) and household employment (persons employed) slipped by 8,500 (0.7 percent) from the April 2017 level. Meanwhile, over the same 12-month period, the U.S. labor force climbed by 1,346,000 (0.8 percent) and the number of people counted as being employed rose 2,020,000 (1.3 percent).

Data from the Establishment survey, which counts the number of payroll jobs as opposed to the number of persons working, indicate private payroll employment in the Pittsburgh region rose 14,300 (1.35 percent), driven largely by gains in education and health, leisure and hospitality along with professional services. There were modest pickups in the goods sectors as well.

However, nationally, private payrolls jumped by 2,271,000 (1.8 percent) during the period, a 33 percent faster gain than the Pittsburgh region.  Note, too, that the national growth rate reflects both fast growing and slower growing states.  For instance, North Carolina comes in at 2.1 percent, Texas at 3.2 percent and Florida at 2.2 percent. These and other rapid-growth states are propelling the country to faster growth than the Pittsburgh MSA as well many other states.

The region’s 1,069,700 million payroll jobs represent the highest April level for the last ten years (2018-2008).  Still, the ten-year growth was only 4.7 percent or well under one half percent per year. The highest recorded amount in any month over the last decade occurred in November 2017 when the survey showed 1,078,200 people were on total private payrolls.

The April to April increase represents the smallest gain thus far in 2018.  In January, the 12-month increase was 17,500, for a rise of 1.7 percent, while the February gain was 15,700 and March posted a 12-month pickup of 15,300.

In the Pittsburgh MSA, leisure and hospitality added 3,500 new jobs from April 2017, a gain of just under three percent.  That was the smallest 12-month gain so far this year. The national April to April gain was 1.6 percent and has been gradually declining since January’s high rate of 2.09 percent.

Education and health provided the Pittsburgh region with the largest number of jobs, adding 5,400 jobs in April 2018 compared to the year ago reading—a 2.2 percent rise. Of this total, the health care and social services sector contributed 5,000 of the new jobs, while educational services added only 400.

Nationally, the education and health services sector did not grow quite as fast as the Pittsburgh area, increasing by only 1.87 percent.  The national growth lagged Pittsburgh’s in hospital, nursing facilities and social assistance.

The trade, transportation and utilities group was the weakest sector in the Pittsburgh MSA, losing 1,400 jobs over the year (-0.66 percent).  The monthly year-over-year losses stretch back to December 2017.  The decline was led by a fall in retail trade employment of 2,200—a drop of 1.8 percent.  That being said, not enough information is available to figure out exactly where the losses happened.  There was an increase in building materials and general merchandise stores but losses in food and beverage stores as well as in clothing and department stores.

Meanwhile, in stark contrast, the trade, transportation and utilities sector nationally had an April year-over-year pick-up of 1.11 percent.  It has been picking up steam as 2018 progressed ranging from a low of 0.58 percent in January to a high of 1.17 percent in March.  At the national level, retail trade is also picking up momentum.  After a decline in January, the year-over-year growth rates have been increasing every month since.

The April 2018 jobs and labor force numbers show that Pittsburgh lags the national labor market pace of improvement. As we have been writing for years, reducing taxes, repealing onerous regulations and curtailing the power of unions would go a long way boosting the business climate which in turn will lead to better labor market numbers. Curbing the desire and willingness to subsidize development and highly questionable ventures that should fund themselves would be a giant step toward relying on the free market to drive the economy.

Revisions Wipe Out 2015 Pittsburgh Area Job Gains

Every month the Pennsylvania Department of Labor and Industry and the U.S. Bureau of Labor Statistics release details about the previous month’s employment totals for the Pittsburgh metropolitan statistical area (MSA).  These releases elicit responses from analysts who try to make sense of the numbers one way or another.

 

But what hardly ever gets mentioned in the media is that these figures will be revised at least twice as the original release represents preliminary estimates which will be adjusted in the subsequent month.  And then every March the entire previous year, and sometimes two preceding years, are re-benchmarked resulting in dramatic changes.  Yet the media only focuses on the preliminary releases which are oftentimes very misleading, especially for policy makers trying to assess the state of the economy.

 

And now, right on schedule, numbers for 2015 have been re-benchmarked and the final tally is quite different from those preliminary figures.

 

The count of total nonfarm jobs for 2015 reported on the original releases (1,177,483) placed the average yearly increase compared to 2014 (1,161,125) at 16,350—a rise of 1.4 percent.  The monthly increases compared to the twelve month earlier figures ranged from 4,800 (March) to 32,800 (July).  February (9,200) and March were the only months to post year-over-year increases of less than 10,000 total nonfarm jobs.  On the surface, it was a respectable year for job growth. But that was before the re-benchmark.

 

March 2016 revisions lowered the number of nonfarm jobs in 2015 (1,161,177), compared to 2014 (1,159,575), to an annual average gain to just over 2,140 jobs—an uptick of only 0.18 percent.  The after-revision gains range from a low of negative 1,500 (December) to a high of 5,400 (January).  There were three months with year-over-year decreases—December, November (-1,000), and June (-400). Thus the re-benchmarking wiped out nearly 14,000 of the presumed job growth in 2015 turning the year from respectable to anemic.  Again long after the media reported the rosier picture painted by the preliminary releases.

 

The re-benchmarking also affected the number of total private jobs.  The yearly average difference, based on the original press release data, came in at 16,925 jobs—a growth rate of 1.62 percent over the 2014 reading.  The range spanned a low of 6,000 (March) to a high of 33,500 (July).  Only March had an increase of less than 10,000 jobs.  After re-benchmarking the data, that average has fallen to just over 3,280—increasing only 0.32 percent over the 2014 figures. The range now covers a low of 100 (December) to a high of 7,300 (January).

 

Revisions by industry groups were once again mixed, with a few having their job counts being revised upward, but most with downward adjustments.  As reported by the original releases the goods producing groups—mining and logging, construction, manufacturing—had an average annual increase of 2,208 jobs compared to 2014—a rise of 1.42 percent.  Unfortunately, the re-benchmarked data shows an average monthly decrease of 1,200 jobs. This swing of over 3,400 jobs shows the degree of volatility there is between the originally released data and the final re-benchmarked data.

 

Of the three industry groups in the goods producing sector, mining and logging went from having average monthly year-over-year gains of 1,158, to having average monthly year-over-year losses of 525.  This may be in large part due to the sharp drop in the price of natural gas which has hampered development and drilling in the Marcellus Shale formation.

 

The construction industry and the manufacturing industry also had reductions to their jobs counts, but not nearly as wide a swing as in the mining and logging sector.  Based on the original releases, the average monthly 2015-over-2014 difference for construction was 1,325.  However, after re-benchmarking the data for 2015 and 2014, this industry’s average annual growth was reduced by more than 930 jobs on a year-over-year basis in 2015 to 392.  The manufacturing sector, based on the original press releases, had shown average monthly year-over-year losses of 275 jobs.  The re-benchmarked data not only confirmed these losses, but expanded them to 1,075 jobs.

 

For the service providing industries, nearly all sectors showed reductions to their average monthly year-over-year jobs totals.  Overall the service providing industries had shown an increase to the number of average monthly year-over-year jobs of 14,150.  With the re-benchmarking of the data, those gains fell sharply to 3,350.  The growth rate fell from 1.4 percent to 0.33 percent.  We will look at some of those sectors below.

 

The one sector that had increases to its average monthly year-over-year jobs totals is the professional and business services sector.  Based on the original press releases, the average monthly year-over-year gains to employment for 2015 compared to 2014, was 583.  After the March 2016 re-benchmarking, that number increased to 2,950.  This was aided by an increase to the re-benchmarked data for both the 2015 and 2014 data, with the average monthly increase to 2015 jumping by 3,250 and for 2014 by more than 880 jobs.

 

On the other end of the spectrum is the education and health services industry group.  Based on the original press release data from 2015, this industry group had a monthly year-over-year average increase of 4,658 jobs.  However with the March 2016 re-benchmarked data that difference became a decrease of over 830 jobs.  Thus a nearly two percent increase in education and health jobs became a loss of 0.35 percent with the re-benchmarking of the data.

 

The two main sectors in the industry group, education services and health care and social services, both took sharp losses with the revised data.  The education services sector had an average monthly boost of 650 based on the original 2015 press releases to having a monthly average drop of 725 –a swing of 1,375 jobs for 2015 compared to 2014. The health care and social assistance sector took an even bigger hit.  Based on the original press release data, this sector had an average monthly year-over-year rise of 4,008.  However, after the re-benchmarked data, that monthly year-over-year average is now a negative 108—a swing of more than 4,100 jobs.

 

For most of 2015 the leisure and hospitality sector accounted for a large share of the job growth in the area.  We warned numerous times that the growth being reported was untenable and the re-benchmarking would likely wipe out most of that growth.  We were correct.  The average monthly jobs in leisure and hospitality in 2015, based on the original press releases, came in at 120,675.  This was revised downward to 116,333 in the re-benchmarking.  The data for 2014 was also re-benchmarked slightly, dropping from 114,633 to 114,325.  Thus, the original difference dropped from 6,042 to 2,008—a fall of over 4,000 jobs.  While this is still respectable growth, these are typically lower paying jobs and not in the area where you would want to see the strongest growth.

 

The re-benchmarking of the 2015 data has wiped out most of the originally reported job gains from the press releases—total nonfarm and total private jobs grew by only 0.22 and 0.32 percent respectively.  What could be the reason for such anemic growth?

 

Two reasons come to mind.  As we wrote in a previous Policy Brief (Volume 15, Number 28), the Kauffman Foundation’s Index of Startup Activity ranked the Pittsburgh area second to last in startup density, rate of new entrepreneurs, and opportunity share of new entrepreneurs, placing the region last overall amongst the forty largest metro areas in the country.  Furthermore, the Pittsburgh area, and Pennsylvania overall, has fared poorly on business friendly indicators for decades.  This does not bode well for job growth and that is manifesting itself in the actual data.

 

Secondly the latest Census data shows that the Pittsburgh region has lost population since the last official census in 2010.  Is the contraction of the area’s population driving the weak job gains or is it the other way round. Is it more appropriate to say that the weakness in job growth is more responsible for the outflow of migrants from 2014-15?  After all, people are typically drawn to an area for economic opportunities more than for any other reason, including environmental amenities.  Maybe policy makers should address the factors inhibiting business startups and business expansion.  Marcellus Shale activity must not be depended upon exclusively to pull the region forward.

Monthly Metro Area Jobs Reports Short on Reliability

The December jobs report for the Pittsburgh metro area was just released.  At first glance, the report on balance seems quite positive. Data from the household survey show a lower unemployment rate, while the employer payroll survey shows a 14,000 increase in nonfarm jobs compared to December 2014. But do the data in the report paint an accurate or reliable picture of the area’s labor market?

 

A deeper look into the household data indicates there might be questions regarding the validity and reliability of the report. In December 2012 the initially reported civilian labor force for the region (not seasonally adjusted) stood just over 1.261 million people, later revised in the spring of 2013 to 1.227 million—a drop of 34,000. Then the initially reported figures for December 2013 showed labor force to be to 1.245 million. Again that number was revised downward, this time to 1.201 million—a decline of 44,000. Then in keeping with the pattern, the initial report twelve months later showed the labor force count for December 2014 to have risen once again to a year to year jump of more than 20,000 to 1.229 million. And once again, a downward revision reduced that number to just 1.195 million, a drop of 34,000.

 

Amazingly, from an initially reported 1,261,000 participants in the labor force in December 2012 to a revised December 2014 count of 1,195,000 the Pittsburgh metro area in just two years has seen the reported number of labor force participants slide by 66,000.

 

Now comes the initially reported figures for December 2015 that place the labor force at 1.222 million.  Given the pattern of downward revisions to the numbers reported over the last three years means the latest labor force count is almost certainly going to be revised to a lower number. However, even if the  December 2015 labor force is not lowered by a benchmark revision later this year it will be very close to the revised 2012 level, which means there has been no net increase in the metro area labor force for three years.

 

If the pattern of downward revisions continues this year, it will mean that in three years, the area’s labor force has actually gone down, assuming of course the revised figures are more reliable than the initially reported numbers. At this point who can be sure? One thing is certain, putting a lot of confidence in the initial reports on the labor force and household employment numbers as a good indication of the state of the labor market is simply not warranted because of the pattern of large revisions.  Of course this is a problem inherent in a methodology that relies on a small monthly sample of households on which to base the estimates.

 

Meanwhile, in addition to the problems in the household survey, there are several glaring issues in the establishment (employer) payroll survey, especially in some of the service producing categories.

 

For December 2015, the recently released report indicates a gain of 17,500 private sector service jobs over the twelve months since December 2014. The largest employment gain occurred in the leisure and hospitality sector (which represents about 11 percent of all private jobs) with a 7,700 rise that accounted for a hugely disproportionate 53 percent of all private job growth between December 2014 and December 2015 (14,500). The initial monthly reports of rapid jobs growth in leisure and hospitality is a long standing trend for this sector.  Sadly, major downward revisions in these jobs are also a long standing trend as we have documented in earlier Policy Briefs (Volume 14, Number 14 and Volume 15 Number 23).

 

Part of the problem is that much of the employment pickup is accounted for by arts, entertainment, and recreation for which there is not enough sampling to provide reliable estimates, so the Labor Department is truly guestimating the job count. As a result substantial downward revisions are necessary almost every year. This has gone on so long it would seem someone at the Labor Department would acknowledge and deal with the problem rather than simply continuing this monotonous pattern of reporting huge gains and then taking them away later with revised data.

 

Another area of questionable data occurred in the education and health services group which added 5,100 jobs over the twelve months ending in December 2015. Education services (does not include public K-12 schools) employment rose by 1,200 jobs while health care and social assistance rose by 3,900 jobs.

 

However, the education services job count looks suspiciously high and warrants closer inspection.  While this sector is up 1,200 jobs year-over-year, its largest and most reliably documented component, colleges and universities, showed a drop of 2,100 jobs.  Thus, employment in the combined remaining education services components (data for individual components are not published) must have risen by 3,300 to offset the decline in college jobs. This group is made up principally of private K-12 schools, education support services firm, and technical schools.  As just mentioned, this group is reported to have had year-over-year growth of 3,300.  This is quite astonishing considering that this group would have had to grow from 14,300 jobs in December 2014 to 17,600 jobs in December 2015—a rise of 23 percent in only twelve months. The absence of any explanation of exactly where such growth is occurring and why it’s so strong makes it hard to accept the numbers as credible.   Downward revisions would seem to be inevitable.

 

Another concern about the jobs data and one we documented in a Policy Brief (Volume 15, Number 44) last year is the fact that the combined employment gains in Pennsylvania metro areas is almost twice as large as the state as a whole.  And adding in the micropolitan area labor markets and county job markets makes the picture even worse with the sum of all the individual labor markets greatly exceeding state totals. Obviously, sampling problems are at the heart of the issue. But the upshot is that downward revisions in most metro area numbers are virtually certain.

 

Finally, it is noteworthy that state government employment across the Commonwealth was reported to have risen by 5,900 jobs from December 2014 to December 2015 after 4,000 job increases in both October and November. In the Pittsburgh metro area state government employment climbed by 700 jobs over the year ended December 2015. Ironically, the state government jobs growth has occurred even though there was no state budget during the last six months of 2015.  It is bad enough that the state continued to spend on all departments and kept everyone employed but it was actually adding to staff and no doubt giving raises while the state funding for public schools in the state was on hold.

 

In summary, the monthly labor market and jobs reports for the Pittsburgh metro area—and doubtless most others across the Commonwealth —must be used carefully because of all the flaws and the enormous amount of revision that occurs every year in the preceding year’s data.

Pittsburgh Area Jobs Count Revised Downward—Again

For the second year in a row the Department of Labor and Industry has made downward benchmark revisions to the establishment payroll employment data for the Pittsburgh region, altering the jobs picture as portrayed in the numbers originally released the prior year.

 

In March of 2014, the revisions erased virtually all of the strong employment net gains initially reported for 2013.  Recently, the Department released revised numbers for 2014.  While 2014’s originally released numbers showed employer payrolls to be growing at a less than robust pace, the revisions produced gains that were even more anemic than the initial reports depicted. For example before the revisions, the monthly average of nonfarm (including government) payrolls in 2014 increased by just over 6,100 compared to the 2013 average. After the revisions that number fell to just over 3,600 jobs, a growth rate of less than three tenths of a percent.  A similar change happened with private employment as the rise in the monthly average was lowered from 7,760 to just fewer than 5,000 with the benchmark adjustments.

 

Going back even further, we can see that job growth in the Pittsburgh MSA has cooled considerably since the rebound following the end of the recession that began in late 2008. From the pre-recession peak in May 2008 to the low point in February 2010, seasonally adjusted nonfarm jobs fell by 42,500. As the economy rebounded from early 2010 to March 2012, nonfarm jobs recovered the losses incurred during the downturn and tacked on 12,000 beyond the May 2008 peak. However, since March 2012 growth has virtually stopped with the March 2015 job count at almost the same level it was in March 2012. In short, nonfarm employment recovered rather quickly after the recession, but has sputtered along since 2012.

 

A similar pattern emerges for private jobs. Employment dropped by 41,000 from February 2008 to February 2010. Growth then resumed and accelerated throughout the year and into 2011 finally returning private jobs to the level from the same month in 2008 with the September 2011 reading. Job gains continued at a strong pace through the summer hitting new record levels in 2012 and then slowed sharply throughout with virtually no growth for the year. The pace picked up again in the second quarter of 2014 but remained much weaker than the heady expansion months of 2011 and 2012—a pattern that has persisted into 2015 thus far. Bear in mind that, as noted above, the private job counts were lowered by an average of over 2,500 for each month of 2014, this on top of very large downward revisions in the 2013 numbers.

 

How did the individual sectors fare in the revisions? For the goods producing sector overall the average annual employment count was adjusted upward by about 2,400 jobs.  There are three goods producing industries—construction, manufacturing, and mining and logging.  The construction sector was virtually untouched by the adjustments, while, promisingly, manufacturing picked up nearly 1,800 of those jobs with mining and logging realizing the rest.

 

However, the private service providing sector did not fare as well as the average annual number of jobs was revised downward in the aggregate by nearly 5,000 employees.  Most of the subsectors such as trade, transportation, and utilities, information, professional and business services, and education and health services were virtually unchanged. The financial services sector was revised downward by about 700 employees.  The biggest change occurred with the leisure and hospitality sector which is explored in more detail below.

 

During the recessionary period from mid-2008 to early 2010 the drop in the average annual job total for the leisure and hospitality sector was very slight—fewer than 300 jobs.  In the first two years of recovery jobs grew 3.7 percent (3,950) before slowing a bit from 2012 to 2014 (2.6 percent or 2,950 jobs).  But what made this sector noteworthy are the enormous revisions to the 2014 employee count. Based on the original data, the monthly average for jobs for 2014 was listed at 119,933.  But when the figures were released in the spring of 2015, that number was adjusted downward by 5,300 jobs to 114,633.

 

At the MSA level, only the accommodation and food services subsector is large enough to be estimated. Accommodation and foods services had its 2014 average monthly job count revised downward by about 1,270 jobs. However, the remaining subsector, identified by the BLS as arts, entertainment, and recreation but not tracked for the Pittsburgh MSA, had its jobs count lowered by the remaining 4,000 plus jobs.  While this subsector accounts for only a tiny fraction of total employment, during 2014 it was responsible for a large share of private job growth. After revisions, those unexplainably large gains were a mirage.  Something we have repeatedly suggested was likely to happen.

 

The revisions to the last two years’ jobs number show just how volatile and unreliable labor data can be.  As was just demonstrated, on first reading, the 2014 Pittsburgh MSA economy appeared to be sluggish compared to 2013.  Then revisions pushed the economy from looking sluggish to being anemic when the one sector with strong employment gains during the year, leisure and hospitality, saw those gains wiped away.

 

All of this underscores a key point. The Pittsburgh economy has been languishing under the weight of heavy taxation and a restrictive regulatory and labor environment.  Until the area and state adopt more business friendly, pro-free market growth policies, we can expect more of the same for years to come.

Cross Currents in the Pittsburgh Region’s Job Situation

December employment data for the Pittsburgh region show a respectable 14,700 rise in private sector jobs from the December 2013 reading. At first glance, this 1.4 percent twelve month increase is fairly impressive. But as we shall demonstrate the overall job growth number does not provide the whole story. It’s the categories of job gains and job weakness that raises concerns about the employment picture.  Moreover, as we have seen in recent years, the re-benchmarked data coming in March could contain major revisions.  Policy Brief Volume 14, Number 14 detailed how virtually all of the gains originally reported in 2013 had been wiped away by the updated figures. Re-benchmarking changes have been large on many occasions so they will bear close watching.

 

After beginning 2014 with year-over-year losses for every month of the first quarter, Labor Department reports showed private job growth strengthening significantly in the second quarter, although year-over-year growth did not reach one percent. The second half of 2014 saw a further quickening in the pace of expansion, averaging 1.2 percent year-over-year growth. July and December posted the best gains at 1.4 percent.  By way of comparison, national private employment in the second half of 2014 rose 2.4 percent compared to the second half of 2013.

 

However, as noted earlier, the pace of the region’s job growth is not nearly the whole story. It is important to look at the sectors of the economy that posted gains and those that did not to get a better assessment.

 

Of the region’s 14,700 private jobs increase from December 2013 to December 2014, 13,500 are service providing jobs with only 1,200 additional goods producing jobs.  Manufacturing jobs were down very slightly while construction and mining posted small gains. In the service producing sector, three industry components account for virtually all the gains; retail trade, leisure and hospitality, and health care.

 

According to the latest report, retail trade jobs grew by 4,100 year-over-year in December.  However, and somewhat baffling, the report shows that most of the large categories comprising retail trade are down:  food and beverage stores (-500); clothing and clothing accessories stores (-500); and general merchandise stores (-300).  The only one showing improvement was building material and supplies dealers (100).  So where has the growth happened?  How can it be that these four sectors, that make up over half of retail employment, had a net a decline of 1,200 jobs and yet the retail trade category grew by 4,100?  This implies that some unidentified sector, or a combination of sectors, had to have grown by 5,300 jobs over the twelve month period. That would mean those sectors grew by 8 percent during this time. It would be very helpful to know where such rapid growth has occurred, if it has in fact increased that much.

 

Moreover, it is important to keep in mind that many retail jobs are part time with few benefits and that the wages are well below the all-industry average. Indeed, in light of the Affordable Care Act requirement that full time workers in firms over 50 employees must receive health insurance coverage or the company pays a penalty, it would be instructive to know how many existing employees in retail have had their hours reduced.

 

The leisure and hospitality sector posted a sizable year-over-year gain for December 2014, rising by 9,000 jobs—a growth rate of 8.2 percent. Employment counts are provided only for the accommodation and food services component and it recorded an increase of 4,800 jobs.  Keep in mind that the Pittsburgh region had 118,800 employees working in the leisure and hospitality industry in December 2014.  Of these, 95,500 (80 percent) worked in the accommodation and food services subcategory.  Thus, the remaining 20 percent (23,300) worked in the arts, entertainment, and recreation subcategory. No data is reported for this component although simple arithmetic says it must have added 4,200 jobs over the twelve month period.  That is an expansion rate of 18 percent.  This number cries out for explanation but none has been forthcoming.

 

What’s more, the 8.2 percent growth to the Pittsburgh region’s leisure and hospitality industry dwarfs the good but modest 2.3 percent growth nationwide, which is in line with overall national job gains.  Amazingly, while leisure and hospitality jobs represent only 11.2 percent of private employment in the region, the 9,000 increase in this component accounts for 61 percent of all private job gains over the last year.  Indeed, even more stunning, the arts, entertainment and recreation sub component, which represents a mere 2.2 percent of private jobs, accounted for 28.5 percent of the private employment expansion over the twelve month period—more evidence that the reporting seems to have areas that require careful scrutiny.

 

One industry that had been strong, but took a step back in December, is the professional and business services sector.  The December 2014 year-over-year loss was only one percent (-1,800 jobs), but as before it is the mix that is of concern.  Even though the category of professional and technical services increased by 3,300 jobs, architectural and engineering services posted a decline of 200 while scientific research and development service showed a modest gain of 100.  Again, because only data for these two subsectors are reported for professional and technical services, there is no way of knowing which other components are showing strength in hiring. Thus, important service sectors such as accounting, marketing, consulting, legal, design, etc., must be adding to payrolls but which ones and by how much is left unknown. Nonetheless, at the national level most of these subsectors posted good to outstanding gains with the exception of legal services where the jobs count fell.

 

The administrative and waste services component of professional and business services suffered the worst year-over-year loss of any sector in the region (-5,500) with 4,200 of that coming from administrative and support services sector.  Of this, 200 were lost in the employment services subsector.  What could have happened to precipitate such a large decline in the administrative and support services sector?  Or is it a sampling error problem and not actually that big of a drop?  Contrast the regional data to the national situation where administrative and support services registered above average growth.  Significant gains nationally were seen in temporary help services, office administrative services, and call centers.

 

The education and health services sector had a respectable year-over-year growth in December 2014 of 3,200 with 1,000 coming from (private) educational services (colleges and universities (800)) and the remainder coming from health care and social assistance.  Health care and social assistance is comprised of ambulatory health care (1,100), hospitals (-100), nursing and residential care facilities (700), and social assistance (500).  Health care in its various forms continues to contribute to the region’s employment gains although hospitals have been losing share for some time.

 

In sum, private employment in terms of overall job count had a good year in 2014 as measured from December to December after a very weak first quarter and so-so second quarter.  But as demonstrated in the discussion above there are some serious reservations about the validity of the job growth.  And given the hefty percentage of the total employment increase accounted for by relatively low paying jobs, it seems certain that absent major revisions in the coming benchmark data, the employment growth as reported for 2014 will not translate into the kind of income gains that would occur if the bulk of the job expansion had occurred in manufacturing, construction, mining or other high paying sectors.

Shocking Revisions to Pittsburgh Employment Numbers

Jobs numbers released on March 18th that incorporated a data re-benchmarking by the Department of Labor and Industry and the Bureau of Labor Statistics paint a dramatically different picture of the Pittsburgh region’s employment situation than earlier data had portrayed. Establishment payroll employment was revised downward for late 2012 and all of 2013 with the downward revisions getting larger as the year progressed. For December 2013, the estimate of non-farm employment has been reduced by 20,700 jobs compared to the number originally reported just a month ago. The downward revisions wiped out all the gains that had been previously reported for 2013.

 

Bear in mind that through most of 2013, the employment reports for the Pittsburgh Metro area were showing the region as the statewide leader in job growth with widespread gains across several industry groupings.  With the new data, the Pittsburgh area is just an also ran with job growth below the state’s very anemic pace. Indeed, the revised December 2013 jobs count is 3,100 under the re-benchmarked figure posted for December 2012.  What’s more, all the strong 15,000 to 20,000 year-over-year increases registered in the summer and early fall of 2013 have completely disappeared in the revised data.

 

Months Measured in 2013

Total Non-Farm Jobs (Original Data)

Total Non-Farm Jobs

(Re-Benchmarked Data)

Difference

October

1,188,800

1,169,600

-19,200

November

1,190,800

1,171,500

-19,300

December

1,183,400

1,162,700

-20,700

Private sector employment (non-farm less government) took a major hit as well with the December 2013 number coming in 21,600 jobs below the figure reported a month ago.  Again the pattern was similar to the non-farm data with downward revisions moving higher throughout the year eliminating what was originally thought to be very good growth.

 

Revisions by industry groups were uneven with some taking big hits, some small hits, and a few showing upward changes. The goods producing sector was down, but only marginally, by a total of 2,400 jobs. Construction was taken down by 1,300, Manufacturing a statistically insignificant 200, and Mining by 900 jobs. The decrease in Mining, while small in absolute terms, does represent a nearly ten percent reduction in that industry sector.

 

Obviously, the big losses had to come from the service producing sectors.  Trade, Transportation and Utilities jobs numbers underwent downward revisions throughout the year that basically eliminated the initially reported employment gains. By December 2013, the lowered estimates had removed 4,000 employees from payrolls in the sector. Wholesale trade accounted for almost 2,500 of that reduction.

 

Finance jobs were lowered throughout the year but took their biggest hit in the summer months when original reports showed jumps of around 4,000 jobs in June, July and August. All those gains are now gone according to the newly revised figures.

 

Meanwhile, downward revisions in the estimates of employment in the Professional and Business services sector were relatively modest for most of 2013 but the reduction of 4,000 jobs in the December count essentially wiped out the originally reported gains for the twelve month period ending in December 2013.   Within this sector, the Professional and Technical grouping was relatively hard hit as half of the growth reported originally for 2013 was taken away in the revised estimates.  Administrative and Waste Services employment also experienced a pullback in its jobs count with the December 2013 number lowered by 3,400, leaving the employment total below the December 2012 estimate. However, the Management of Companies and Enterprises portion of this sector did have its job totals revised upward with each month now showing about 1,000 more jobs than initially reported.

 

In something of a surprise, the perennially strong Educational and Health sector suffered the largest setback with the amount of the reductions increasing throughout 2013 to over 9,000 for the last four months. The revisions took away all of the gains that had been originally reported during the year. Indeed, for December 2013, employment in the sector was actually down slightly from the figure posted in December 2012.

 

On the upside, sectors including Information, Leisure and Hospitality, and Government had their jobs totals revised upward. The biggest winner was Leisure and Hospitality with a pickup of 2,600 jobs in the newly re-benchmarked December 2013 number.  The other sectors’ increases were quite small. Obviously, the gains from upward revisions were not nearly enough to offset the large negative revisions in the rest of the industry groups.

 

Without question, if the re-benchmarked numbers are correct, and they usually stand up over time, they are giving a completely different and far less optimistic portrayal of the Pittsburgh region’s employment situation from the one depicted in 2013’s originally reported jobs numbers.  It should also be noted here that the two other Pennsylvania metro areas (Philadelphia and Harrisburg-Carlisle) for which re-benchmarked data are available showed modest upticks in employment over the earlier reports.

 

Moreover, the Household Survey of employment and unemployment corroborates the weakness in jobs growth in the region. The report for January 2014 shows the number of people reporting themselves as working fell slightly from a year earlier and on a seasonally adjusted basis was also down by over 2,000 from December 2013. Meanwhile, the number of people in the labor force dropped sharply, falling a seasonally adjusted 22,400 over the last twelve months. Thus, with the unemployment count falling by a similar number, the unemployment rate tumbled from 7.6 percent to 6.0 percent—a quite remarkable decline in the unemployment rate but for the wrong reason.

 

Throughout 2013 the difference in signals about employment gains between the Household survey and the Establishment survey were suggesting that one or the other or perhaps both sets of employment estimates might have to be revised. The unusually large gains in the Professional and Technical category were also problematic, as we pointed out, because so much of the growth was concentrated in sub-sectors too small to be reported separately and thus there was no way of knowing or verifying what was propelling the Professional and Technical sector growth.

 

What does all this mean? It means our understanding of the regional economy and forecasts of future growth will have to be re-examined.  The spate of stories about how well the Pittsburgh region has fared in terms of employment compared to other regions will certainly have to be looked at again. Perhaps other metro areas in other states will find their jobs numbers were not as good as first thought—or maybe some, like Philadelphia, will see better jobs numbers.

 

To conclude, it is important to note that Pittsburgh’s recovery from the recession through 2012 was very strong as private sector employment climbed to an all-time high following a dramatic surge in job formation beginning in mid-2010.  The re-benchmarking did not push the 2013 employment total below the 2012 total but did effectively eliminate the gains we thought had occurred in 2013.