The Steel City was the darling of many narratives, as it sanded off the rust and started coding
When the G20 summit of leaders of the planet’s largest countries came to Pittsburgh nearly a decade ago, it was an opportunity to unveil a city transformed.
President Barack Obama, in an interview with the Post-Gazette, called it “a recognition that Pittsburgh is a world-class city.” The narrative was that Pittsburgh had — some two decades after the collapse of its steel industry — managed to reinvent itself as a diversified modern economy.
Calling the city a “Road Map For Recovery” in the pages of the Wall Street Journal, Clare Ansberry wrote, “Among the city’s crown jewels, and in the eyes of many, the keys to its survival, are two large universities: Carnegie Mellon, a leading technology center, and the University of Pittsburgh, which is closely affiliated with UPMC.” Technology and health services, went the story, had saved Pittsburgh.
“We had thousands of reporters in town back in 2009 who really spread the word about Pittsburgh as a real symbol of regeneration,” said Bill Flanagan, head of investor relations at the Allegheny Conference on Community Development. “We were weathering the storm much better than everyone else.”
Pittsburgh rode out the storm so well that when asked to talk about the recession, University of Pittsburgh economist Christopher Briem assumed the question was about 1983, when local unemployment neared 20 percent.
Experts like Mr. Flanagan and Mr. Briem warn, however, against over-weighting certain narratives that capture headlines and public attention — or were true a few years ago and have not necessarily persisted.
“The real danger we could have is believing our own press clippings and not taking the data seriously,” said Mr. Flanagan.
With that in mind, the Post-Gazette has gathered a collection of economic metrics that might not align with public perceptions, and we are giving you the chance to try to write the region’s economic story since the recession, and see how you stack up to reality.
The regional economy
From 1990 to 2005, Pittsburgh’s regional economy had an unemployment rate very close to that of the the nation. The chart below shows the region’s relative unemployment rate: the local rate minus the national rate. Lower numbers mean there is less joblessness here than nationwide, while higher numbers mean there is more. On the chart below, click the end of the trendline in 2008, and drag to the right according to your best guess of what the relative unemployment rate looked like. Once you have drawn your guess, you can see what the data, from the St. Louis Federal Reserve, show.
During the recession, relative unemployment plunged, as Pittsburgh fared much better than the nation as a whole. But the strong numbers did not last; while unemployment has remained relatively low, it’s been several years since the regional economy has been stronger on this measure than the economy as a whole.
“Relative unemployment is at its worst since the 1980s,” said Mr. Briem.
Part of that, of course, is because national unemployment numbers are strong now.
Jim Futrell, also of the Allegheny Conference, said, “We were kind of isolated from the Great Recession by a couple of factors.
“The shale rush going on meant lots of jobs, lots of growth. PNC was one of the financially healthy banks in the country, so that put them in the position to expand during that period. But as we came out, we entered a situation where the rest of the country caught up with us and recovered fully, while our employment growth was stagnant.”
From 2008 to 2014, unemployment was more than a point lower in Pittsburgh than nationwide. But for the last couple of years, the region’s unemployment rate has been a half-point higher than the rate nationally.
When the Great Recession hit in 2007, the total number of jobs in the Pittsburgh area had almost recovered its early-2000s peak. Can you predict what happened next?
Kurt Rankin, an economist at PNC, emphasized that even to the extent that unemployment is low, that has not come from job growth but from continuing population declines.
“Until this last year, Pittsburgh had not seen a single net new job created since 2000. The peak in 2000 was the same peak until 2016,” he said.
“There was a recession in there, a decline in there, but even after coming back from that, it plateaued. It did not come back.”
Mr. Briem said he always returns to population numbers because they underlie so much of the broader picture. “A shrinking population doesn’t necessarily mean we’re doing badly, but 70 percent of the economy is goods and services provided to the local population. Every two people we lose, that’s a job.”
Just under 5000 Southwestern Pennsylvanians had jobs in mining and logging in 2007. Below, you can predict how many there have been in each year since.
That regional population decline stopped, and even reversed briefly, from 2009 to 2014, and according to Mr. Briem, a big part of that was driven by the oil and gas industry.
“I think to some degree there is less appreciation than there should be for how significant a driver of the whole regional economy the energy industry has been,” said Mr. Flanagan.
“This rapid, excessive shale development, that was real — people did come to the region,” said Mr. Briem. “That’s why a lot of metrics that I and others watch have gone from positive to negative.”
With the collapse in oil prices in mid-2014, however, those trends turned around, and the population decline resumed.
“The industry has normalized,” in terms of labor force, said Mr. Briem.
From 1990 to the Great Recession, the health care and education industries in the Pittsburgh area saw one to four percent employment growth per year. Do you know how their workforce has changed since the recession?
Another facet is that for all the weight that the health care industry has around here, it actually has not seen much growth.
“It’s the 18th largest education and healthcare center in the country,” said Mr. Rankin. However, “Through October of last year, year-over-year growth was 218th. And if you look at previous five years, it was 275th.”
Still, UPMC is Pennsylvania’s biggest employer, and between that health system and rival Highmark, there are already $3 billion in investments in the pipeline, pointed out Mr. Flanagan.
Pittsburgh was first called Roboburgh almost 20 years ago in the Wall Street Journal, but does that really reflect the technology industry’s size in terms of employment?
The other prominent story about Pittsburgh is the growth of the technology industry, particularly in robotics and AI (or artificial intelligence), perhaps best represented by the ride-hailing company Uber’s decision to launch its self-driving car pilot program in the city.
According to the experts, part of this story is real: “Today we have many more companies,” said Mr. Flanagan.
Yet that’s not the whole story. Mr. Flanagan continued, “It’s still small relative to the rest of the economy.”
According to Mr. Briem, the biggest change in the tech sector is privatization. “Ten years ago, I would say … tech was concentrated in the universities,” he said. “Now it’s commercial.”
Mr. Rankin pointed out that even if it is a small sector, it can have a big role. “Consumer sentiment does matter. If people are feeling good about the local economy, they’re more likely to spend their paychecks into the local economy.”
You have one last chance to prove you know the local economy: draw the median home price, according to Zillow, for the last decade.
Another of the hot local stories, gentrification, is very localized by neighborhoods, said experts. Housing prices have increased across the region by zero to five percent a eyar since the recession, and on the whole, home prices remain low relative to other metropolitan areas.
“The story about our emergence as a technology and healthcare hub, that is largely an Allegheny County story,” said Mr. Futrell. The surrounding counties are not seeing that growth, and accordingly their housing prices remain low.
“The perception [of gentrification] does exist and it’s accurate, as long as it’s stressed that it’s isolated neighborhoods,” said Mr. Rankin.
Enter our In The Lead special section
One topic that all the experts underscored was the role of professional business services, including professions like accounting, consulting, finance, and legal services.
“Almost nobody talks about financial business services, which on an employment basis is almost as big as healthcare,” said Mr. Futrell.
“As a percentage of our workforce, we have twice the concentration of people who manage companies as New York City,” added Mr. Flanagan.
According to Law360, Pittsburgh also houses two of the 15 biggest law firms in the country in terms of attorney headcount, Reed Smith and K&L Gates.
Mr. Briem underscored that on the whole, the core trends in the local economy since 2009 have either been extending older trends, or variations in the shale industry in particular.
“G20 was a big thing because of the Great Recession. That’s the point where all these people came into town, and people perceived that it’s not this apocryphal rust belt dystopia.
“But nothing structural changed in 2009. We’ve been doing well since 2009, but all these things were trends decades before that.”
Christopher Huffaker: email@example.com. | Data design + development: Zack Tanner
Are you enjoying this special report? If you are, consider subscribing.
Support journalism. Subscribe today.
If you are a loyal subscriber, thank you for your support.