Wednesday, June 04, 2008

where's the wabbit?

Not long ago, the question everyday from somewhere was "What are the recession's impacts in Pittsburgh?" Of course, they still have not officially declared a recession nationally, but locally the story continues to be counterintuitive almost across the board.

On the same day that GM announced the large drop in auto/truck sales nationwide they announced that they would be expanding production at their Lordstown plant in Ohio (just over the Ohio border), even including plans to add a third shift which will increase employment in order to build a new small car at the plant. Remember when Pittsburgh was once the small car nexus of North American auto production? I was going to file this as a "Cleveburgh" story since there are workers from across the region who commute to jobs at the Lordstown plant.

But it goes beyond that. Forbes reports that imports of steel into the US declined last month, which is good for US producers. It's not just the level of imports, but the profitability of steel that is shooting up. Forbes had another story yesterday on that: Steel Prices Show no Rust. One big reason for that is clearly the declining value of the dollar with respect to foreign currencies which is a big boost to US manufactuers. The thing about currency impacts on output is that they do not respond immediately to changes in exchange rates, contracts are fixed over longer terms and companies that do business internationally will often hedge their currency risk in long term options . The the impact of the lower value of the dollar takes time to percolate, which also means that we have not yet seen the full impact recent weakness in the dollar. And the steel industry has local employment impacts beyond the manufacturers these days.

The coal and gas industries in the greater region are 'surging'. That is a positive for the still large coal industry and its induced economy (those coal barges have workers if nothing else... workers which are getting harder and harder to come by). Energy prices are not a completely rosy story of course, even beyond the pain at the pump. If there is a recession, energy prices are one of the big causes. but Pittsburgh still is home to a number of very energy intensive industries that are finding it very difficult to operate in such a high energy cost environment. Verdict still out on how that will all play out for certain US industries.

I honestly am waiting for when the idea of building an indoor Nascar track in Pittsburgh is going to come back into play. What does that have to do with anything? The site where it was going to be built was really sitting on a bunch of coal that I bet was difficult to get a license to mine. So the project was probably just an indirect way to get at the valueable coal. It's funny seeing how the media covered this as a 'sports' story, not that sports isn't big business, but you get the point. If the coal was worth enough to do all this years ago, imagine what it is worth these days.


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