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The Pittsburgh Labor Market

Though the United States has been experiencing one of the weakest labor markets in decades, employment conditions in the Pittsburgh area have been much more favorable in recent years. While employment fell 5.4 percent across the US during the Great Recession - the steepest decline since the 1930s - in the Pittsburgh metropolitan statistical area (MSA), it fell by about half as much (2.7 percent). Only 15 of the largest 100 US metro areas saw smaller employment declines during this period. This experience contrasts sharply with what happened in the Pittsburgh area in the early 1980s, when the steel industry underwent significant change and consolidation. From January 1980 to December 1982, during the so-called twin recessions, employment in the Pittsburgh MSA declined dramatically by 8.5 percent.

Payroll Employment, US and Pittsburgh MSA

Because of its more modest employment decline during the last recession, Pittsburgh was one of the first metro areas to return to its pre-recession employment levels in the recovery that followed. In September 2011, when Pittsburgh-area employment eclipsed its pre-recession level, only eight other US metro areas among the 100 largest had achieved the same milestone. The nation as a whole has yet to return to its pre-recession employment peak. In addition, the Pittsburgh area's cumulative employment change since the end of the previous expansion (December 2007) is currently the fifteenth best among these 100 American metro areas. Again, though, this largely reflects the milder employment decline the area experienced throughout the recession. Employment growth during the recovery (after June 2009), while better in the Pittsburgh area, has been much closer to the national average: 5.4 percent for the Pittsburgh MSA versus 4.6 percent for the US through October 2013.

Percent Change in Employment by Industry, December 2007-October 2013

The industries driving Pittsburgh's above-average employment gains in this business cycle include construction, financial services, and business services. In the case of construction, the US housing crisis caused national construction employment to fall sharply after 2007. As of October 2013, national construction employment had fallen about 22 percent from its December 2007 level. By contrast, construction employment fell just over 2 percent in the Pittsburgh area over the same span. The area also never saw the bust in residential real estate values experienced nationally. While US home prices fell more than 12 percent from the fourth quarter of 2007 to the third quarter of 2013 (according to the Federal Housing Finance Agency), Pittsburgh area prices rose almost 9 percent.

Home Price Index US and Pittsburgh MSA

The fallout from the housing crisis has also been an important factor in reducing financial services employment nationally. Weakened financial firm balance sheets have driven consolidation in the industry in recent years, while at the same time, households have generally been reducing their debt levels. As a result, employment in financial services nationally fell about 4.5 percent from December 2007 to October 2013. However, over the same period, Pittsburgh saw financial services employment grow almost 9 percent. In fact, it is among just a handful of metro areas among the 30 largest where financial services employment increased over this period. Only the Dallas metro area saw stronger financial services employment growth.

Financial Sector Employment Growth in the 30 Largest MSAs, December 2007-October 2013

Finally, employment in professional and business services - which includes things like legal, accounting, and advertising services, as well as scientific research and the management of companies - has grown nationally since the last expansion ended in late 2007. From December 2007 to October 2013, employment in this collection of industries increased almost 4 percent. In the Pittsburgh area, the same set of industries grew more than twice as rapidly, at just over 11 percent. Again, among the largest 30 American metro areas, Pittsburgh's employment growth in these industries was in the top 5.

Professional and Business Services Employment Growth in the 30 Largest MSAs, December 2007-October 2013

The area's recent employment growth in these two service-sector categories - financial and business services - is notable and a potentially promising sign for the future of the Pittsburgh economy. In a recent article, economist Joel Elvery described the positive correlation between "knowledge jobs" in tradable-service-sector industries - which he identifies as jobs in information, financial services, and business services - and an area's growth over the past 50 years. Drawing on the work of economist Enrico Moretti, Elvery suggests that these trends are likely to continue in the years to come.

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