Recession and Restructuring in the
Pittsburgh Economy
Perlman Roundtable
March 20, 2009
Christopher Briem
Program in Urban and Regional Analysis
University Center for Social and Urban Research
University of Pittsburgh
121 University Place
University of Pittsburgh
cbriem@pitt.edu
This Presentation
n
Legacy of Industrial Transformation
n
Adjustment and Change Since the 1980’s
n
Current Recession Impacts
2
Unemployment in the Pittsburgh Region: 1970-2004
20
15
10
5
0
1970
1975
1980
1985
1990
1995
2000
2005
2010
3
Unemployment Rate By County Within the Pittsburgh MSA
30
25
20
Allegheny
Beaver
15
Westmoreland
Washington
Fayette
10
5
0
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989
4
Unemployment Rate – Pittsburgh vs. US: 1970-2008
5
Difference Between Pittsburgh and US Unemployment
Rates: 1970 - 2009
10
5
0
-5
1970
1975
1980
1985
1990
1995
2000
2005
2010
6
Historical Steel Industry in Pittsburgh
n
Natural resource based competitive advantage
n
Extremely specialized industry structure
n
Few other ‘export’ industries in region for over a
century
n
Historically minimal impact of international trade
n
and, minimal competition from other US regions
n
Comparable to: Ruhr Valley (Germany), Lille
(France), Luxemburg….. now Harbin?
7
Scale of Economic Change in Pittsburgh
n
120,000 net manufacturing employment loss
between 1981-84. (~50% of all manf. jobs)
n
Loss concentrated in manufacturing industries.
n
Particular sub-regions hit even harder.
n
Change too fast for local industries to adjust
n
Significant unemployment and out-migration of
workforce – especially younger workforce
8
Demographic Impact and Legacy
n
n
n
n
n
Net out-migration of working age population:
50,000+ per year in mid-1980’s
Out-Migration was very age selective (younger
left, older stayed).
Region soon became one of the ‘oldest’ regions
in the country.
Workforce migration left region skill-deficient for
new/emerging industries.
Region still has a unique older demographic
affecting current population trends.
9
Less Obvious Impacts of Steel Industry
n
Local industries had been mostly large firms
n
Ownership was also highly concentrated
n
Established supplier networks hard to break into
n
Result: diminished entrepreneurial activity
n
Still considered a local problem
For more: Ben Chinitz: "Contrasts in Agglomerations: New York and
Pittsburgh" American. Economic Review, Papers and Proceedings 2
(May 1961):
10
Post Steel Changes: 1985-1990
n
Local unemployment and rate of out-migration
decreased significantly between 1985-1990
n
Employment Growth in service sectors. Financial
service/ education industries began to make up
for manufacturing losses.
n
Female labor force participation increased
n
Rate of manufacturing job loss decreased
11
Female Labor Force Participation Rates:
Pittsburgh & US - Women Aged 35-54
80%
75%
70%
65%
60%
55%
50%
45%
40%
1980
1985
1990
US
1995
Pittsburgh
2000
2005
(Pittsburgh) will, however, slowly
decline unless new industries
employing women and those engaged in
the production of consumer goods are
attracted to the area.
- Econometric Institute (1947)
1990’s
n
n
n
n
n
Manufacturing employment stabilized
“Heavy” industries continuing to decline, but
some success at attracting new firms (Sony
Plant in Westmoreland County for example)
Continuing shift of employment into service
sectors
National economic expansion has positive
impacts, but region lagged rest of country.
No “Dot.com” boom.
14
2000 - 2008
n
n
n
n
n
No Dot.Com Boom  No Dot.Com bust
Local unemployment rate below national
unemployment rate between 2001-2004.
Demographic changes in region (elderly
population decline, slower out-migration of
working age population)
Employment/Labor Force now larger than
before decline in the Steel Industry
Recession impacts different from the past.
15
Local Technology Development
n
n
n
n
History of promoting ‘high tech’ for local economic
development since 1980’s
Aversion to “Smokestack Chasing”
Continuing need for brownfield redevelopment
throughout region
Technology base built up locally by history of
heavy industry.
–
–
–
Biotechnology
Advanced Manufacturing
Energy (including Nuclear)
16
Biotechnology/Life Sciences in Pittsburgh
n
History of medical technology
(Jonas Salk/Polio Vaccine - 1950)
n
Emergence of transplant technology in 1980’s
n
Pittsburgh region receives large concentration
of national biomedical research $
n
Continuing Public/Private focus on
development of biomedical firms.
n
Commercialization a challenge
17
Concentration of Engineering Occupations in Pittsburgh - 2004
Occupation
Employment
Pittsburgh
US
% of US
Nuclear Engineers
1,340
15,870
8.4%
Mining and Geological Engineers
Industrial Engineers
Electrical Engineers
Environmental Engineers
Materials Engineers
Engineers, All Other
Civil Engineers
Mechanical Engineers
Health and Safety Engineers
Architects
Surveyors
Chemical Engineers
Electronics Engineers
Computer Hardware Engineers
Landscape Architects
Petroleum Engineers
130
2,500
1,870
620
230
1,580
2,070
2,000
170
580
310
170
790
330
nr
nr
5,480
184,900
147,120
50,120
20,940
153,090
226,100
219,040
25,910
96,540
51,960
28,590
133,410
79,670
19,130
14,790
2.4%
1.4%
1.3%
1.2%
1.1%
1.0%
0.9%
0.9%
0.7%
0.6%
0.6%
0.6%
0.6%
0.4%
22,570
2,385,680
0.9%
Total - Architecture and Engineering
Occupations
18
Foreclosures – 100 Largest Metro Areas – 3Q 2007
Foreclosure rate:
Pct. change
1 filing for every Properties from Q3
Total filings X households with filings
2006
Rank
Area
1
2
3
4
5
6
7,116
25,708
31,661
16,595
14,948
15,479
31
33
43
48
48
48
4,409
16,079
20,664
9,367
11,482
9,241
465.3
93.4
267.9
127.4
200.3
408
7
8
9
10
11
12
13
14
15
STOCKTON, CA
DETROIT/LIVONIA/DEARBORN, MI
RIVERSIDE/SAN BERNARDINO, CA
FORT LAUDERDALE, FL
LAS VEGAS/PARADISE, NV
SACRAMENTO, CA
CLEVELAND/LORAIN/ELYRIA /MENTOR,
OH
MIAMI, FL
BAKERSFIELD, CA
OAKLAND, CA
AKRON, OH
DENVER/AURORA, CO
FRESNO, CA
MEMPHIS, TN
PHOENIX/MESA, AZ
16,332
15,484
3,947
13,245
3,992
13,179
3,687
6,239
18,328
57
60
64
71
76
77
79
85
87
11,821
10,232
2,824
8,062
2,941
7,751
2,434
3,353
11,242
178.5
82
361.4
268.8
128
28.3
239.9
38.6
246
74
PITTSBURGH, PA
2,548
432
1,526
-28.6
100
GREENVILLE, SC
79
3,289
65
-82.319
Renewed Strength in Traditional Industries
Global steel market resurgence benefiting
region
Global steel support industry remaining
Energy prices impacting local coal industry
Pittsburgh and commercial nuclear power
–
–
–
Potential new domestic sales for first time in decades
China/International Sales
Westinghouse expansion
20
Pittsburgh Seam Coal Price
160
140
120
100
80
60
40
20
0
4/07 6/07 8/07 10/07 12/07 2/08 4/08 6/08 8/08 10/08 12/08 2/09
21
US Steel Stock Price 2000-2009
$200
$180
$160
$140
$120
$100
$80
$60
$40
$20
$0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
22
Pittsburgh Recession Impacts
Foreclosures declining in Pittsburgh for last
two years. (while Cleveland is ground zero
for most of the foreclosure crisis).
Large construction projects ongoing: NSC,
Casino, Arena, PNC Tower, Children’s
Hospital.
Education - countercyclical industry?
Health Care – less business cycle impact
Finance – PNC acquisition of NatCity
23
Regional Unemployment Rates Jan 2000 – Jan 2009
Pittsburgh, Cleveland and Detroit
13
12
11
10
9
8
7
6
5
4
3
2000
2001
2002
2003
2004
Cleveland
2005
Detroit
2006
2007
2008
2009
Pittsburgh
24
Regional Unemployment Rates Jan 2000 – Jan 2009
Pittsburgh vs. Charlotte, NC
11
10
9
8
7
6
5
4
3
2
2000
2001
2002
2003
2004
Charlotte
2005
2006
2007
2008
2009
Pittsburgh
25
Pittsburgh Region Labor Force: 1970-present
1,300,000
1,200,000
1,100,000
1,000,000
1970
1975
1980
1985
1990
1995
2000
2005
2010
26
Pittsburgh Region Labor Force: 1970-present
1,300,000
1,200,000
1,100,000
1,000,000
1970
1975
1980
1985
1990
1995
2000
2005
2010
27
Recession and Migration:
Net Migration from the Pittsburgh MSA 2001-2008
0
-2,000
-4,000
-6,000
-8,000
-10,000
-12,000
-14,000
2001
2002
2003
2004
2005
2006
2007
2008
28
Recession and Migration
29
Why is this recession different?
Combination of factors inhibited predatory
lending/subprime crisis here: legal
precedents, institutional decisions, overall
regulatory climate.
Large construction projects ongoing for
now.
Core industries less impacted by business
cycle.
30
“...the Pittsburgh region's future depends to such a major
extent upon retaining and attracting highly qualified and
professional and technical people and business enterprisers,
who are in demand everywhere and who command a high
standard of residential amenity and cultural and professional
opportunities.”
From: Region With a Future. Volume 3 of the Economic Study of
the Pittsburgh Region. 1964.
31
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