fracking Pennsylvania update

So here is something you don't always see, but an economic time series running into a wall. Below is an update of my contrived time series of mining employment in Pennsylvania net of the Pittsburgh MSA, or a measure of what is happening across the vast Pennsylvania "T" (since Philly has little mining employment to begin with).

In short, the collapse in this time series came to an abrupt end in August. Absolutely no change from July.  We kind of skipped the inflection point altogether.  I do admit I was expecting the trend to continue downward, though it could never have continued at the same pace. But you rarely see a time series just come to a halt so abruptly. What happens next?  A big turnaround?  Dead cat bounce? Or this was just a blip in a longer term trend?

As I said last month, the time series showed that pretty much all employment gains in mining employment from before the expansion of alternative gas development were gone, or at least down 98% from the employment average for 2005. It is true that the Pittsburgh MSA has retained some of its gains in mining employment since before the big frack began, but that series has been on its own massive collapse as well.

So as the big Shale Insights conference kicks off here in Pittsburgh, the news is good or bad depending on how you want to take it.  The collapse has ended, quite definitively at least for this month, but still all past employment gains remain eviscerated.  I do think there has been some gains in natural gas employment across the state, but just barely enough to offset the resulting collapse in coal employment in Pennsylvania, now at levels not seen since before the civil war. 

Funny that there are no longer any economic impact reports on fracking being produced, despite the reports were originally promised to come annually.  Before the reports were all a bit conjectural about the future, but now we have data to work with.  I know local interest has switched focused to the new $7 billion dollar ethylene refinery (i.e. cracker) being planned for Beaver County.  Some in the region are aware of what Chinese steel production did to steel prices and the steel industry here.  Well, take a look at $24 billion ethylene refinery being built in China.  But we won't talk about that. 

Pittsburgh GDP up 3.3% (sort of)

So here is a data conundrum.   Headline this morning from a dump of data from the BEA shows that Pittsburgh's GDP jumped 3.3% in 2015, a decent bump over the national jump of 2.5%, both as measured in real (inflation adjusted) dollars.   Here is the BEA's time series of GDP data for Pittsburgh as they show for both current and inflation adjusted (real) $.

So for a reference number if you want to know how big the Pittsburgh economy is, the current dollar estimate for metropolitan GDP is $138.9 billion annually. GDP is, broadly speaking, intended to be a measure of value added production. A good number to keep in mind when comparing the size of things you read about in the news.

But I need to look at something closer here.  The real GDP estimate for Pittsburgh shows a 3.3% jump, but the current dollar increase between 2014 and 2015 is only showing a 0.9% increase.  Inflation is low, but typically even with low price inflation current dollar increases appear larger than the inflation adjusted amount in almost all time series. Looking at this data, for most all regions current GDP growth is higher than real GDP growth, but for Pittsburgh it isn't, by a palpable difference.  So I calculated the ratio of the current dollar GDP to inflation-adjusted GDP across all metropolitan areas in the BEA data.  The ratio of the two is different across all MSAs, but within a narrow range of around 1.12. For Pittsburgh, the ratio is much lower at 1.06, one of the lowest ratios among all MSAs that I calculated. 

So now we get all wonky, but this is interesting.  Basically if the data is correct, it is saying there has been an abnormal deflation in prices in Pittsburgh based on the mix of goods consumed here.  The methodology used by the BEA does not assume different regional prices per se, but it does de facto calculate different regional price deflators based on different mix of goods produced here. So if we produced more of some good that had abnormal price changes, that results in regional differences in deflators and the result observed.  If I had to speculate, I think the strange result for Pittsburgh (much lower current dollar GDP growth compared to 'real' GDP growth) is coming from price deflation in energy markets. The price collapse in coal and natural gas over the time period for this data would give this result for regions that have concentrated output in those products.  Makes for some different interpretations of the data for surer.

So yeah, methodology matters, no matter how easy it is to quote a headline number.

Still a magnet for educated immigrants

Your Wonk Quotient is high if you know that last week the Census Bureau released 2015 data from the American Community Survey (ACS).   More may have noticed various media stories looking to pull some interesting factoid from the latest data.  The problem is that the ACS has a panoply of data and finding one interesting datapoint to comment on is hard.  There is a bigger problem that the ACS survey data, especially the 1-year estimates data just released, has sampling error and related issues that really make most media stories an exercise in misoverinterpretation at best. You really want to exercise extreme caution when commenting on something in the 1-year ACS data if the latest data looks to be a significant change from the past.

That being said, I thought it safer to look at what hasn't changed in the ACS data for Pittsburgh. I thought I would start with a look at immigration for Pittsburgh. Not just immigration in general, but the characteristics of the immigrants who currently reside in Pittsburgh. This came to mind since I see yet another immigration attraction effort has started in Pittsburgh, the last in a long long line of similar efforts.  The new programs are always written about as if they are a new thing no matter how much immigration here has been written about worldwide.

Anyways, here is a true example of Pittsburgh exceptionalism.  Yes, immigration here is pretty low, usually measured as low as you would expect among large metro areas.  However it has also been true that among the immigrants who do reside in Pittsburgh, they are clearly the most educated cohort of immigrants among large metro areas in the US. Again, nothing new and something I have been pointing out for years. Still, the latest ACS data is interesting in that it confirms that factoid is still true, but if anything is stronger than ever.

Here are some rankings of how the educational attainment of the foreign born populations compare across the 40 largest Metropolitan Statistical Areas.  Here is what it looks like for the percentage with a bachelor's degree or higher.

I'd point out one important caveat here which gets to definitions.  Strictly speaking the ACS is measuring the characteristics of residents here.  The definition of 'foreign born' is just that. What you will see by many, and myself on occasion is referring to the same group as immigrants which isn't actually correct.  Immigrants are those who have moved permanently to the United States.  Foreign born residents here can include those not intending to stay in the US, such as many foreign students currently enrolled, or on non-permanent visas... although many of those may be intending to convert their visa status eventually.  So an important distinction, though I think the general pattern would hold if it was possible to strictly measure immigrants.

Still, not only is Pittsburgh out in front with over 56% of immigrants here now holding a bachelor's degree or higher.  Unsurprisingly, San Jose, CA, is #2 but well behind Pittsburgh at 50%.  But here is another figure comparing the percentages with a graduate degree.

So Pittsburgh is again out in front, but by an ever larger margin compared to #2.  Over 34% of the foreign-born population in Pittsburgh have a graduate degree of some kind.  #2 again is San Jose, but back at 26%. So when you read about efforts to attract and retain immigrants in Pittsburgh, remember we do pretty well at attracting immigrants with advanced professional skills. We are so far ahead of most anywhere else, you have to ask how much higher is even possible no matter the effort put in. What Pittsburgh lacks almost entirely are immigrants with less than a college degree, or even less than a high school degree. How and why those flows are not coming to Pittsburgh is the issue.

I will put the data that made the tables here, in a 'Footnotes' section on my web page. 

Coal employment dropping even faster than you may think in Pennsylvania

So last month I posted about the employment trends for coal mining in Pennsylvania.  The latest data at the time I saw was for the 4th quarter of 2015 when Pennsylvania coal mining employment had reached a new all time low of 5,918, or as I pointed out at the time a level Pennsylvania had not seen since before the civil war.

So the next quarter of data is out.  From a level of 5,918 for 2015Q4, the average employment for the first quarter of 2016 dropped to 4,835, or an 18% drop over the course of just 3 months.  Within that data the monthly data actually shows March of 2016 coal employment statewide dropped even further to 4,775.  Again that is total coal mining employment across Pennsylvania. How bad does the trend look like:

So the trend went from bad to worse, right.  Dig deeper and it gets even worse.  The same data also captures total wages by industry.  While coal mining employment dropped 18% from 2015Q4 to 2016Q1, total wages by quarter dropped by just under 30% over the same period.  Take a look at that:

So not just jobs are being cut, but among the jobs folks still have, either hours or wages (or both) are being cut as well. 

Pittsburgh always fighting the last demographic trend

It was a bit odd reading the recent headline from a few weeks ago: Pittsburgh's Youth Exodus Revereses - Millennials are being drawn to Pittsburgh.

Reverses?  Compared to last year? The last decade?  Maybe it's been lot longer since Pittsburgh was losing young folk. Not that you would know it from the headline.

Still... the headline implies some positive demographic trend is just beginning when it may actually be at the end  For years the message that Pittsburgh was NOT hemorrhaging young folks was met with less than deaf ears.  It was very lonely not being negative. Even after years of the data showing clear net migration into Pittsburgh, and lots of other positive demographic trends, the Post Gazette itself would write editorials ("Reports of a population uptick are unproven") in utter denial of hard data and calling me out by name for having the temerity for not being more negative.  Of course my favorite was the letter to the editor in the Trib calling virtually all non-nabobism, especially mine, as "Unctuous Bafflegab".

Sorry.. truth is I'm not really sore about the latter. I'm really a bit envious of Mr. Brock's wordsmithing and wish I could turn a phrase so well.  His is the single reference that turns up in the entire Googleverse of the phrase 'Unctuous Bafflegab"

So now all of a sudden the news coverage says all is well. Our long demographic nightmare is over, or so you would think. The thing is that any trend of young people migrating to Pittsburgh story was clearly a reflection of some remarkable economic trends, but remarkable trends that have clearly ended. A regular meme here was tracking how Pittsburgh's unemployment rate dropped well below the national unemployment rate and remained below the national rate for an extended period of time.  My updated graphic of the region's  unemployment rate (United States minus Pittsburgh MSA rates) shows this:

That big block of green on the right end of the graph was a period of 100 straight months where the Pittsburgh region's unemployment rate was below the national average.  If you include a few months where the two rates were the same you can extend it out to say that it was 109 straight months, literally 9 years and a month, where the local rate was not higher than the national rate.  There has probably not been a longer period where Pittsburgh unemployment rates stayed below the national rates in at least the previous half century, and probably going back as far as unemployment rates were reported at a regional level. So a big deal, and probably resulting in  the net positive migration the Pittsburgh region experienced by Pittsburgh for probably 7 straight years.

So after 7 years of positive net migration for the region, the headlines finally came to believe things have changed.   But already the headlines are lagging data and the most recent shows the migration trend is again negative for the region.  What about the future?  Look at the graphic above again and look at the last year there and the red on the far right. You see that in 2016 the Pittsburgh region's unemployment rate gave up the ghost and shot up well above the national rate. Not just by a marginal amount either.  In June the local unemployment rate was 0.8 percentage points above the national unemployment rate.  You have to go back to 1988.. yes 1988, to find a month where Pittsburgh was faring that far below the nation. That relative migration metric is a great predictor of net migration at the metropolitan level, so the next couple of years at least its unlikely the region will be pulling too many folks from elsewhere.  It is not so much that Pittsburgh is doing horribly, in absolute terms the local unemployment rate is still well below historical levels, but the much lower national unemployment rate reflects economic conditions in other regions that are developing serious labor shortage issues that will limit reasons to move here. Simple and unavoidable economics.

New low for Unionization Rate in Pittsburgh

I used to do this calculation from CPS data myself regularly, but the folks at UnionStats do the same thing and I am sure they do it much better so I will just pull their data.   But their latest data on the unionization rate by Metropolitan area show a remarkable thing. The private sector unionization rate within the Pittsburgh MSA has fallen to 6.8% in  2015. This is what their time series looks like.

I'd point out two things.   The annual time series compiled from the CPS shows more variation than you would expect in the real world, and that is to be expected from survey data.  But if you smooth the trend out to remove the sample error you clearly see the downward trend.  I'd suspect the actual rate for 2015 to be more like 8%, which still is pretty much an all time low, and something below that now in 2016.

But the bigger question that comes up when I talk about this data is what exactly is being measured.  Private sector unionization here measures union membership, but only among those currently employed.  So when you look at the greater obvious union presence at the Labor Day parade for example, realize that here in Pittsburgh for sure there are a lot of households with retirees or former union workers as well that would not be captured in this stat.  Note also the overall unionization rate in Pittsburgh is just a little big higher because public sector jobs have a higher unionization rate here.

A couple thoughts on what it means.  Whenever you hear of someone saying - and they still occasionally do  - that somehow unionization impedes economic growth in Pittsburgh...  the unionization here is actually below that of a lot of other metro areas.  Seattle for one example now show a private sector unionization rate of 10.0% in Seattle, compared to Pittsburgh at 6.8%. Seattle has been doing pretty well nonetheless.

Also, the historical trend is still a big deal.  This time series only goes back to 1986, but even then the private sector unionization rate in Pittsburgh was measured at 18.8% - or about 3 times the current rate.  1986 was clearly after so many union jobs went away across Western Pennsylvania. Remember this metric measures unionization only among those currently employed.  So the rate was much higher just a few years before that.  But go back further.  My research tells me that peak manufacturing employment came in the early 1950s when manufacturing jobs alone represented 40% of the local workforce.  Any measure of unionization back then was far upwards of that 40%. 

Where is George Westinghouse when you need him?

Remember last month there was a nice story saying all was hunky dory in the state of entrepreneurial Pittsburgh: Tech startups surprised to find Pittsburgh's assets add up .  That and the more routine coverage of startups that makes it seem like we are being overrun with new firms. For example see: 15 Startups to Watch in 2015. I sometimes will look at stories like these from a decade or more ago to see what firms survived, if any.

The problem, as it has always been, is that by virtually every measure with hard, or semi-hard, data of entrepreneurial activity Pittsburgh is always ranked either very very low, or literally last. It's like we willfully don't believe any of the data.  One story that acknowledged our low ranking on startups focused in on an idea that it was a result of Pittsburgh being a relatively small metro area in the universe of regions compared. Problem is that Pittsburgh is the 27th or 28th largest metro area depending and if you are ranking the top 50, I think we actually are right in the middle, so how does that excuse mean anything?

Anyways, there is new data on all of this from the first ever Census Bureau Annual Survey of Entrepreneurs.  There is way way too much data in it to begin to parse here, but a few factoid headlines tell the tale for Pittsburgh.  See the benchmarking from the magazine Governing and their table of Metro area employment generated from new firms (link).  Which region is absolutely last there?

What is more troubling is even within the limited entrepreneurial activity here is the lack of diversity showing for Pittsburgh. Out of Kansas City there is a story showing some angst that they rank 8th from worst in the diversity of entrepreneurial activity.   Well, the region that is actually last - outright last - is again Pittsburgh.  So we are doing poorly overall and certainly doing poorly at minority owned firms.

While I know it may seem dated, written before most readers here were born, but many of us swear that the Rosetta Stone for understanding the long-standing lack of entrepreneurial activity here is the seminal journal article by former Pitt econ professor Ben Chinitz:  Contrasts in Agglomeration: New York and Pittsburgh..   If you are interested in the Pittsburgh economy in any way, you need to read every paragraph.   A modern variation on a theme is of course Mike Madison's: Contrasts in Innovation: Pittsburgh then and now.

If you want to dispute how bad we are doing here I suspect you want to throw out examples like maybe Google, or now Uber's growing offices here.  If so, there we are actually talking about very different things.  Yes, both firms are growing in Pittsburgh and generation employment growth for sure.Good things, but that is something different from organic firm creation.  Neither firm started here and it is a different dynamic to talk about how Pittsburgh is doing at firm relocation or branch expansion.

Looking for entrepreneurs is about new firm creation.  As Chinitz points out, the lack of new startups here goes back a long long time and he believed that was much a result of the steel and coal industries that long dominated Pittsburgh.  Obviously those industries are eviscerated, but its hard not to see the continuing threads of Chinitz's logic that are binding to this day.

If you ask me, the one true star of Pittsburgh's entrepreneural ecosystem was the historic Westinghouse Corporation.  Alone among the major firms of Pittsburgh, Westinghouse produced a steady stream of new entrepreneurs decade in and decade out much like you see out of Silicon Valley today.  George W. himself just had a different form of management that both encouraged that result, but it was then baked into the corporate ethos there that long outlived him. Long after he passed Westinghouse was a singular star in spinning out new firms and businesses compared to most any of the other large firms in Pittsburgh.

Thus the real travesty of Pittsburgh' recent  (as in recent decades) economic history is not when steel employment collapsed, but when the Big W hired Michael Jordan as CEO and he began a process to become a media company.  The purchase of CBS and the de-facto reverse merger into that media company lead to the dismantling of the vast research and development enterprise that had been a worldwide leader for almost a century.   Whether any of it made sense from a corporate profit point of view is debatable in itself, but the lack of appreciation for what was destroyed and its impact on the Pittsburgh region and sheer national innovation capacity really was criminal.  I'm sure Jordan was amply rewarded for his bold moves.

Note that is no disrespect to any of the parts of the old Westinghouse that remain, to include the Westinghouse Nuclear piece that comes closest continuing on the traditions of Westinghouse.  But the big difference is that Westinghouse Nuclear is very good in a very niche business. Old Westinghouse routinely produced new technologies that actually generated new firms across a panoply of entirely new industries.  The big Westinghouse R&D complex once located in Pittsburgh was also a big employer of new young engineers and scientists, which brought many to Pittsburgh and many of those folks stayed with many become successful tech entrepreneurs later on.   We lost most all of that and there exist few really big tech firms that have the luxury of hiring large cohorts of young engineers right out of school (fresh outs) and train them up. Virtually no firm has filled that role since W folded. So Pittsburgh today is at a major disadvantage in the long battle for talent.

Ok.  Not may left reading I am sure.  But I am going to stare at the new census entrepreneur data and see what nuggets of insight pop up.

Pennsylvania Mining - the end or the beginning

Just an update with July data on my running tally of how the mining industry is doing across central Pennsylvania. See previous posts for more discussion of the metric.  But I think I am calling this one and by my count, Central Pennsylvania has now given back all of the employment gains in mining that came after the expansion of unconventional gas (i.e. fracking) came to the state. If the data says 98%... well, this is July data so I am sure before August began a few weeks ago we crossed my arbitrary Rubicon by setting the baseline as the 2005 average.  But again, the question is how negative this trend will go given the slope is pretty dire right now.  

Pennsylvania coal employment down 97%+

Few would have predicted that coal would be so much in the news this election season. Lots has been impacting the coal industry across the country and Pennsylvania has long - did I say long - been coal country.

I myself have been fascinated with the news headline that came out last week that Kentucky coal jobs hit lowest level since 1898.  The earth shattering factoid generating that headline was that the number of Kentucky coal miners dropped to 6,465 in the 2nd quarter of 2016, a low not seen since before the turn of the (19th) century.

Of course I had to ask what the comparable factoid for Pennsylvania? Has Pennsylvania coal mining employment dropped to levels of 1898? The latest published data itemizing coal mining employment specifically for Pennsylvania says there were 5,922 employed in coal mining as of the 4th quarter of 2015.  How does that compare to past coal mining employment in Pennsylvania?

I will admit not being able to find a clean dataset of coal employment going back far enough to answer that directly, But how about looking back just to 1898.  Is Pennsylvania back to 1898 levels?   Actually no, and not even close.  If you add up employment in both Anthracite and Bituminous mining, you get a Pennsylvania employment total in excess of 223 thousand in 1898 - a year that was likely a few decades before employment levels peaked remarkably.

By those numbers, Pennsylvania coal mining employment is down down over 97% from 1898 levels.  How far back do you need to go to get a Pennsylvania employment level under 5,922?  Hard to say given how far back you need to go. At least for Anthracite mining - which was the predominant type of coal mined in the state in that era - you have to go back to 1850 to get a lower employment count (p. 434).

So I didn't lie, Pennsylvania coal jobs are down 97% or more.  The title does not specify what the reference year was.   So when there is politispeak about how mining can/will come back, the first question you might ask is what year, or what century, the state's employment level can be rolled back to.

Which leads to an obvious, and possibly more pertinent, question.  What have been recent employment trends in Pennsylvania coal mining?  Here is the annual employment data since 2001, a time series that is remarkable stable when you think about it given all that has been happening across the industry elsewhere.

For reference here is the tabular data for that chart:

2001	8,421
2002	7,964
2003	7,062
2004	7,212
2005	7,415
2006	7,592
2007	7,420
2008	7,872
2009	7,685
2010	7,772
2011	8,454
2012	8,619
2013	8,002
2014	7,306
2015	6,428

I want my Bitcoin MAC machine

So how do you trade in Bitcoin? Some limited establishments will take Bitcoin for paying various bills, but how do you easily acquire and sell Bitcoin. I mean easily, not mining new Bitcoin —  which requires running your computer for hours/days/months on end — or getting involved with some of the ethereal trading exchanges you can create accounts on to trade Bitcoin. What was once one of the biggest trading exchanges for Bitcoin was Mt. Cox, but if you call up their website these days, you will see why that is not an optimal path to buying – or what is really important, selling – bitcoin. Why can’t you get Bitcoin the way you get ‘currency’ normally via a conveniently located Bitcoin MAC Machine ATM?

It turns out there actually are Bitcoin ATM machines and there are even some in Pittsburgh. Well, actually there are all of two Bitcoin ATMs. According to coinatmradar.com there are a total of 2 ATM machines within a hundred miles of Pittsburgh. I can't begin to vouch if the ATMs they have listed there, and mapped even, is a complete list.

Some ATM machines allow you to only purchase Bitcoin (purchase or exchange?... depends on whether you define Bitcoin as a currency or not.) Other ATMs allow exchange both to and from dollars. One ATM listed in Pittsburgh where you can only ‘buy’ Bitcoin is at the One Stop Mini Mart on the Blvd of the Allies. But that is reported to be non-operational as I write.

The sole machine listed where you can both buy and sell Bitcoin in Pittsburgh — and so the only place where you can trade your Bitcoin to get cold hard US cash — is at the Quick Stop on Liberty Ave. at the seam of Lawrenceville, Polish Hill and the Strip District. I would love to get a comment from anyone who has actually used this machine, or any other local Bitcoin ATM? Seriously, does it work and why use it?

The debates over whether Bitcoin is or isn’t a currency are still really only beginning. The thing I do wonder about is why Bitcoin is legit enough to be used at a range of retail establishments, and legit enough to have ATMs, why was the Ice Cream money that one local establishment created just a few years ago was deemed to be illegal. Ice cream may not meet the technical definition as a store of value, but compared to blockchains?

And with full disclosure I have no business relationship with these folks, so I won’t be getting a commission if you to this site to procure your own Bitcoin ATM machine (only $14K).

Ex post frack Pennsylvania

Just a quick update on my ongoing tracking of how the fracking boom is doing across central Pennsylvania. Here is my quick calculation using June data showing how mining jobs are faring across Pennsylvania outside of the Pittsburgh MSA.  The rate of decline has slowed a tad, but hard to see a soft landing in the time series and soon the number of jobs in this metric will drop below where they were before the shale development even began. The question remains, how much lower will it go?

How many bicentennials does one city deserve?

Lest we forget, this isn’t the city of Pittsburgh’s first ‘bicentennial.’ The curious thing about the City of Pittsburgh’s bicentennial this week is that is not the city’s first bicentennial celebration.  In fact it isn’t even the 2^nd.   

The biggest celebration the city ever held was in 1958. The first bicentennial celebrating the nominal founding of Pittsburgh as a place on the English colonial map and an outpost for the Ohio Company by Royal Charter as Virginian gentry looked to extend their interests. Really it was the de facto  founding of Upper Yohogania as Virginia would name the land underneath us later on.It would be decades before the best cartographers and lawyers of the era settled a lingering debate whether the forks of the Ohio rested within the boundaries of Virginia or Pennsylvania.

Take a look at how big that celebration was in 1958.  One small project commissioned for the 1958 Bicentennial was the first edition of Stefan Lorant’s opus: Pittsburgh: The Story of An American City. That book would not be finished for 7 years in the end, but it was initially commissioned for the bicentennial celebration and went on to 4 more editions subsequently. More than that, Pittsburgh Bicentennial Coins were minted, and check out this great montage of Pittsburgh Bicentennial advertisements via PBRTV.com. There was even a dedicated Bicentennial office set up years prior to the event to manage it all.

1958 was a period of immense change across the city, far more than today no matter how you slice it.  Take a look at this Pittsburgh Bicentennial Redevelopment Map (below) also produced for the celebration. Look at all we now think of what defines modern Pittsburgh (some good and some bad) that was in construction, or even just in planning, at the time.

Then there was the 2^nd Bicentennial..  In 1994  a 'little known bicentennial for the city' was pushed as a reason to celebrate again. The nominal excuse was the anniversary of when Pittsburgh was formally incorporated as a Borough.  Ok, then.  The city tried to make a big deal of it but even back then editorials were opining that there was No Point in Celebrating the Bicentennial Again. Still it sparked a yearlong celebration of sorts.

So here we are, again celebrating a bicentennial of sorts. This third bicentennial now celebrates the conversion of the tiny Borough in to a newly defined city of the Commonwealth of Pennsylvania. I am sort of surprised we didn't make a bigger deal of Pittsburgh's first sestercentennial which ought to have been in 2008.  We could be doing this every few years if you get just a little more creative. 

MiningPA update

Just a chance to update my graphic of mining and logging employment across Pennsylvania. Again this is a bit contrived and shows data for mining and logging employment in Pennsylvania net of that in the Pittsburgh MSA. It is an attempt to capture what is happening across the vast Pennsylvania T*.

To capture the impact of shale development across Pennsylvania I highlight the change in employment from a baseline I define as 2005 through the lastest data for May 2016.  Not really any slowdown in the collapse in this metric.  The trend has not retreated all the way back to the 2005 levels, but it sure is not far from it.  The thing I have pointed out is that there appears no soft landing here and it sure looks like it is going to very soon overshoot the employment level before there was any palpable shale development across the state.  At the rate this is going, this metric will fall below the 2005 baseline in July... which given the lag in when data is reported is now just around the corner. Will there be as much notice as there was of the employment gains earlier on?

The reason I argue the employment effect will be negative is natural gas' impact on coal mining. The vast expansion of natural gas has collapsed the price to the point that it has displaced a lot of the nation's demand for coal. Taken holistically, the employment impact of shale development in Pennsylvania is about to turn negative.. a conclusion any conceivable extrapolation of this time series leads you to:

* Note it is not Pennsylvania net of Pittsburgh and Philadelphia just because there is limited data easily available on mining and logging employment for the Philadelphia MSA, most likely because the scale of that employment in the Philadelphia is insufficient to report due to confidentiality suppression. But on the assumption mining employment in Philadelphia is low, or has low variance, the graphic fairly represents that is happening across Pennsylvania.

Pittsburgh immigration data update

Same story, new year.  New data - or not so new data, just newly published - on international immigration was released from the US Department of Homeland Security earlier this month. Someone ought to notice. The trend for Pittsburgh in naturalizations, those becoming citizens, here can be updated to include 2014 data.  Bottom line: a very small tick up from 2013.  1,496 naturalizations occurred in Pittsburgh in 2014. Still, if you normalized on the size of the region Pittsburgh remains about as low as it gets in this statistic, much as it has been for decades. Naturalizations in Pittsburgh are noticeably below the level of Cleveland (1,942) and Cincinnati (1,691) and far less than half that of Columbus, Ohio (3,407) for just for a few nearby examples.

Also very different from national data, there has been virtually no new citizens naturalizing in Pittsburgh who were born in Mexico (a total of 29) no matter how many stories you read about the changing demographics of Beechview. As has been the trend, most naturalizations here come from Asia, which includes India. Granted this is data on naturalizations and it takes a long time to become a naturalized citizen. So sure, it could be that there will be a trend up in a decade, but that was the story from a decade and a half ago as well. Other than that I'll skip any more pseudo punditry and just post this for the pseudo record. Here is the trend and basic stats on naturalizations in Pittsburgh and some US data for comparison. 

PERSONS NATURALIZED BY REGION OF BIRTH
FISCAL YEAR 2014
	US	Pittsburgh MSA
Total	653,416	1,496
Europe	71,325	254
Asia and Oceania	236,562	871
Africa	62,175	166
Mexico	94,889	29
Other North America	127,658	97
South America	60,665	79
Unknown	142	-

Pittsburgh real estate

Lots of real estate data to parse in Zillow's recent Negative Equity Report for the 1st quarter of 2016. Negative equity being defined as mortgage holders with homes worth less than the outstanding debt on their mortgage, something that can happen when the value of your home drops after you buy it..

Using Zillow's data, first take a look at this benchmarking of how metro areas compared 4 years ago.

Pittsburgh was that extreme stable case. We just didn't see the real estate price collapse that happened elsewhere. It really was a remarkable observation. There just was little notice of just how extreme we were for a whole bunch of years.  All the stories of real estate miasma elsewhere just was not a systematic issue here at all.  In part it reflects how little the prior real estate bust hit here, a fact all the more remarkable by how deep the real estate bust was just on the other end of Cleveburgh.

So today.. still true?  No, but...   National real estate prices are on a tear if you have not seen the news or the numbers lately.  But across metro areas some reversion to the mean was inevitable. So indeed Pittsburgh no longer has the lowest % of homes with negative equity, but we remain far closer to the low end than the high. Still, note how dramatically the negative equity rate has dropped in some of the formerly worst-off areas.

It's not that Pittsburgh, the metro area, has not seen similar declines, but when you start out so low you just can't drop anywhere near as much. Still a positive trend for Pittsburgh, with the negative equity rate dropping from 16.7% to 9.2% over 4 years.  Also note these are metro numbers.. If you look at Zillow's county level data, Allegheny County is coming in with the lowest negative equity rate across the metro region at just 7.5%, well below their national average of 12.5%.

In the end as every knows for real estate it is location, location, location, and by that it means micro-location.  Averages are usually not really that helpful at saying what your house is worth.  Still if you want to tell the whole Pittsburgh story in a nutshell... ponder just one data point. For those of us born in Lawrenceville, real estate prices like this are pure cognitive dissonance.  Didn't click the link? The price history for that typical Lawrenceville 2x2 was sold for $25K in 1983 (somebody probably paid way too much), $60K late in in 2013 and now on the market for $395K. The current asking price is a bit incongruous with the current assessed value for that property, literally less than 1/6th the current asking price. That has to be some sort of record. No comment at all on the prices of places like this.

Bringing back manufacturing to Pittsburgh

For sure the news of a new ethane cracker is relatively big economic news for the greater Pittsburgh region—a topic unto itself for another day maybe. Still it is hard to separate out conjecture from current reality. That comes to mind reading this from the WSJ (and he of true McKeesport roots my friend @timpuko - Hi Tim) which has this:

Ohio Valley Lures Manufacturers With Rock-Bottom Natural Gas Prices 


Here is the unavoidable truth. Maybe the ethane cracker will spur some future growth in manufacturing for Pittsburgh; I am sure that will be a topic here or for other economic pundits for sure. But that is not the current impact. If you date the beginning of shale gas development to 2008, the trend in local manufacturing employment has only been down since then. Down in absolute numbers, down as a proportion of all regional employment and down compared to national trends. Using BLS data on Pittsburgh MSA manufacturing and total nonfarm jobs I did the division - but feel free to do it yourself - to come up with a metric of manufacturing jobs as a percentage of all nonfarm jobs in Pittsburgh.

I've posted the comparable graph of absolute numbers of Pittsburgh manufacturing jobs in the past, but if you just want a few factoids to reference.  There were still over 100K manufacturing jobs across the Pittsburgh MSA as late as August 2007, around the time shale development was really taking off.  The latest April 2016 data is an employment count of 85,300.  For purely historical reference, my own research says that the all time peak manufacturing employment in the Pittsburgh metropolitan region (then defined as 4 counties for precision) was over 379 thousand at work in the plants in October 1952. An existential economic factoid defining Pittsburgh and a hard intergenerational memory to forget for many. It was also a remarkable  ~40% of all employment in the region.

You just feel that some think this one project, albeit big—especially when you ponder the
construction activity that will come and then go—will bring back that past. But ponder the scale of the numbers.  Maybe 600 jobs on the site when in operation. Pick some inconceivably large multiplier of indirect jobs it will create... 6 is huge multiplier by all known standards.  Mulitply about and get 3,600 jobs which is less than 1% of that past peak. Multiply that number by another 5 (so a multiplier of 30???) you get around 16K jobs which is just enough to bring the Pittsburgh manufacturing count to where it was in 2007—not exactly an era of manufacturing renaissance here. And that is assuming there are no further losses of manufacturing jobs locally after April.

What is even more important is that the regional trend has all been down while, in fact the national story is quite the opposite over the last 8 years.  National manufacturing employment has generally been going up since 2010. So we need several thousand additional net new manufacturing jobs in Pittsburgh just to maintain pace with national growth rates in recent years.

One small point on the ethane cracker and the reported numbers that employment at the site will be up to 600 jobs. Keep in mind that the Horseheads inc plant that recently departed the site, itself. had ~500 jobs near the end of its time here, so on net this is mostly a wash. But on shale related jobs that can be generated indirectly here. Once there was a belief there would be this vast demand for tubular steel. Whatever tubular steel bubble that came to pass here, it passed quickly. Yes, I do think there are other indirect jobs generated by the shale development across the Pittsburgh region and its environs, but I bet the bulk of those jobs are not in manufacturing at all, but spread across a wide range of service sector (the service sector writ large - to include finance, legal and hospitality sectors) jobs.

I leave you with what remains one of the most remarkable videos explaining how drilling was here to save Pittsburgh from itself. The viewer is left to connect the dots between the latest cupcakery in Regent Square and hipster barber (in Lawrenceville I think... a city Neighborhood where fracking is still banned by ordinance I do believe) and shale development elsewhere.  I wonder what videos would have been made if the drilling planned for Lawrenceville itself - one of the densest parts of the entire region - ever happened.