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Pittsburgh metro private jobs recovery in 2021

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Background:  In April 2020, the seven-county Pittsburgh Metropolitan Statistical Area (MSA) (Allegheny; Armstrong; Beaver; Butler; Fayette; Washington and Westmoreland) suffered a loss of 219,000 private sector jobs from the April 2019 reading, an astounding decline of 20.3 percent. Although employment began to recover through the rest of 2020, the December count was still 98,400—9.1 percent—below the December 2019 level.  For 2020 as a whole, average annual jobs were 93,300, or 8.7 percent lower than the annual employment level in 2019.

There were monthly gains in 2021 compared to 2020 except January, February and March that had not taken the huge hit that came in April 2020.  These gains brought the yearly total to 23,100 or 3.4 percent higher than the 2020 level. Unfortunately, the 2021 annual reading was still 70,200, or 6.5 percent under the 2019 annual reading.

Pre-pandemic

From the post-2010 recession year of 2012 through 2016, private employment in the MSA had climbed a modest 9,300, or less than 1 percent in four years. From the 2016 level through the last pre-pandemic year of 2019, private jobs rose 32,300, a three-year gain of 3.1 percent, over three times more than the four-year gain from 2012 to 2016. 

While not comparable to many MSAs with much more robust growth, the period was a marked improvement over the Pittsburgh MSA’s previous four years.  But sadly, this faster growth period was interrupted by the economic impact of the COVID pandemic.  And the 2021 gains have been too anemic to restore the jobs to the 2019 year-end levels, with the December 2021 reading still 58,500 below the December 2019 level.   

Pandemic losses by major sector

As noted, the annual average total private sector jobs in 2021 were still 70,200 below the 2019 level. Of that number, 12,300 were goods-producing and 57,700 were service-providing.  The 58,500-shortfall from the December 2019 posting is comprised of 10,800 goods-producing jobs and 47,700 service-sector employees. 

Table 1

Manufacturing jobs in 2021 as-a-whole remained 7,800 below the 2019 level and in December 2021 were 6,500 lower than December 2019. However, the December 2021 count was barely above the 2020 level and there had been essentially no growth in factory employment since the fall of 2020.  Construction employment fell dramatically, by nearly 50 percent in April 2020 when the lockdown occurred.  But it showed great resilience and by June of 2021 had recovered to the June 2019 level.

Within the services sector, the biggest loser has been leisure and hospitality.  In April 2020, employment fell by 66,500 from April 2019, a drop of 55.9 percent.  By December of 2020, nearly 32,000 jobs had been recovered and by December 2021 another 18,000 had been recovered.  The 2021 annual average employment was 22,700 (18.8 percent) under the 2019 yearly figure.

Comparison to other MSAs

To evaluate the strength of the Pittsburgh MSA’s private employment recovery it is useful to look at seven similarly sized MSAs around the country.  The sample is divided into two groups of four. One northern and north-central and long-time traditionally non-right-to-work (Buffalo, Cleveland, Milwaukee and Pittsburgh); the second, southern and mountain, and long-time right-to-work (Ft. Worth, Nashville, Raleigh and Salt Lake City).

Table 2

The first group, the northern group, turns out to be very weak compared to the second group, the southern group, in terms of long-term employment growth as well as recovery from the losses due to the pandemic in 2020.

Between 2011 and pre-pandemic 2019, private employment in the four-weak MSAs rose an average of 7.4 percent. Remember, 2011 was in the early stages of recovery from the 2008-2010 recession. The strongest MSA in the weak group was Milwaukee at 9.1 percent growth and the weakest was Pittsburgh at 5.7 percent. Meanwhile, in the strong group the average growth from 2011 to 2019 was 30.4 percent, led by Nashville at 37 percent. The slowest gain was posted by Ft. Worth at 23.4 percent. Thus, average employment growth in the strong group was four times faster than the weak group.

The same pattern holds for the recovery of jobs following the huge decline in April 2020.  Extent of recovery is measured in two ways. First, the December 2021 count of private employment is compared to the December 2019 reading. Second, the annual average employment is compared to the annual average for 2019.

As shown in Table 2, the weak group average shortfall in December 2021 compared to 2019 was 5 percent. Pittsburgh was the weakest of the group with jobs still 5.4 percent below the December 2019 level.  The strong group average a 2.2 percent increase compared to December 2019 with all MSAs fully recovered. Salt Lake City led the way, climbing 4.5 percent above the 24-month-earlier level, followed by Raleigh at 2.6 percent above the pre-pandemic December count.

Thus, at the end of 2021 the strong group was a total of 7.2 percent further ahead in employment gains than the weak group that was still significantly below the pre-pandemic job counts. 

Conclusion

The statistics in Table 2 amplify the significant difference in approaches to the job markets and government’s attitude toward control of economic activity and individual liberty among the states—and especially in large cities where control of government has been liberal or very liberal for decades.

In the case of the Pittsburgh MSA, the region is working in an environment of state regulations and development policies that rely too heavily on subsidies in various forms while imposing unnecessary or outdated regulations on the economy and local governments. High costs of fuel and Pennsylvania Turnpike usage driven by state law are not an inducement for prospective businesses to locate in the region and add substantial cost to commuters to work and local truck freight.  Then, too, hefty reliance on subsidies to attract airlines has been largely unsuccessful in adding to the region’s economic growth while sending a bad signal to carriers.      

Lack of regular, periodic reassessments of real estate produces a situation in which inequities mount, forcing appeals that are costly and create uncertainties for homeowners and businesses that could be avoided.  Binding arbitration rules that do not require taking into account the financial capability of local government in union contracts are clearly not in the interest of taxpayers.

Public transit operations in Allegheny County are extremely costly compared to other systems around the country, requiring tremendous subsidies from taxpayers. Then, too, the extraordinarily high education expenditure per student in the City of Pittsburgh and other districts with very poor academic achievement are a substantial force that pushes parents with school-age children out of these school districts.

In short, the MSA and the central city are saddled with a legacy of policies that are not free market supportive. The poor growth compared to other regions points vividly toward the need to make drastic changes in these growth-inhibiting polices.

Evaluating Pittsburgh’s private jobs recovery from COVID downturn

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Summary: Recently released employment data for May show the Pittsburgh area has made progress since the COVID-depressed level of 2020.  However, that progress is disappointing when compared to similar metros from around the country.  This brief compares the Pittsburgh metro’s performance with those from a sample of metros from Right-to-Work states and from non-Right-to-Work states. 

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The recently released May 2021 employment data for the Pittsburgh seven-county metropolitan statistical area (MSA) show a significant jump from the COVID-depressed May 2020 level. Note that comparisons of monthly data to the same month a year ago are necessary for meaningful indications of gain or loss because MSA jobs data are not seasonally adjusted. 

Pittsburgh MSA overview

Private-sector jobs—that had fallen by 16.3 percent (177,000) from the May 2019 level to the May 2020 count—rose 11.4 percent (103,200) from May 2020 to May 2021. However, notwithstanding the hefty May-to-May upturn in the MSA’s private sector employment, the count remains 74,000 (6.8 percent) below the pre-COVID reading of May 2019. This May’s increase from a year ago reflects substantial growth in retail trade, leisure and hospitality and construction jobs. But the significant gain was not nearly enough to erase the huge losses sustained in 2020.

Meanwhile, government employment in the Pittsburgh MSA (and generally across the state) suffered a much smaller percentage jobs loss from May 2019 to May 2020 with a decline of 5.7 percent (6,700 jobs), 2,500 of the lost jobs were recovered in 2021. Thus, in comparison to the private-sector, government jobs, especially state and federal, were relatively safe. Local education services, excluding teachers and principals, accounted for the majority (63 percent) of government job losses between May 2019 and May 2020.

Comparing Pittsburgh to other MSAs

The obvious relevant question is this: How does the jobs performance in Pittsburgh compare to other MSAs around the country?   To answer that question, the private employment history of a group of 13 MSAs from around the country were collected to see how Pittsburgh’s COVID-caused job losses, and the ensuing recovery, fared relative to other metro areas.

The MSAs include seven situated in Right-to-Work (RTW) states and seven from non-Right-to-Work (NRTW) states.  MSAs from RTW states include Boise; Richmond, Va.; Indianapolis; Raleigh; Nashville; Jacksonville and Louisville.  For the NRTW group, besides Pittsburgh, the MSAs include Hartford; Kansas City (Mo.); Cincinnati; Minneapolis; Albuquerque and Rochester, N.Y.

To get a more complete perspective on relative MSA performance, this analysis looked at four statistics: (1) the percent loss from May 2019 to May 2020, (2) the 12-month jobs average (annual) loss from 2019 to 2020, (3) the percent change from May 2019 to May 2021, (4) the employment growth in each metro area between 2013, the year following an almost full recovery from the recession, and 2019, the year prior to the COVID pandemic. 

The first step in the analysis was to aggregate the RTW and NRTW MSAs by calculating an unweighted average of each gauge of performance.

May 2019 to May 2020

For the 2019 to 2020 changes, the RTW MSAs had an average drop of 9.9 percent, May-to-May, while the NRTW MSAs suffered a 14.2 percent decline, which represents a very large number of jobs lost compared to the RTW MSAs. 

Pittsburgh jobs fell 16.3 percent with only Rochester (-17.3 percent) losing a higher percentage. A way to view this loss is to calculate what the Pittsburgh MSA jobs decline would have been if it had experienced the same percentage loss as a much better performing MSA. For example, take the Raleigh MSA’s 10.2 percent decline. In that case, the region would have lost 66,000 fewer jobs than it actually did.  

Kansas City, among the NRTW MSAs, had the smallest private employment drop at 10 percent. Meanwhile, Louisville, with its 13.7 percent decline, was the only MSA in the RTW group with a loss near the NRTW average of 14.2 percent. Boise, at minus 4.5 percent, had the smallest job decline of the 14 MSAs examined.  Jacksonville at -7.3 percent was second lowest. These two performed much better than the other MSAs.

It is almost certain that the decisions of governors in Idaho and Florida to impose fewer mandatory business closings and limitations played a major part in holding down job losses to well below the MSA average. 

The two best performing MSAs in the NRTW group were Cincinnati and Kansas City with respective losses of 12.9 and 10 percent. Both states have Republican governors.  Meanwhile, Rochester, Hartford and Pittsburgh had an average loss of 16.2 percent. It is noteworthy that all three of these MSAs are in states where severe and lengthy constraints and mandatory closings were ordered.

2019 to 2020 annual change

A second measure of the degree to which government mandates affected recovery of private-sector jobs since May 2020 is the annual change from 2019 to 2020.  The longer and more binding were the constraints the weaker the job gains would be in the second half of 2020. Thus, the percentage change in 2020’s annual average employment from the 2019 annual average provides a reasonable estimate of the impact of difference constraint regimes on business activity. 

For the RTW MSAs the annual average decline was 4 percent and for the NRTW MSAs it was 7.4 percent. Boise had the best overall performance with a drop of only 0.2 percent, followed by Jacksonville with a 3.0 percent loss. Louisville was the worst performer in the RTW MSAs with a drop of 6.0 percent.   For the NRTW MSAs, Kansas City (-4.9 percent) and Cincinnati (-6.1 percent) were the best at recovering lost employment in the second half of 2020.

Pittsburgh (-8.7 percent) and Rochester (-9.4 percent) suffered the largest year-to-year declines of the 14 MSAs while Hartford and Minneapolis each lost 7.8 percent in 2020 compared to 2019—much higher than the average 4 percent decline in RTW states.

May 2019 to May 2021

The most direct measure of recovery from COVID-induced losses is shown by the change in the level of jobs in May 2021 from the count in May 2019. For the May 2021 RTW group, private jobs on average were 1.3 percent below the May 2019 reading. Meanwhile, the seven NRTW MSAs’ May 2021 average employment count was 5.1 percent under the 2019 level. Thus, neither group on average had fully recovered although the RTW was far better than the NRTW.

Among the RTW MSAs, Richmond stands out as having the worst recovery with May 2021 jobs still 6.4 percent below 2019. Evidently, the gubernatorial restraints were tighter in Virginia than the other RTW states. Boise was far and away the strongest performer with May 2021 employment 4 percent higher than May 2019.

Pittsburgh (-6.8 percent) and Hartford (-7.2 percent) were the two weakest MSAs in recovering jobs lost to the pandemic. However, Kansas City (-2 percent) and Cincinnati (-3.6 percent) had recoveries more in line with some of the RTW MSAs and better than Richmond.

2013 to 2019 jobs growth

Longer-term employment gains can provide insight into why some MSAs fared better than others during the pandemic.  Here the change in annual average employment in 2019 will be compared to 2013. By 2013, U.S. private jobs had almost fully recovered from the serious downturn that began in late 2008.  2019 was the last year before COVID took its toll.

The numbers are very revealing as to underlying strength in the states and metro areas. The seven RTW MSAs averaged jobs gains of 21 percent from 2013 to 2019. Four—Raleigh (22.8), Boise (29.1), Nashville (25.8) and Jacksonville (21)—led the way with outstanding percentage gains.  Louisville, Indianapolis and Richmond were well behind with gains in the 12 to 13 percent range.

Still the slowest RTW MSA growth was stronger than all of the NRTW MSAs. The best performers in the NRTW group were Kansas City (10.8), Cincinnati (10.3) and Minneapolis (10.3).  The worst were Hartford (5), Rochester (4.4) and Pittsburgh the weakest at 3.9 percent. Albuquerque fell in the middle of the NRTW MSAs at 8.5 percent.

These longer-term gains point to very disparate approaches to the business community and labor/management issues that are not helpful for growth. It is, in large part, a reflection of the presence or absence of the Right-to-Work. Workers cannot be forced to join a union or pay dues in RTW states.

Another factor that has a strong negative correlation with growth is the percent of government employees who are unionized. For instance, the three worst-performing MSAs in terms of longer-term growth, the extent of recovered lost jobs and losses during the pandemic year of 2020— Hartford, Pittsburgh and Rochester—are in three states that average 60 percent unionized public employees. On the other hand, the three fastest-growing MSAs, of the 14 analyzed—Raleigh, Nashville and Boise—are in states that average only 13.5 percent of public employees unionized.

These results argue that, everything else equal, the presence of RTW and relatively low percentage of public sector unionization are associated with friendlier better business climates and a more free-enterprise oriented approach to regulation while not having Right-to-Work and heavy public sector unionization are indicative of a less friendly business climate. 

Conclusion

On each of the measures used to evaluate MSAs in terms of private-sector employment growth before the pandemic, during the worst of the COVID-caused downturn and in the recovery period, the Pittsburgh MSA’s performance was very poor compared to most other metro areas. It lost a greater percentage of jobs during 2020 than 12 of the 13 other metro areas of comparable size studied. Only Rochester was worse.

The Pittsburgh MSA had the second-largest decline from May 2019 to May 2020. Again, only Rochester’s loss was larger.

And the Pittsburgh MSA surpassed only Hartford in recovery of jobs as measured by the change from May 2019 to May 2021.

Finally, it had the weakest 2013 to 2019 jobs growth of the 14 metro areas analyzed.

In short, the structural, labor and regulatory policies of Pennsylvania and the metro area core-city are inhibiting growth. And it is most notable in comparison with states that have adopted Right-to-Work legislation and have low government-sector unionization.

Additionally, the longer Right-to-Work has been in effect matters as well. Recent adoption will not have substantial impact on either private or public-sector unionization for some time and union influence already in place will be hard to overcome.

Pittsburgh MSA jobs data disappoints

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Summary: A recent Policy Brief (Vol. 21, No. 6) outlined the 2020 statewide job losses owing in large part to the pandemic lockdowns.  As that Brief noted, nearly every sector in the state posted employment declines.  Data for the Pittsburgh Metropolitan Statistical Area or MSA (Allegheny, Armstrong, Beaver, Butler, Fayette, Washington and Westmoreland counties) show similar results.

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The pattern for most sectors in 2020 was a slight year-over-year gain in both January and February before the sharp year-over-year losses began in March as the state-mandated lockdown was put into place and restrictions continued throughout the remainder of 2020.

As with the state analysis, non-seasonally adjusted U. S. Bureau of Labor Statistics employer payroll survey data are used to calculate a monthly average for the year and to compare months in 2020 to the same months in 2019. 

Total non-farm jobs

Total non-farm jobs for the Pittsburgh MSA averaged 1.106 million per month in 2020.  This represents a drop of 88,000 or 7.35 percent from 2019’s monthly average of 1.194 million.  Furthermore, the 2020 figure represents the lowest jobs count since 1997. The previous low reading since 2000 was 1.120 million in 2009.  The very weak 2020 number is the result of steep year-over-year drops in April (17.92 percent), May (14.25 percent) and June (9.79 percent).  Even though the year-over-year losses diminished steadily over the remaining months of 2020, no month posted a smaller decline than 7.05 percent.

The Pittsburgh MSA’s percentage loss of non-farm jobs in 2020 mirrors the state’s decline (7.36 percent) and both were significantly worse than the national drop (5.75 percent).  It’s a not surprising finding since the MSA’s non-farm jobs growth has been very sluggish since 2000. Indeed, private-sector employment rose at a paltry average annual rate of just 0.3 percent in the 19 years from 2000 to 2019 and saw all those gains wiped out in 2020.

In only three years since 2010 were annual non-farm job gains greater than one percent—in 2011 (1.74 percent), 2012 (1.09 percent) and 2018 (1.01 percent). Note that 2010 and 2012 were bounce-back years from the sharp downturn in 2009-2010 and are not indicative of a speed up in underlying growth in the region.

Goods-producing sectors

Goods-producing sectors include mining and logging, construction and manufacturing.  After posting solid year-over-year gains for 2017 (2.42 percent), 2018 (3.02 percent) and 2019 (3.20 percent), the overall goods-producing sector lost 7.10 percent of its jobs in 2020 which is worse than the statewide loss of 6.30 percent. 

Mining and logging has had strong growth since it was first estimated (as a separate goods-producing sector) for the Pittsburgh MSA level in 2005.  That’s in large part due to the presence of Washington County, one of the state’s leading shale gas producers.  In 2005 the monthly average was 5,100 jobs in the Pittsburgh MSA.  By 2014 it had grown to 11,800—a 131 percent increase.  It did tumble to 8,900 jobs by 2016 before ratcheting back up to 11,900 jobs in 2019.  The monthly average in 2020 fell to 10,100—a drop of 15.57 percent.  The statewide loss was less at 14.43 percent.   

Construction’s growth was also strong over the last few years.  In 2017 the monthly average number of construction jobs was 56,900.  In 2019 that number climbed 10.5 percent to reach 62,900.  In 2020 it fell back 7.63 percent to 58,100.  The statewide drop to the construction sector was just 6.75 percent.   

The manufacturing sector has been losing jobs in the MSA for quite some time.  The monthly average number of manufacturing jobs in 2000 was 129,800.  It fell at a steady pace until bottoming out at 85,700 in 2017—a decline of 34 percent.  It then ticked up a bit over the next two years to reach 87,300 in 2019—a growth rate of 1.9 percent from 2017.  In 2020 that number dropped again to a new low of 82,500 (-5.56 percent).  The percentage loss was close to the statewide fall of 5.68 percent. 

Service-providing sectors

The trade, transportation and utilities super sector is comprised of sectors such as retail trade, truck transportation and warehousing. Since 2000 this super sector has not done well, posting job losses in 15 years before the pandemic of 2020.  In fact, there were only three positive annual gains posted in the 19 year period—2010 (0.11 percent), 2011 (1.27 percent) and 2014 (0.44 percent).  The decline in Pittsburgh MSA jobs in this super sector (6.73 percent) is slightly worse than the statewide decline (6.55 percent). 

The retail sector is of particular interest as grocery stores and general merchandise stores were exempted from the statewide lockdown even though they were subjected to capacity restrictions.  However, the retail trade sector has been in nearly constant decline in the Pittsburgh MSA for quite some time.  In 2000 there were 141,500 average monthly jobs in this sector.  But by 2019 employment had slumped to 118,500 (-16.30 percent).  The average number of monthly jobs in 2020 fell by another 6.22 percent to 111,200 jobs.  The drop in retail from 2019 to 2020 in the MSA was smaller than the state’s decline of 8.50 percent. 

Education and health services are sizable producers of jobs. This is one sector where there has been consistent growth over the last two decades, owing to the large number of colleges, universities and major medical facilities in the area. In 2000 jobs in the “eds and meds” sector posted a monthly average of 198,100. By 2019 it had steadily grown to 259,200—an impressive jump of 61,000 or 31 percent—before dropping back 5.47 percent to 245,000 in 2020. The sector’s gain over the 19 years was greater than the increase in total non-farm jobs of 47,000.

In comparison, “eds and meds” statewide grew by a much stronger 41.3 percent from 2000 to 2019 and fell back just 4.96 percent from 2019 to 2020. 

Educational services—all colleges, universities and private k-12 and training centers—also suffered a large drop in the monthly year-over-year employment count in 2020, coming in 9.11 percent lower than in 2019.  This decline was slightly smaller than the statewide drop of 9.75 percent.

The healthcare and social services sector had strong growth from 2000 to 2019 (35.9 percent) but suffered a loss of 9,400 jobs or 4.54 percent in 2020. The ambulatory care sub-sector (doctor offices and out-patient services) lost 5,300 jobs (7.35 percent) while hospitals lost another 1,400 (2.33 percent). 

Leisure and hospitality suffered the hardest hit from the lockdowns.  Across the state 25.96 percent of leisure and hospitality jobs were lost from 2019 to 2020.  The Pittsburgh MSA had a similar experience, shedding 26.68 percent—32,300 jobs.  This sector was among the fastest growing in the MSA for a long time with 24.8 percent growth from 2000 (97,000) to 2019 (121,100).  In 2020 that average monthly total fell to just 88,800.

Within this sector, the restaurant sub-sector took huge losses as its average monthly jobs count plunged by 32.29 percent.  In April, when the lockdown was in full force and restaurants were forced to close in-person dining, restaurant employment was 58.51 percent lower than in April 2019.  That monthly year-over-year decline gradually diminished as in-person dining was reinstated, albeit at a maximum of 50 percent capacity, until it hit 33.64 percent in November before another shutdown was instituted in December, pushing and the year-to-year loss back to 40 percent. 

The arts, recreation and entertainment subsector also lost jobs as large gatherings were prohibited, which affected concert venues, theaters and sports arenas.  While this is a relatively small sector, its employment losses were the largest in percentage terms.  In 2020 the average monthly employment level was 35.20 percent lower than in 2019. This sub-sector was enjoying strong growth of 14.29 percent in January, and 10.11 percent in February, before the pandemic began in March (6.91 percent).  In April, the year-over-year drop was nearly 60 percent.  In May, the decline was 54.15 percent.  It stayed above 41 percent in each subsequent month of 2020.

While the economic calamity of 2020 is well known, it is also worth remembering that it continues into 2021.  As of the end of February, the pandemic continues and the restrictions on business are still in place with reduced capacity and limited customers.  While the vaccinations are increasing and reported daily infections are decreasing, the movement to lift the restrictions at any level of government is slow, leaving many businesses to struggle.  The governor’s recent announcement of an increase of occupancy for indoor events to 15 percent of capacity, up from 5-10 percent, with outdoor events being increased to 20 percent, up from 10-15 percent, will most likely just affect the arts, recreation and entertainment sector. 

The only news for them is bad as both the federal and Pennsylvania governments contemplate raising the minimum wage by 107 percent.  As we have mentioned before, raising the minimum wage is a tone-deaf measure that will only exacerbate the job losses for many sectors that employ low-skilled labor. 

It will remove opportunities for new labor force entrants as they seek their first job or force some businesses to close as they will not be able to absorb the increased costs.

It is more important now than ever before for the leaders of the state and region to push for a more friendly business climate with lower taxes and regulations to help struggling businesses recover, bringing back much needed job growth.

Halting and uneven jobs recovery in the Pittsburgh region

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Summary: May payroll jobs numbers for the Pittsburgh Metropolitan Statistical Area (MSA) have been reported by the state. As expected, the May data continue to show the economic devastation from the lockdown ordered by the governor in response to the coronavirus. Despite a loosening of restrictions in May with all counties in the metro area being moved into the governor’s yellow phase by mid-month, ongoing dramatic job declines from pre-virus levels continued.

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In the yellow phase, the stay-at-home restriction was eliminated while some in-person retail resumed (though curbside pickup was recommended). Note that several retail categories including grocery, pharmacy, gasoline stations and other so-called essential items were allowed to remain open. Several big box chains remained open throughout the lockdown, mitigating the hit to retail jobs. Other types of businesses were given permission to resume with the requirement of following building safety orders (though telecommuting was still encouraged).  Indoor recreation, health and wellness facilities, education facilities, hair salons and all entertainment remained closed.  Restaurants and bars were limited to carryout.   

An April Policy Brief (Vol. 20, No. 18) demonstrated the severity of the lockdown’s red phase wherein only a select number of firms were allowed to open. The methodology of that Brief is also used in this analysis. As noted in that Brief, seasonally adjusted data are not available for many of the subsectors of major interest so the year-over-year differences in the unadjusted values will constitute a reasonable estimate of the virus’ lockdown impact.  Thus, the May 2020 job counts compared to May 2019 will serve as a good measure of the impact of the virus closings. 

May 2020 nonfarm jobs in the MSA dropped by 175,800 or 15 percent from May 2019.  This represents some improvement compared to the April number which saw a year-over-year loss of 214,000 (18 percent).  The smaller loss in May reflects the gradual reopening of some segments of the economy and some pickup in sectors that were not in full lockdown. Nonetheless, employment is still suffering a huge decline and the most recent data point to a long road ahead to a full recovery for many sectors of the economy.  

Bear in mind that nonfarm jobs include government employment. Unfortunately, the private sector has borne the brunt of the job reductions. From May 2019 to May 2020 MSA government employment fell by only 5,000 from 116,000 to 111,000, with local governments accounting for all the decline. Federal and state employment was not cut.

Earlier Briefs have argued that the MSA’s jobs performance has been restrained by bad public policies such as onerous regulations and high taxes along with a generally unfriendly business climate.  Prior to the virus lockdown, nonfarm jobs year-over-year grew 0.5 and 0.6 percent in January and February.  Going back even farther, the year-over-year growth for each month in 2019 (vs. 2018 levels) ranged from 0.6 percent (November) to 1 percent (January). 

Compared to national job growth, the Pittsburgh MSA’s performance has been lackluster. Nationally, during the 2020 pre-virus period of January and February, total nonfarm jobs climbed 1.5 and 1.6 percent, respectively, above year-earlier levels. In 2019, national monthly jobs gains ranged from 1.2 percent to 1.7 percent.  After the virus impact arrived, nonfarm jobs nationally fell 11.7 percent in April and 8.7 in May, much smaller declines than in the Pittsburgh MSA.  

Goods-producing sectors

Goods-producing sectors, mining and logging, construction and manufacturing, accounted for 146,800 of the 1,024,500 MSA nonfarm jobs (14 percent) in May.  Employment in those three sectors combined fell 17,700 from a year earlier, an 11 percent decline and represented 10 percent of the MSA’s total nonfarm job losses (175,800).  Manufacturing, which had been on the upswing over the last couple of years (2.5 percent growth from 2017 to 2019), lost the most jobs (9,400 or 10.7 percent) while mining and logging suffered the largest percentage drop (21 percent or 2,600 jobs).  Construction jobs were down 5,700 from May 2019 (8.8 percent).  This sector rebounded substantially from April’s job count when the employment loss was 40 percent lower than the year-ago level.  In the yellow phase construction projects were given permission to resume.  

Service-producing sectors

Service-producing sector jobs have been hardest hit, accounting for 90 percent of MSA nonfarm job losses. In a sign of some improvement in job markets, the May 2020 decline of 158,100 jobs from the May 2019 reading was significantly smaller than the year-over-year loss in April (201,500) and evidence that jobs were being added as the lockdown loosened up slightly in the yellow phase.  

Leisure and hospitality suffered the biggest employment decline. The sector lost 58,700 jobs in May compared to May 2019 but that was a slight improvement from April’s 66,000 drop. Activity at some of the affected component categories picked up in the yellow phase.  Still, the 64,300-job count in this sector was the lowest May level since the 91,800 jobs reported for 1990, the earliest year for which the U.S. Bureau of Labor Statistics reports MSA leisure and hospitality numbers.  

The leisure and hospitality sector is divided into two major subsectors: arts, entertainment and recreation and accommodation and food services.  Prior to the virus, arts, entertainment and recreation accounted for only 20 percent of the leisure and hospitality jobs, however in May 2020 they accounted for an even smaller percentage (15) as most sports, theaters, concerts, amusements, museums, etc. were still unable to open in the yellow phase. In May 2019 there were 22,900 jobs in this group.  But in May 2020 that number had plummeted to just 9,900—a drop of 13,000 or 57 percent. With this subsector opening very slowly, even under the green phase where large gatherings are still forbidden, these enormous job losses may linger longer than in other sectors.  

Meanwhile, accommodation and food services jobs remained very depressed in May.  While the drop to jobs of 45.7 percent was smaller than the 54.7 percent slide in April, it points to a long road ahead before this group returns to the 2019 level.  Full-service restaurants took the brunt of the losses, dropping 34,300 jobs (a 75 percent plunge) while limited-service restaurants lost 7,100 jobs (20 percent).

The next hardest hit sector was education and health services which lost 38,600 jobs or 15 percent in May 2020 compared to a year ago and was slightly higher than the 34,000 year-over-year loss in April. Education services are defined by the BLS as all colleges, universities, training centers and private k-12 schools.  Public k-12 schools are reported under the category of local government education services.

Education services posted 43,500 jobs in May, down 8,200 or 16 percent from last May—similar to April’s losses of 8,300 or 15 percent.  Bear in mind, however, that college and university jobs make up the bulk of education services (37,200) and suffered only a minor loss of 500 jobs from May 2019 to May 2020.      

Surprisingly, in the midst of a pandemic, health care and social assistance suffered the heaviest losses in the “eds and meds” sector with a plunge of 30,400 from May 2019 to May 2020, accounting for 79 percent of the overall decline.  Part of this huge drop can be attributed to the governor’s orders to shut down non-essential medical practices which included elective procedures at hospitals and outpatient centers.  

Ambulatory healthcare services—practitioners not providing inpatient services such as doctor’s offices and outpatient service facilities—were hardest hit losing 18,300 jobs (25.5 percent) from a year ago, falling to 53,400 jobs.  This represents the lowest May level in 15 years (2005, 51,900).  

Hospitals, protected by the lockdown to prevent them from being overrun, also suffered losses falling 3,100 jobs or 5 percent.  

The remaining job losses in the healthcare and social assistance subsector occurred in nursing and residential care facilities (2,100) and social assistance jobs (6,900).  The year-over-year losses to both nursing homes and social assistance jobs were greater in May than in April (1,800 and 6,500 respectively).

The trade, transportation and utilities group posted a decline of 27,400 jobs (13 percent) from May to May to stand at 180,800.  While this represents an improvement over April’s loss (35,000 jobs), it still shows just how far the economy has to go.  It is worth noting that the number of jobs in this sector has been declining steadily since 2000 when the sector employment reached 242,300.   

The retail trade component’s 15,600-job decline (13 percent) was the largest. Transportation, warehousing and utilities posted a loss of 7,400 with truck transportation accounting for 2,700 of those losses.

May-to-May declines were also seen in professional and business services (13,400), almost the same as April’s drop. The sector known as “other services” saw employment fall 13,000 (23 percent), most heavily in personal services such as barber shops and salons.

Meanwhile, finance sector employment was slightly higher in May 2020 than May 2019 (76,600 to 76,300) after recording a slight increase from April-to-April as well. Incredibly, in May 2020 there were 11 times more jobs in finance than in full-service restaurants. 

The Pittsburgh MSA’s economy was dealt a huge blow by the virus-related lockdown of businesses and citizens.  The impact will be long-lasting and is leading to a slow recovery related to the slow release from the lockdown.  But as earlier Briefs have noted many times before, the area’s economy has seen sluggish growth for the last few years and has been unable to keep up with national growth rates.  The business-unfriendly high-tax and regulatory environment in the state and area that was responsible for the pre-virus sluggish growth will also hamper the economy’s recovery.

Estimates of employment impacts of coronavirus in the Pittsburgh MSA

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Summary: The economic deterioration resulting from the coronavirus plague worsens daily in the U.S., in Europe and here in Pennsylvania and the Pittsburgh metro area (MSA).  Based on data through the end of March, a rough estimate of the unemployment levels for the region can be calculated.

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The calculation looks first at the household data for the number of people newly out of work as measured by unemployment claims.   Since March 15, Pennsylvania has recorded 844,000 new unemployment claims. That represents roughly 13.6 percent of the number of Pennsylvanians working as of February.  Assuming that percentage also applies to the Pittsburgh MSA (which is reasonable in light of the governor’s mandated statewide business closing orders) there would have been 155,600 unemployment claims in the MSA. The unemployment rate which stood at 5.2 percent in February—the latest official number—could be close to 18 percent as of the end of March and will almost certainly worsen further in April.

No doubt the claims will continue to rise in the weeks ahead, perhaps more slowly since the mandated closings have already had their heaviest impact.  However, the situation will continue to worsen as the effect of rapidly rising unemployment in many sectors not under the governor’s mandate begins to push unemployment claims upward. Travel-related sectors such as hotels, airlines, taxicab services, etc., will almost certainly be much worse off in the days ahead.

A rough estimate of the job losses by business sector can be made by focusing on the businesses ordered closed by the governor and the ones allowed to remain open. The Bureau of Labor Statistics provides MSA data for the broad industry sectors, including retail, leisure and hospitality, goods producers, transportation, wholesale, education and health, finance and professional services.

However, within the broad sectors there are many subcomponents for which there are no data.  In several cases involving retail components some are under mandated closure orders and some are not. By applying the retail subcomponents’ percentages of national retail to Pittsburgh MSA total retail jobs, a reasonable approximation of the area’s employment in the subgroupings can be obtained.  For example, nationally, pharmacies make up 4.5 percent of all retail jobs and grocery stores account for 17.5 percent.

Using the national percentages means that in the Pittsburgh MSA for businesses still open, there are close to 6,000 jobs in pharmacies, 21,000 in grocery stores, 7,000 in gas stations (including attached convenience stores) and 14,500 in super centers. And there are others such as building supply, pet supply stores, auto parts and non-store businesses, including electronic (internet, etc.) ordering services that could add another 10,000-12,000 to those allowed to remain at work.

All told, employment in retail likely stands at about 59,000 jobs while approximately 57,000 are out of work, including motor vehicle dealers; clothing stores; appliance and electronics; sporting goods and hobby; furniture and other “non-essential stores”.

Note that some grocery stores and supercenters have added jobs but that number is not available. To the extent that is occurring, the 57,000 out of work figure would be a little lower.

The other very hard-hit sectors are in the leisure and hospitality group. In February this group had 118,000 jobs.  Of that number, eating and drinking establishments employed 88,500; accommodations (hotels, motels, and others) had just under 10,000 employees, and the arts, recreation and entertainment group had roughly 20,000.

Eating and drinking establishments were ordered closed but many restaurants are offering take out. It is reasonable to assume that no more than 40 percent of these employees are required (note about 35 percent of eating places’ employees work at fast food restaurants that are less affected by the closing order) that would mean about 52,000 food and drink workers are not working. Meanwhile, hotels have been hard hit by the enormous drop in travel. One can assume that with the occupancy rate at 23 percent nationally for the week of March 22-28 (Pacific Business News, April 3, 2020) that the rate in the Pittsburgh MSA would be fairly close to that figure. In that case, there would most likely be some serious layoffs of personnel, perhaps as many as half so far. That would mean 5,000 fewer jobs.

Finally, the arts, entertainment and recreation component of 20,000 jobs has also taken a major hit owing to mandated closings. Assuming that 20 percent or so of these employees are office workers and can work from home, this component would add another 16,000 to the unemployed roll.

In total, leisure and hospitality would have around 73,000 workers off the job.  And with 57,000 off the job in retail there are an estimated 130,000 fewer jobs in the region owing to the coronavirus in just these two industry groups. And the number of people not working are being added to daily by local and state government employees being sent home. Some may be working from home and some will be on layoff status.

Moreover, other sectors are being affected by the economic slowdown including airports, local trucking, and wholesalers.  However, there is no direct or reliable indirect way as-of-yet to estimate the number of layoffs. 

Education and health, a very large sector of 260,000 employees, has likely not yet been significantly affected.  Education, including public education, continues by remote instruction at least until the spring semester is over.  Health and public assistance might well be adding help. There is no news on that.

Mining and logging and most of the construction sector were locked down on March 20th but extraction industries are now open again.  Construction employment in the MSA stood at 69,000 in February.  Some manufacturing (mostly durable goods except for primary metals) is closed by edict amounting to roughly 50,000 employees, as are many business services and legal services.  However, since many of these business services jobs can be carried out from home, the numbers actually out of work cannot be reliably estimated although the total affected by the mandatory closing order is at least 150,000.

At some point employers might decide to lay off business service employees as opposed to letting them work from home because of reduced demand for their services and falling revenue as the economy slows dramatically. In that case unemployment claims will swell further and the unemployment rate in the April report will rise to a catastrophic level.

The obvious question has become crucially important. When is the cure worse than the disease? There should be much more effort to find ways people can work safely at their regular workplace. Otherwise the downturn becomes a self- sustaining downward spiral as incomes dry up and demand plunges.  While the massive federal spending plan will soften somewhat the effects of the jobs lost because of the mandated closings by replacing some of the lost wages and business revenue, it will not replace the massive loss of output that is occurring.  The economic damage is real and enormous.

Pittsburgh region’s October payroll jobs fall

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Summary: The October 2019 jobs report for the Pittsburgh Metropolitan Statistical Area (MSA) showed the number of non-farm jobs had fallen by 3,000 from the count posted for October 2018—a decline of 0.3 percent.  This year-over-year loss is the first since August 2016 when jobs dipped 1,900 from the 12 month-earlier reading.  This Policy Brief compares the Pittsburgh area to other metro areas. All data are from the U.S. Bureau of Labor Statistics.  In a word, the Pittsburgh region’s employment looks very weak compared to other metro areas.

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For the nation as a whole, non-farm jobs rose 1.4 percent from October 2018 to October 2019, i.e., year-over-year. This gain was much higher than in Pennsylvania, where statewide year-over-year growth was just one-half percent.  Meanwhile, the Philadelphia metro area (Pennsylvania counties only) had a year-over-year increase that just exceeded the national rate (1.48 percent). 

Other non-Pennsylvania metro areas include Charlotte, Cincinnati, Cleveland, San Antonio and Indianapolis. San Antonio led the group with an October year-over-year gain in non-farm jobs of 3.4 percent.  This was followed by Charlotte (2.3 percent) and Cincinnati (2 percent).  These metros also outpaced the national rate.  Cleveland (0.9 percent) and Indianapolis (0.8 percent) trailed the national growth but easily outpaced the Pittsburgh area. Pittsburgh’s 0.3 percent drop stands in stark contrast to these similarly sized metros.

Jobs are divided into two broad categories—goods-producing and service-producing.  The former includes mining and logging, construction and manufacturing.  The latter includes sectors such as professional and business services, retail, financial, transportation, education and health services and leisure and hospitality. 

Goods-producing jobs typically have a higher multiplier effect on jobs in other industries and are prized for higher rates of pay. 

Nationally, the October year-over-year growth rate of goods producing industries was just under one percent.  This was better than Pennsylvania’s rate (-0.5 percent) and far ahead of the Pittsburgh MSA’s decline of 2.4 percent.  Two other metros in this small sample—Cleveland (-0.1 percent) and Charlotte (-0.8 percent)—had declines as well but not on the magnitude of the Pittsburgh MSA.  San Antonio and Indianapolis had strong year-over-year growth in goods-producing jobs (4.4 percent and 4.1 percent, respectively) while Cincinnati had nearly 2 percent growth.  The Philadelphia metro also had a very small gain of 0.2 percent.

For the service-sector industries, the national job count grew by 1.5 percent year-over-year in October while Pennsylvania’s service-sector industries grew at a slower pace (0.7 percent).  Among the MSAs in the comparison group the jobs gains range from a high of 3.3 percent (San Antonio) to a low of 0.1 percent (Pittsburgh).  Charlotte, Cincinnati and Philadelphia outpaced the national rate while Cleveland and Indianapolis fell below.

Two industry classifications in which the Pittsburgh MSA has performed well in recent years are education and health services and leisure and hospitality. 

The education and health industry sector, also known as “eds and meds”, includes colleges, universities and private schools.  It does not include public k-12 schools.  The health care portion includes hospitals, physician offices and social assistance. 

Nationally, jobs in “eds and meds” grew at a 2.6 percent rate from October 2018 to October 2019.  Statewide, the sector grew by 0.5 percent, well below the national rate.  Among the metro areas being examined in this Brief, the top performers were Cincinnati and Charlotte (3.7 percent).  Indianapolis and Philadelphia both had year-over-year gains of less than one percent.  Of the areas in the sample only the Pittsburgh MSA posted a decline (-1.0 percent) in the “eds and meds” sector. 

The leisure and hospitality sector includes food services, accommodations and arts and recreation firms.  Nationally, the sector had a strong job gain of 3.9 percent from October 2018 to October 2019.The metros of San Antonio (5.3 percent), Charlotte (4.9 percent) and Philadelphia (4 percent) exceeded the national growth rate, with Cincinnati (3.2 percent) not far behind.  Despite Philadelphia’s success, statewide jobs were down in Pennsylvania (-0.4 percent) and in the Pittsburgh MSA (-0.6 percent). 

The Pittsburgh MSA’s best-performing sector was professional and business services with a 1.3 percent gain. By comparison, Indianapolis posted an increase of only 0.9 percent, the same as Pennsylvania statewide. However, Pittsburgh trailed other metro area gains badly led by San Antonio’s 7.8 percent, followed by Cleveland (5.6 percent), Charlotte (3.1 percent) and Philadelphia (2.4 percent).  Nationally, the growth was 2 percent. 

The Pittsburgh area’s year-over-year October job growth was negative for the first time in years.  Although October is the only month with a decline in jobs thus far in 2019, recent months’ have shown sluggish growth. Indeed, Pittsburgh metro gains have fallen behind the national rate and, when compared to other metros, fall far short.

This outcome is not surprising.  As we have noted for years, the constant interference with the market and generally unfriendly attitude toward the private sector and employers have tamped down growth prospects.  Of late, proposals have come out of Harrisburg that would massively increase the statewide minimum wage and change the overtime rules to allow more salaried workers to claim extra pay.

Locally, City of Pittsburgh officials have also lobbied for higher mandated wages and have offered a host of regulations that would hinder private businesses.  These ideas, when combined with the already unfriendly business climate, and if enacted, will make the state and region even less competitive. Even proposing them signals a bias against employers. The effects of market-interfering regulations and anti-business attitudes are clearly manifested in this jobs report.  Without substantial changes to the regulatory and tax environment, slow to no job growth will be the status quo for the foreseeable future.

Population losses being felt in labor market

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Summary: A recent Policy Brief (Vol. 19, No. 18) analyzed the long-running population decline in the Pittsburgh Metropolitan Statistical Area (MSA) and the challenges the economy faces as a result.  Obviously, population changes affect the area’s labor market, specifically the labor force available for employers.  This Brief looks at the area’s labor force and how it has changed over the past decade.

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The Pittsburgh MSA consists of the seven counties of Allegheny, Armstrong, Beaver, Butler, Fayette, Washington and Westmoreland.  In the previous Brief, we noted that in 2010 the Census Bureau placed the Pittsburgh MSA’s population at 2,356,285.  Based on the most recent estimate from July 2018 the area’s population had fallen by 31,542 to 2,324,743—a loss of 1.3 percent.

The U.S. Census Bureau’s American Factfinder website provides estimates of the share of the population in the labor force for each county, specifically for those 16 years of age and over. The data is presented as five-year moving estimates starting with 2009 (2005-2009) with the most recent covering 2017 (2013-2017).  The MSA participation rate was calculated using a weighted average of the county rates.

These estimates place the MSA’s population aged 16 years and over in 2009 at 1,934,482, rising to 1,955,211 in 2015 and then falling to 1,950,671 in 2017.  Over the eight years the net change in the population aged 16 years and older increased slightly by 0.84 percent.

The Census breaks down population counts into seven different age segments:  16-19, 20-24, 25-44, 45-54, 55-64, 65-74 and 75 years and over.  Splitting the MSA’s working-age population roughly in half between the younger (16-44) and the older segments (ages 45 and up) reveals that the younger group of the population fell by 27,487 while in the older portion in the MSA grew by 42,676.

The population aged 16 years and older represents the number of potential members of the labor force.  Bear in mind the definition of labor force. The Census’ glossary classifies someone in the labor force as a person who is not institutionalized that is either working, waiting to start work or actively seeking employment. Those not actively looking for work are not counted in the labor force (for example, retirees).  The Census also provides estimates of the labor force participation rate which represents the proportion of the population that is in the labor force.

Pittsburgh MSA’s labor force in 2009 is estimated to have been 1,195,370.  All figures are five-year moving estimates rather than yearly estimates.  57,870 members of the labor force (4.8 percent) were aged 16-19 years old and 105,675 were 20-24 years old (8.8 percent). Combined they accounted for 14 percent of the MSA’s labor force.  By 2017, when the total labor force reached 1,224,224, the combined 16 to 24 age group’s share had fallen to 13 percent.

Meanwhile for the oldest age brackets, the share of the labor force increased.  For those in the 55-64 age range, 181,376 were in the labor force in 2009 (15.2 percent of the total).  By 2017 there were 237,788 people in the labor force in that bracket (19.4 percent)—the largest increase of any age cohort.  But the second largest jump belonged to the 65-74-year-old age group with an increase from 41,491 in 2009 (3.5 percent share) to 60,916 in 2017 (4.9 percent share).

The age cohort with the biggest decline happened to the 45-54-year group.  There were 309,492 in 2009’s labor force count (25.9 percent of the total).  By 2017, their numbers dwindled by over 42,000 to just 267,400 and accounted for only 21.8 percent of the area’s labor force.

Of course, many factors determine why a person enters/stays in the labor force.  Principal among those are financial conditions and opportunity.  For those at the bottom age rung of the labor force (aged 16 to 19), their family situation may be financially stable enough that they don’t need to enter the labor force as their families can support them.  For the older age groups, it could be health-related, a need or willingness to stay active, finances or changes in the minimum age to claim full Social Security benefits.

Opportunities in the labor market are evidenced by growth or declines in employment statistics. Two measures are provided: the household survey from which labor force estimates are derived and the establishment survey which estimates the number of payroll jobs. As employment begins to increase, people currently not in the labor force are more likely to enter (or re-enter) as they see more and better opportunities for employment. Likewise, when employment falls and good job openings become scarce, some workers will become discouraged and stop actively looking for work.

The U.S. Bureau of Labor Statistics (BLS) publishes monthly employment data for the MSA.  This data has been converted to five-year moving averages (2005-2009) through (2013-2017) to be comparable to the labor force estimates provided by the Census.

In 2009, the number of people employed in the Pittsburgh MSA was 1,146,698, which was the highest level for the period through 2017. The (2005-2009) period represents employment levels before the recession of 2009-2010 began.  The lowest five-year employment, 1,127,661, occurred in 2013 (2009-2013), which includes the very weak years of the recession. By 2017 the employment estimate reached 1,143,631, still slightly below the 2009 reading.

In addition to the finding of very slow growth in the numbers of people working over the 2009-to-2017 period, it is also clear that the workforce is aging dramatically.

Looking at labor force and population counts for persons aged 16 to 54 and those 55 and over reveals substantial changes. In 2009 there were an estimated 1,239,706 people aged 16-54 in the seven-county Pittsburgh MSA.  By 2017 that number had fallen by 82,146 to 1,157,560—a decline of 6.6 percent.  Over the same period, the 55 and older age group grew from 695,776 in 2009 to 793,111 in 2017, a jump of 97,335 or 14 percent.  The average age of the area’s working-age population has become significantly older.

And, of course, there are ramifications for the labor force.  In 2009 there were 962,403 people in the labor force aged 16 to 54.  By 2017 that number dropped by 48,469 to 913,934 (-5 percent).  By contrast, for those aged 55 and up, the labor force count rose from 233,783 in 2009 to 311,643 in 2017—a jump of 77,859 or 33.3 percent. Indeed, the over 55 group accounted for all the net increase in labor force.

National data also shows the older portion of the population growing faster than the younger part from 2009 to 2017.  The population aged 16 to 54 grew by 1.24 percent (2,048,302) while the population 55 and over climbed by 25.3 percent (17,877,686).

And that of course is also reflected in the labor force with the number of people aged 16 to 54 increasing by just one percent (1,302,273) from 2009 to 2017.  Meanwhile, for those 55 and older their ranks in the labor force jumped by 32.3 percent (8,456,866). Nonetheless, national employment was up significantly faster during the 2009 to 2017 period, growing almost four times as fast as the MSA’s one percent.

But while the Pittsburgh MSA lost labor force participants in the younger segment, nationally there was a gain, even if it was marginal.

The fact that the population and labor force participation is skewing older does not bode well for the region.  Job growth in the region over the last decade, whether measured by the household survey or the employer survey (see Policy Brief, Vol. 19, No. 9), has been anemic at best.

Jobs, and the prospects of finding a job, draw people to the area, thereby increasing not only the population but the pool of labor force participants.  Thus, the region would do well to greatly improve its economic policies to make the region attractive to both businesses and job seekers.

10-year jobs changes in Pennsylvania and the Philadelphia and Pittsburgh regions

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Summary: Many Institute Policy Briefs over the years have analyzed the employment situation in Pittsburgh and Pennsylvania.  This Brief expands coverage to examine the state and its two largest metro areas including Philadelphia.  Because the five-county Southeastern Pennsylvania area accounts for about a third of Pennsylvania’s private-sector jobs, changes in that region will bear heavily in the state’s overall performance. This analysis evaluates the region’s role over the last 10 years in comparison to the state and the Pittsburgh seven-county metro area. A final comparison with the national performance is also provided.

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The jobs data used for comparison purposes are the Bureau of Labor Statistics (BLS) establishment payroll employment estimates rather than the household survey count that measures the number of persons reporting themselves as working. Performance is measured by the 2008 to 2018 changes in four categories—total private jobs, private services, goods-producing and manufacturing.

Data are readily available for the Pittsburgh metro area and Pennsylvania. However, Philadelphia’s combined five-county data are not provided by the BLS.  Philadelphia-area figures are reported for the three-county Pennsylvania metropolitan division made up of Chester, Bucks and Montgomery counties and for the two-county Pennsylvania metropolitan division comprised of Philadelphia and Delaware counties.  Philadelphia County and Philadelphia City are identical geographically.

The five-county area data are derived by adding the two-county and three-county divisional data together.  This procedure might produce different numbers compared to a process that sampled the five counties as a whole but the differences should be too small to affect the important findings regarding trends in the five-county region. For completeness this analysis looks at the two divisions separately as well.

All jobs figures are presented as annual averages of monthly data.

Total private employment

In the three-county division (Montgomery, Chester, Bucks) private employment rose from 947,000 in 2008 to 992,600 in 2018, a gain of 45,600 or 4.8 percent and a 0.47 percent annual average over the period.  Note that employment fell to 902,000 in 2009 and did not recover fully to the 2008 level until 2015.

In the two-county division (Philadelphia and Delaware) private jobs climbed from 753,500 in 2008 to 834,200 in 2018, a rise of 80,700 and a 10.7 percent increase or a 1.02 percent annual average over the ten years. Private employment fell to 735,000 in 2009 but had fully recovered to the 2008 level by 2012.

Combined the five-county region saw private employment move upward from 1,700,500 to 1,826,800, a gain of 126,300 or 7.4 percent, with 64 percent of the growth accounted for by Philadelphia and Delaware counties.  These two counties fared better during the recession and grew faster after the recovery began.

Meanwhile, during the 10-year period, Pennsylvania’s private-sector jobs rose by 285,000 or 5.7 percent. And during the period the Pittsburgh metro area’s private sector job count moved up by 50,000 or 4.9 percent. Thus, the five Southeastern counties posted stronger than state growth thanks to the 10.7 percent rise in the Philadelphia and Delaware county division. Indeed, the two counties had a jobs increase of 30,000 more than the seven-county Pittsburgh region.  On the other hand the Pittsburgh region kept pace with the Montgomery, Bucks and Chester division.

Private-service jobs

In the three-county Pennsylvania metropolitan division private services added 62,800 employees over the 10 years rising from 787,100 to 849,900, a boost of 8 percent. In the two-county group the service employee count climbed by 89,500 above its 2008 level of 686,000 to reach 775,500, a 13 percent gain for a 1.2 percent annual average growth. Combined, the five counties saw service employment rise from 1,473,100 to 1,625,400, a pickup of 152,300 or 10.3 percent.

Over the same 10 years, Pennsylvania private service employees climbed 355,600 or 8.6 percent, well short of the 10.3 percent gain in the five Southeastern counties. In the Pittsburgh metro area, private service jobs were up 52,800 from 2008 to 2018, a 6.1 percent rise that was slower than the state and well below the five Southeastern county growth pace.

Goods-producing employment

Over the 2008 to 2018 period, goods-producing jobs did not fare well in the Southeastern, Pittsburgh area or in the state. In the three-county group, goods employment slid from 159,900 to 142,700, a drop of 17,200 or 10.8 percent.  For the two-county division, goods jobs were down from 67,500 in 2008 to 58,700 in 2018, a decline of 8,800 or 13 percent. Combined, the five Southeastern counties lost 26,000 goods-producing jobs and were down by 11.4 percent of the 2008 total.

During the 2008 to 2018 period Pennsylvania’s goods-producing jobs tumbled by 70,500, a 7.7 percent drop from the 2008 level. Pennsylvania’s goods-producing jobs decline was smaller in percentage terms than in the Philadelphia region. Pittsburgh-area goods jobs fared better than the state and much better than the Southeastern counties, declining by only 2,800 or 1.7 percent.

Manufacturing jobs     

Over the 10 years, the three-county Pennsylvania metropolitan division’s manufacturing jobs fell from 104,600 to 90,200, a decline of 14,400 or 13.8 percent. The two-county division saw factory employment plunge from 44,200 to 34,100 or 22.8 percent. Combined, the five Southeastern counties lost 24,300 factory jobs, 16.4 percent of the 2008 total.  Note that in the two-county division factory jobs represented only 5.8 percent of total private employment in 2008 and an even smaller 4.1 percent in 2018. For the five Southeastern counties, manufacturing accounted for 8.7 percent of jobs in 2008 and only 6.8 percent in 2018.

Meanwhile, manufacturing employment in Pennsylvania fell by a net 77,800 jobs or 12.1 percent over the 2008 to 2018 period to stand at 565,900 and account for 10.6 percent of the state’s total private employment. This represents a significant drop from the 12.8 percent figure in 2008. Factory jobs in the Pittsburgh region fell a net 11,600 or 11.8 percent to stand at 86,800. In 2008, manufacturing employment made up 9.6 percent of private jobs but accounted for only 8.1 percent in 2018.

The loss of high productivity manufacturing jobs and their replacement by lower paying service-producing sectors jobs in Pennsylvania is not a recipe for sustaining strong gains in real gross state product. Two of the biggest job gains over the ten years were registered by education and health (190,000 jobs) and leisure and hospitality (90,000 jobs). These sectors had statewide average weekly incomes in 2018 of $812 and $386 respectively. During 2018 manufacturing jobs paid $1071 per week. Almost any job growth is better than no growth but some jobs have much greater economic impact than others.

It is important to note also that mining jobs related to shale drilling pushed up mining jobs in Pennsylvania sharply by over 15,300 from 21,700 in 2009 to 37,000 in 2014. Much of that big jobs gain was lost through 2016. And despite a rebound in mining employment since 2016, jobs remain well below the 2014 level.

Comparison to U.S. employment

In comparison, U.S. private employment was up by 10.4 percent from 2008 to 2018, almost 3 percentage points or 40 percent faster than the five-county Philadelphia area and about double the state (5.7 percent) and Pittsburgh (4.9 percent) growth rates. Meanwhile, U.S. private service employment posted a 13 percent increase over the 10 years which was significantly faster than the five Southeastern counties’ 10.3 percent.  Likewise, the U.S. service employment gain easily outpaced the statewide growth of 8.6 percent and was more than double Pittsburgh’s 6.1 percent.

U.S. manufacturing jobs were down 5.4 percent over the 10 years although significant gains in the last two years have helped hold the 10-year decline to the 5.4 percent drop after the sector started to lose jobs in the second half of 2016. The factory employment percentage decline was much smaller than Pennsylvania’s 12 percent, Pittsburgh’s 11.8 percent and dramatically lower than the five-county Philadelphia area’s 16.4 percent loss.

In short, the state and its two largest metropolitan regions have lost ground relative to the country over the 2008 to 2018 period despite weathering the recession of 2008-2010 better than the national economy largely because the housing crisis was not as bad in the state.  Philadelphia and Delaware counties performed about on par with the country in private jobs and service jobs but were hit much harder in the manufacturing sector.

Pittsburgh Metro’s December jobs report disappointing

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Summary: The latest employment figures for the Pittsburgh Metropolitan Statistical Area (MSA) is once again disappointing.  The area’s total private job gains fail not only to match the national growth rate, but also the growth rates of comparable metros.

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The employment figures for December 2018 recently released for the Pittsburgh MSA (Allegheny, Armstrong, Beaver, Butler, Fayette, Washington and Westmoreland counties) were not encouraging.  Private sector payroll employment (not seasonally adjusted) rose by just 8,100 (0.75 percent) between December 2017 and December 2018. This continues a trend of relatively weak growth that defined the local economy in 2018.  Seasonally adjusted data are not available for payroll data at the metro level. However, the 12-month-ago comparison eliminated most if not all seasonal effects and is a good measure of year-to-year gains.

To provide perspective, this Brief will compare employment growth in Pittsburgh to jobs gains in the metro areas of Columbus, Ohio, Indianapolis, Ind., Nashville, Tenn. and the national performance.  Data in all comparisons will be private employment changes from December 2017 to December 2018. Comparisons are presented for total private jobs, jobs in goods production and private service sector production as well as in the focused areas of manufacturing, education and health, and leisure and hospitality.

Nationwide total private jobs grew 2.02 percent from December 2017 to December 2018.  Indianapolis’ and Nashville’s MSAs job counts topped that by rising 2.31 and 2.14 percent, respectively, while Columbus’ MSA fell just short (1.72 percent).  Meanwhile, the 0.75 percent pickup in the Pittsburgh MSA was well short of not only the national growth but also the gains in the sample of comparable metros.

In the goods-producing super sector (which includes mining and logging, construction and manufacturing) employment nationally posted a solid 3.13 percent gain.  The highest jump among the metro areas belongs to Indianapolis (5.67 percent) with Pittsburgh coming in a distant second at 1.41 percent but not too far above Columbus (1.33 percent).  Nashville had a decline to its number of employees in the goods-producing super sector (-0.88 percent).  Much of Pittsburgh’s pickup, 80 percent, was in the construction sector.

At the same time, manufacturing employment rose 2.11 percent from December 2017 to December 2018.  While the Pittsburgh MSA had positive growth in manufacturing jobs (0.12 percent), it was not only well behind the national rate, it was much slower than Columbus (1.49 percent), and Indianapolis (1.41 percent) but ahead of Nashville, which was the only metro in this sample to see a decline in manufacturing jobs (-1.56 percent).

In the private service-providing super sector, employment nationally recorded a rise of 1.81 percent—a much slower pace than the goods-producing super sector.  In the group of metros, only Nashville exceeded the national pickup (2.64 percent).  Columbus’ (1.77 percent) was just below that of the nation closely followed by Indianapolis’ MSA (1.71 percent).  The Pittsburgh MSA followed well behind all areas with a mere 0.64 percent jobs gain.

A key private service-providing subsector is the education and health subsector, often known as “eds and meds.”  The Pittsburgh MSA prides itself on being strong in this area with its many hospitals and universities.  However, the employment gain in “eds and meds” from December 2017 to December 2018 was the lowest for all comparison areas at a paltry 0.47 percent. Nationally these jobs climbed 2.25 percent over the 12 months with the highest growth posted by Columbus (3.21 percent).  While the Indianapolis and Nashville MSAs came in below the national gains (1.86 and 1.72 percent respectively), the gains were far stronger than in the Pittsburgh MSA.

Leisure and hospitality job growth is the last sector examined. This sector includes the accommodation and food services subsectors (the largest subgroup) as well as the arts and entertainment subsectors.  The Pittsburgh MSA did quite well in the leisure and hospitality group posting growth of 2.33 percent from December 2017 to December 2018.  This was much better than the national growth of 1.18 percent and handily besting Columbus (1.06 percent), Nashville (-0.79 percent) and Indianapolis (-3.83 percent).

However, as has been explained in previous Policy Briefs, this is the one sector that perhaps does the least to boost economic growth because of very weak multiplier effect and low wages.  For example, statewide (timely wage data are not available by sector below the state level) the average weekly wage of all employees in the manufacturing sector was $881.50 in December 2018—a 2.17 percent increase over the weekly wages rate one year ago.  By contrast, the statewide average weekly wage for employees in the leisure and hospitality sector was just $385.79—up just 1.45 percent from its year-earlier posting. Manufacturing wages are more than twice as high as leisure and hospitality wages in Pennsylvania and contribute more to the state and MSA’s tax coffers, as well providing stronger multiplier effects.

Average weekly hours worked for each sector show workers in the manufacturing sector have much longer work weeks and far beyond those in the leisure and hospitality sector (41.6 hours vs. 25.1 hours).  It’s not hard to see why manufacturing jobs are more sought after than are those in leisure and hospitality—yet the latter sector is where the Pittsburgh MSA excels.

A primary reason that jobs growth continues to languish in the Pittsburgh MSA, and even statewide, are economic policies that make the business climate less friendly than other areas and consequently making it a less desirable place for startups and for existing businesses to grow.

The latest salvo aimed toward business is a plan announced by the governor to raise the minimum wage in Pennsylvania from the national minimum of $7.25 per hour to $12 per hour in 2019 with the ultimate goal of increasing it to $15 by 2025.

Apparently, no amount of evidence of the negative effects of large increases in mandated minimum wages will deter politicians who prefer to look concerned about incomes, as opposed to helping their states and regions grow businesses and employment with higher wages and produce strong demand for workers. Strong sales and good profits lead to higher wages in a competitive labor market. Avoiding this truism is not a good way to boost economic prosperity.

As long as Pennsylvania, and the region, continues to ignore the impact of policies on business friendliness—which seems to be the case—job growth will remain stunted and future disappointing jobs reports will be the norm.

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

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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.