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Allegheny Institute

Key Changes in the Pittsburgh Area's Job Mix

by Policy Brief

The past couple of months have seen a distinct pickup in the pace of 12 month gains in payroll employment in the Pittsburgh region. Impressive growth in health care continues along with large gains in the professional and business services category account for the bulk of the 8,000 rise from March 2007 to March 2008. Construction also enjoyed a solid increase over the last 12 months.

Even though the 8,000 uptick in jobs represents an improvement in the pace of growth compared to the average of the last several years, it must be born in mind this is still less than one percent growth over the year. Moreover, the region's private sector job total remains 8,200 below the level attained in March 2001. So, while we can applaud the recent stronger growth, it is not yet time to break out the champagne. Seven years with no net increase in private employment is far too poor a performance to permit celebration.

In addition to the lackluster overall numbers posted for the last seven years, there have been some significant shifts in the region's industry employment mix. Two of the long running trends have been sustained over the decade so far. Health care continues to account for a rising share of all jobs and manufacturing continues to see its share shrink. In 2001 (the pre-recession peak year), health related employment held a 15.22 share of private sector jobs. By March 2008, that share has climbed to 17.7 percent through the addition of over 24,000 employees to payrolls. Manufacturing, on the other hand, has seen its share fall from 12.1 percent to 9.8 percent after dropping 27,000 jobs over the period to stand below 100,000.

Within the private service industries there are several notable differences in the pace of job gains resulting in shifts in industry shares. The most noteworthy pickup in terms of both relative and absolute job growth has been the sector labeled as "Management of Companies and Enterprises." While a relatively small component with only 28,900 jobs—2.8 percent of total private sector jobs—this category has experienced a doubling in job count and its share of total jobs, rising by 14,300 jobs since 2001 when its share stood at just 1.4 percent.

Management of Companies and Enterprises jobs include (1) workers in establishments that hold the securities of companies and enterprises for the purpose of owning a controlling interest or influencing management decisions or (2) establishments that administer, oversee, and manage establishments of the company or enterprise and that normally undertake the strategic or organizational planning and decision making role of the company.

Interestingly, in comparison, the national growth in this industry sector was a very slow 2.2 percent from 2001 to 2008. Why this sector has expanded so much more rapidly in the Pittsburgh region has not been investigated but it is a remarkable finding that deserves some research by the State Department of Labor and Industry.

Meanwhile the Leisure and Hospitality industry in the Pittsburgh region has also enjoyed a solid, if not spectacular, growth rate over the last seven years, rising a total of 8.6 percent to 102,700 jobs. Leisure and hospitality includes accommodations, eating and drinking places and recreation. These components have all performed reasonably well over the period.

Joining manufacturing on the declining side of the industry job ledger since 2001 are retail trade (-8.4 percent), transportation and warehousing (-15.2 percent), information (-22.2 percent) and other services (-9.0 percent). Other services include components such as personal and laundry, religious, repair and maintenance of machinery, funeral services, and pet care services.

In total, these industry groups saw employment fall by 30,000 jobs over the 2001 to 2008 period. Combining the gains in the health, education, leisure, and management of companies with the 30,000 losses in the declining sectors results in net growth of private service employment of 19,600. Unfortunately, that is not enough offset the goods producing loss led by the 27,000 drop in manufacturing, leaving the region with a net private sector job decrease of 8,200.

Note too, that several important sectors, notably, finance administration and support services, professional, scientific and technical services and wholesale were little changed over the past seven years, neither appreciably adding to nor taking away from the region's total job count.

So, overall, what to make of these numbers? First and foremost, the fact that the region has had no net job growth since the 2001 pre-recession peak levels must be viewed as a serious disappointment notwithstanding recent modest gains in employment. It is far too soon to know if this is a major shift in a long term pattern or a temporary catch-up after lagging the nation for so long.

Of more concern perhaps is the concentration of job gains in health care with some unexplained strength in management of companies and national average growth in leisure and hospitality jobs. But in key sectors such as retail, information, transportation and warehousing the numbers are down with no employment growth in finance or technical and scientific services. An economy will not be able to generate sustained solid growth when it is reliant on health care and leisure and hospitality (eating and drinking places) to generate enough jobs to offset the huge losses in manufacturing, and the failure of other key sectors to post increases over time.

There will always be some sectors that lead and others that trail in terms of job growth in a dynamic economy. However, the long term trend in the Pittsburgh region to depend so heavily on two sectors to provide gains reflect some severe distortions in the underlying structure that must be addressed. Taxes, regulations and public sector unions would be good places to make changes. Talk of merging the Pittsburgh and Allegheny County governments is a red herring that takes attention away from the real problems in the region.

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Jake Haulk, Ph.D. President
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