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.  

What Do Union Members Want for Their Children and Grandchildren?

If someone were to ask a rank and file member of a teachers’ union or a transit drivers’ union what they want for their children, what would the typical answer be? It would not be a far stretch to believe they would say something along the lines of, "I would like them to get a good education and have a nice career with opportunities for advancement, to go as far as their abilities and drive will take them, to live and raise their kids in a safe neighborhood with good schools, parks, and recreational facilities." One would hope that all parents, except perhaps a handful constrained by religious beliefs, would want a more prosperous and rewarding life for their children.

How many would want their children to be more successful than themselves? Odds are most would. And being more successful would mean becoming economically and financially better off. Do union members want their children to become professors, doctors, great writers, chemists, engineers? For those who have children who have become well paid engineers or doctors are they proud of those children? Are they proud of children with MBAs who have important positions with major companies? When the children work for banks or brokerage firms are the members happy about the nice homes and luxury cars the children are able to afford? Or do they view them as traitors to their upbringing?

In short, do union members think they are breaking faith with the labor movement if they want a much better life for their kids?

The irony is that in order for there to be an economy strong enough to offer a vast array of great opportunities for everyone’s children, it has to be a free economy with few constraints on its ability to allocate resources efficiently and reward entrepreneurs and risk taking investors. Otherwise, the economy grinds its way into permanent stagnation or worse.

Thus, for labor union members who want a better world for their children and grandchildren, their continuing virulent attacks on free enterprise, profits, and freedom of workers to join or not join a union are exactly the wrong message and policy stance. Instead, they are insidious poisons that threaten the ongoing ability of the economy to offer a better world for their children-or anyone else’s. One need only look at Greece, Italy, Spain, and France to see where the animus toward the free economy leads. Economies are organic creatures that, like the goose laying the golden eggs, cannot be strangled and abused if they are to keep producing. The biggest error in the thinking of unions is that the economy will keep going at a high rate of speed no matter what regulations, tax burdens and price distortions are forced upon it.

It is hard to imagine the mixed emotions of died-in-the-wool labor stalwarts when they see their offspring thriving as well paid corporate executives or engineers in the free enterprise, profit driven economy they so despise. But that was always their conundrum. Unions have always been a one generation at a time oriented institution. If it were not for public sector unions and their incestuous relationship with elected officials, total union membership would now be 5 percent or less of the total work force despite the overwhelmingly legal advantages they enjoy. Why? Because they are not focused on building something other than ways to extract as many current member benefits as they can; nor do they care about the longer term future. Watching transit drivers hold the public hostage by threatening to strike or teachers walking out and leaving children in the lurch should be evidence enough of the single mindedness of unions. To recall that unions went on strike at war materiel plants during World War II while their fellow countrymen were being killed or wounded to protect them is profound in its implications about the union sense of entitlement and privilege.

And yet as parents union members almost certainly have parental aspirations for their children’s futures. How do they live with the mental gymnastics required to be good foot soldiers for the cause which, in its full flower, destroys the hopes they have for their children’s and grandchildren’s future? The only way they can is to deny that their demands on their employer are harmful; indeed they will argue that it is helpful to their employers and the economy despite all the pain filled historical evidence to the contrary.

Predictably Wrongheaded Comments at the Labor Parade

What would a Labor Day parade be without a few choice parade attendee comments demonstrating a lack of economic understanding and faulty logic? Gems from this year include the parade’s theme, a steelworker’s opinion and a head scratcher from a school teacher.

According to the head of the Allegheny County Labor Council "the message of this year is bring our jobs home." Presumably, he means bring back the factory jobs that have gone overseas or to states with a better business climate. He cannot mean teacher, transit driver, or firefighter all of whom provide local government services that cannot be supplied from Taiwan or Alabama.

So what does it mean to "bring our jobs home"? How can they be "our" jobs if someone else has them? Were they "our" jobs before they left? Were they the workers’ jobs? Were they the unions’ jobs? How interesting. Who hires the workers and pays them their wages and benefits? If the jobs belonged to the workers or the unions, how were they able to pick up and move? Clearly, to the extent jobs can be owned by someone they are owned by the employer. The labor effort belongs to the worker, but the job must belong to the owner.

And why did the jobs leave in the first place? Some were lost due to productivity improvements or technological changes that eliminated jobs or made fewer workers necessary. Some were lost due to less expensive or higher quality imports that lowered demand for U.S. made product. Some were lost as companies sought better business and labor climate locations for their production facilities.

If the Labor Council wants to see more job growth in the sectors that have seen huge losses over the decades, the first thing they must do is to quit thinking in terms such as "bring our jobs home." To business owners and decision makers, that phrase conveys the notion that the same old adversarial labor-owner attitude persists. After all, in many cases it was labor’s exorbitant and intransigent demands regarding compensation, work rules, time off and grievance procedures that caused a lot of the jobs to move away. Until labor leaders (as well as rank and file) in the private sector realize what intense competition means and learn to deal with it, the odds of "their" jobs returning will remain extremely slim.

Meanwhile, back at the parade, a steelworker offered the opinion that President Obama needs a second term because it takes two terms in order to get anything done. One has to smile at that in light of the hash the President’s policies have made of the economy, the debt that has piled up, the impending tax hikes, the runaway job killing regulatory environment and the loss of business confidence in the President’s economic leadership. And beyond that, it is amusing to consider how the unions excoriated earlier Republican Presidents at election time arguing they did not deserve a second term even when the economy was in far better shape than it is currently.

Finally-and the cake taker-came from a local teacher who said, "Every child should have the right to learn the same-not the best education their parents can pay for." Here some speculation as to meaning is called for. Surely, it cannot mean that if a parent can afford a high quality education for a child that child should learn the same as everyone else. More likely, the teacher means that public education is needed to ensure that all children have an opportunity to attend school. But like most public school teachers, this teacher believes that government provided education must be a government monopoly run education. Consider students in the Pittsburgh school district where spending is well in excess of $20,000 per pupil. If the taxpayers could switch $12,000 per year to parents so they could choose their child’s school and educational opportunity, does anyone doubt the parents could afford and find a much better education than the average student in the Pittsburgh schools is receiving?

So, the unjustified assumption underlying the teacher’s comment is that because the taxpayers subsidize education, the schools must be a public monopoly. That of course is not the only option. But in the union dominated public school system that is the mindset. Teachers are the most important element in the education equation, not the students. And certainly the taxpayers get no consideration at all as witnessed by the demands teachers continue to make and the strike threats even when the economy and taxpayers are struggling.

Paraphrasing the teacher’s comment, "We need to make more money so parents cannot possibly afford to pay for a good education for their children and only taxpayers can be squeezed for that much money."

Pittsburgh Area Jobs Grew in June

Private sector employment grew in June at a respectable pace as measured by the change from June 2011. Jobs increased by 19,000 over the period, a rise of nearly two percent. Still, the latest monthly and quarterly gains are well below the torrid pace of 30,000 plus gains set in the fourth quarter of last year.

June’s good year over year growth reflects strong gains in professional and technical service (3,500), leisure and hospitality (4,500), and trucking (1,900, an almost 10 percent 12 month rise). Education and health services rose a solid 3,800 but that is well below the very strong gains from last fall when 12 month gains topped 13,000.

On a less positive note, construction employment fell by 2,700 compared to June 2011 while manufacturing managed a tiny 300 gain. Mining and logging slowed to 1,100 from the nearly 2,000 yearly rise posted in June 2011.

Overall, the June 2012 jobs numbers are good but with the Marcellus drilling activity slowing from the year ago blistering pace, the trucking, technical and hospitality sectors could begin to be negatively affected.

All told, the Pittsburgh area has profited from the gas drilling and the fact that there was no major collapse of the housing sector as happened in so much of the then fast growing regions of the country.

Why No State Reports on the TIF Program?

“The Department of Commerce, in cooperation with other State agencies and local governments, shall make a comprehensive report to the Governor and the General Assembly every two years commencing January 1, 1992, as to the social, economic, and financial effects and impact of tax increment financing projects.” –53 PS 6930.10, Tax Increment Financing Act

 

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Keystone Research Jobs Confusion

Parroting President Obama’s notion that job growth nationally has weakened because of the layoffs of government workers, the Keystone Research Center says that Pennsylvania’s slowdown in job growth is also due to government layoffs. Some facts might be useful. Over the last twelve months government employment fell by 10,800 in the state while private employment expanded by 48,000 jobs-not stunningly good but okay. In June of this year, government payrolls jumped by 9,000 over the May figure (seasonally adjusted so it is not due to seasonal hiring factors) while private jobs managed only a 5,400 pickup.

Several private sectors showed decrease in employment in June including construction, trade and transportation, information and education and health. The big increase in leisure and hospitality employment (7,000) kept the private monthly figure from showing a decrease. So, over a period when government jobs fell, private sector jobs were moving higher at a reasonably good pace with broad based gains led by mining and leisure employment but when government jobs jumped, private jobs were very weak except for one sector. Now how does the President’s theory explain this? It cannot.

First of all, increasing or maintaining government jobs means resources have to be taken from the private sector to cover the costs of government workers. Moreover, government workers in many categories receive higher salaries and much richer benefits than comparable private sector workers. Certainly that is true for teachers, who account for the largest single share of government jobs. And because the competition in most private sectors is absent in government, it is a virtual certainty that comparably situated employees in government jobs are less productive. Indeed, it is not clear how to measure productivity in government jobs.

Second, most government workers in non-supervisory positions are unionized in Pennsylvania. And Pennsylvania laws protect unionized government workers. Pension obligations-no matter how generous-have to be met, unlike the private sector where bankruptcy can reduce such obligations for employers. Teachers cannot be laid off for economic reasons. Unless enrollment declines or entire programs are cut, teachers’ jobs are safe and they will get any wage or benefit increases called for in a contract regardless of the financial situation in a school district.

In short, the Keystone Research Center has it exactly backward. A growing government sector, for any reason other than population growth, is detrimental to the private sector where real, measurable production takes place and is necessary to support whatever government exists. Keeping government small is the best strategy. Privatize, outsource wherever possible. It can be done if the will is there to do it.

Pittsburgh Region Jobs Picture is Looking Up

Has the Pittsburgh area climbed out of the recession?  Notwithstanding the commentary nationally and locally lamenting the tough economic times across much of the Country and State, the Pittsburgh metropolitan statistical area (MSA) employment picture has been showing significant improvement for most of 2011.  In fact, the Bureau of Labor Statistics’ preliminary payroll survey for October 2011 shows the employee count to be at its highest October level for at least two decades going back to 1990. While data revisions have been known to reverse initially reported gains, the year-over-year increases for every month in 2011 have been quite healthy and are perhaps signaling that from a jobs standpoint, the area has exited the recession.

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Debunking Fallacy Filled Economic Analysis

How to speed job growth in Pennsylvania?  According to the latest offering from the Keystone Research Center (KRC), the Commonwealth and local tax levying bodies should raise taxes and hire more employees. 

 

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Pennsylvania’s Job Market Improvement Hit a Snag in July and August

After some solid gains over the last year or so, Pennsylvania’s unemployment rate jumped from 7.8 percent in July to 8.2 percent in August. A 16,000 drop in the number of employed (as measured by the household survey) and a 6,000 increase in labor force pushed the unemployment rate up quite sharply. At the same time, the separate establishment survey of jobs found a tiny 1,500 rise in employee count from July to August-much smaller than the average 5,700 per month increase since January.

What’s more, the July establishment job count was revised downward by 11,000 resulting in slight 2,000 job decline from June’s reading rather than the 9,000 jump reported in the July Labor and Industry Department’s release on labor force statistics. On a year over year basis, August employment remains 56,600 ahead of the August 2010 level. However, that figure is well below the 85,000 average of year on year gains during the first three months of 2011. The only truly bright spots in the August data were the gains in mining, manufacturing, professional services and financial employment. Surprisingly, the education and health services sector posted a decline as did leisure and hospitality, sectors that have been mainstays of the jobs recovery. Meanwhile, information services suffered an abrupt 3.6 percent drop in employment between July and August.

All told, the substantial downward revision in July numbers and the small increase in August establishment jobs point to a significant slowing in the Commonwealth’s progress to full labor market recovery.

Editorial Writers Schizophrenic about Jobs

On Tuesday the PG’s editorial page writers were adamant in arguing that Congress and the President take dramatic actions to accelerate growth job. Decrying the awful state of the job market and lack of employment gains, the editorial said the time for political bickering must be set aside. Unfortunately, the calls for action do not ask Obama to offer up any rollbacks of the regulatory nightmare that has been created since he became President. How the writer expects the business world to shake off the impacts of the reduced return on investment and the higher levels of risk produced by the piling on of new regulations is not made clear.

Amazingly, one day later, the same editorial page offers up a sharp criticism of Obama’s decision to delay for a couple of year a job destroying EPA plan to lower the ozone level standard for a couple of years. The editorial argued that opponents’ claims the tighter ozone standard would create billions in additional business costs was an old rerun of the argument that a cleaner environment is the enemy of economic prosperity.

The problem with the editorial position is that ozone levels have fallen significantly over the last two decades, locally and across the country (California remains the poster child for serious ozone problems). Moreover, if the EPA’s desired reduction in the standard of 75 parts per billion to a range of 60 to 70 parts per billion were imposed at say 65 parts per billion, virtually every county in the country with suburban levels of population density would fail to meet the new standard-based on the latest EPA data. Locations in the northern tier of Western and Midwestern states will not be slapped with a non-attainment ruling. Hawaii will also escape the impact.

In short, with the new lower level standard in hand, the EPA would be in a position to go after any company contributing to ozone levels. The negative impact on new investment as well as current and future jobs would be substantial at a time when job creation is at a standstill.

The irony is that the cleanest air in any of the lower 48 states in terms of ozone concentration is in the 50 parts per billion range. So the EPA and the editorial writer are willing to do untold damage to the economy in an effort to get every monitoring station to within 15 to 20 parts per billion of the lowest readings currently being taken. The efforts to get everyone under the current ozone cap are costing enough already. Check with California where environmentalism reigns supreme and many ozone monitor readings are routinely100 per parts billion or higher. The EPA’s effort is designed simply to continue expanding its power.

For the people supporting the EPA, the costs imposed by what they do are irrelevant. Their objective is zero pollution beyond what nature itself creates. Although, if they could sue Mother Nature they would take a serious look at doing so after a volcano or earthquake throws out pollutants.