The housing crisis and the financial collapse hit hard, but this region had some secret weapons
When the Great Recession dawned in December 2007, the Pittsburgh region had a $108 billion economy, the unemployment rate was 4.8 percent and the average production worker was taking home $705 a week.
In the months that followed, thousands of subprime mortgage loans soured and housing prices collapsed, leaving homeowners on the hook for debt that exceeded the value of their property. Financial giants like Bear Stearns and Lehman Brothers collapsed. Cleveland’s teetering National City Bank was acquired by Pittsburgh’s PNC Financial Services Group, which used $7.7 billion in federal government assistance to complete the $5.6 billion transaction. Wachovia, a troubled Charlotte, N.C., bank, was rescued by Wells Fargo.
The nation’s greatest economic crisis since the Great Depression slammed Pittsburgh’s economy, but not as hard as it hit other cities that leaned more heavily on the housing and financial services industries.
It took Pittsburgh’s economy only 45 months to return to the 1.15 million jobs the region had in December 2007, according to a recent study by the Federal Reserve Bank of Cleveland. It took the nation 78 months to hit the same landmark.
Tampa leads in job creation
Although a slowdown in the energy sector caused job growth to slow after that, economists say Pittsburgh did a decent job of bouncing back from the 2008 financial crisis and the recession.
“Pittsburgh made it through the recession relatively well,” said Tom Jackson, a principal economist with IHS Markit, an economic research firm. “Pittsburgh didn’t have a housing boom, so it didn’t have as much of a housing bust.”
A comparison of Pittsburgh and six other U.S. cities that had similar-sized economies entering the recession bears that out.
Only two of the cities — Charlotte and Columbus, Ohio — experienced greater economic growth and higher average weekly earnings growth than Pittsburgh over the last decade.
On the job front, Pittsburgh didn’t fare as well despite its early return to prerecession job levels.
By the end of last year, Charlotte, Columbus and three other cities — Cincinnati, Indianapolis and Tampa — had experienced job growth over the last decade stronger than Pittsburgh’s 3.3 percent increase.
Pittsburgh bests only Cleveland in jobless rate
Only Cleveland — which has nearly 1 percent fewer jobs now than it did entering the recession — performed more poorly than Pittsburgh.
And while Pittsburgh’s unemployment rate entering the recession was lower than most of the other six metropolitan regions, only Cleveland had a higher unemployment rate as of December. The jobless rate in the other five cities was lower at the end of last year, even though several had peak unemployment rates higher than Pittsburgh at the depths of their recessions.
A tech assist
PNC chief economist Gus Faucher said Pittsburgh experienced a milder recession than some cities for several reasons.
In addition to the absence of a housing boom that resulted in inflated and then deflated home prices, Pittsburgh has fewer cyclical industries than some of the cities it outperformed, Mr. Faucher said. Rapid growth in the Marcellus Shale industry also contributed to the region’s accelerated recovery from the recession, he said.
And burgeoning technology-based industries helped.
As of 2010, Pittsburgh was in the top 20 percent of the nation’s 100 biggest cities in terms of 25- to 35-year-olds with a bachelor’s or advanced degrees, according to the Federal Reserve Bank of Cleveland. Highly educated workers demand higher wages, which is one reason why average weekly earnings in the region have increased 23 percent since the recession began, Mr. Faucher said.
Highly educated workers drive up Pittsburgh’s pay
By contrast, Tampa — which beat Pittsburgh on several measures — only experienced average weekly earnings growth of 17 percent over that period.
Mr. Faucher said Tampa’s economy features lower wage jobs, such as employment provided by the tourism industry. He said the Florida city also has younger workers and more non-unionized workers, two groups that typically make less than the older, more unionized workers who make up Pittsburgh’s work force. Tampa also has more workers with just high school degrees.
“That’s a structural factor that’s going to restrain wages in Tampa,” the PNC economist said.
The energy industry recession that hit a few years ago was partly to blame for the fact that job growth in Pittsburgh leveled off after the region returned to its prerecession job levels in 2011.
Births vs. deaths
Mr. Jackson says there’s a deeper structural issue restraining economic growth in the region: Pittsburgh’s aging and shrinking population.
Cleveland and Pittsburgh were the only two of the seven cities to see their populations shrink between April 2010 and July 2016, the IHS Markit economist said.
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Moreover, Pittsburgh was the only city in the group to experience fewer births than deaths over the period, Mr. Jackson said. Cities with shrinking populations or stagnant population growth face challenges in increasing the number of jobs in their region, Mr. Jackson said.
“That really does kind of stand out,” he said. “That’s an indication of a population heavily skewed toward older folks, with relatively low population in child-bearing years. The significance of that is that it takes a long time to turn that around.”
As of December, the Pittsburgh region’s work force stood at 1.2 million — down nearly 1 percent from December 2007.
Pittsburgh, Cleveland see labor force shrink
“A flat labor force is bad news,” Mr. Faucher said. “Businesses are looking for workers, so if the labor force isn’t expanding, that means it’s difficult to find workers.”
The PNC economist said the size of the labor force will be something Amazon considers in choosing the site for its second headquarters.
Len Boselovic: email@example.com or 412-263-1941.
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