Saturday, December 03, 2011

A Tale of Two Recessions

So I wind up often getting into an argument that boils down to me disagreeing with a common belief that the recent recession for Pittsburgh is a slighly milder, but still very similar experience to the recession of the early 1980's.  Nationally it was actually two recessions officially (January to July 1980 followed by the longer period July 1981 to November 1982), though I think most would agree that the two recessions really were one big recession for the Pittsburgh region.

So as the national news parses the good unemployment numbers yesterday, the nabob version focuses on the drop in the labor force participation the numbers seem to show.  It lead me to making the graph below.  I took the labor force trends in Pittsburgh and made a comparable index from a period early in the two recessions.   So from January 1982 and from January 2008 forward, the graph shows what happened to the national and Pittsburgh region labor forces over the subsequent 4 years.  The graph shows the change from those baseline months.  Lot's to parse from it, but just take a look:

The extreme differences for Pittsburgh in the two recession (1980s vs recently) go way beyond what that graph shows. That decline in labor force in Pittsburgh actually masks the decline in the male labor force a bit as women entered the workforce in record numbers to replace the men who were out of work. The drop in the labor force clearly correlate with the net migration that spiked from the region and the drop in population it caused. The folks who were leaving both the regional labor force and leaving the region period were predominantly younger workers who were the folks most capable of adapting and changing to new jobs in new industries.  Those who stayed were far more likely to be older workers who had been displaced from the occupations they had had for decades and for many would never find new employment.  Today we know that in recent years we have seen the first net migration into the Pittsburgh region in decades and changes in migration patterns almost entirely reflect changing migration patterns of young workers.   It is folks in their 20's who dominate migration flows with rates of migration dropping as folks get into their 30's, 40's and older.. until there is a bit of a spike in early retirement years. So if net migration for the Pittsburgh region flipped from net negative to net positive just a few years ago, it has to reflect changes in the flow of younger workers into the region. 

So, just as the incredibly high unemployment rates of Pittsburgh in the early 1980's persisted even though so many workers were leaving the region which would have taken a lot of potentially unemployed folks out of the regional labor force...  masking how bad the employment situation really was; today the regional unemployment rates are being impacted by more workers, or those seeking work, flowing into the region and potentially making local labor force metrics look worse than they appear otherwise.


Anonymous BrianTH said...

Also confirming the thesis of this post: as Chris has pointed out, October employment was at an all-time high. If the labor force hadn't grown so much since pre-recession, presumably we would be back down to pre-recession unemployment rate levels, but of course the unemployment rate is still elevated (albeit heading down).

As always, my question is how long all this can last. Basic migration theories say as long as our labor market is notably better than the U.S. average, we should be getting net migration. So far we are creating new jobs fast enough to maintain the gradient--and it likely helps that new people can create jobs for themselves.

Nonetheless, eventually a new equilibrium should be restored, but my questions are how and when--and what the area will look like by then.

Saturday, December 03, 2011 12:57:00 PM  

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