Friday, May 20, 2016

Pennsylvania jobs frackageddon

Just a quick update, adding in the April jobs data just out, of a graphic I put together last month focusing on the fate of mining jobs in Pennsylvania. Again this is a bit contrived in that I subtract out what is happening in Pittsburgh so as to get at what is happening across central Pennsylvania.

In short the jobs Frackageddon continues across most of Pennsylvania. It is not as fast a loss in the Pittsburgh data I excluded here for the record, but elsewhere in Pennsylvania things are now beyond dire.  In fact the net loss in mining jobs between March and April (-900) is actually the single biggest month over month job loss I calculate anywhere in the time series.  So the job loss is accelerating.  I am amazed because, as you see in the graphic, the loss of these jobs is already down 85% from peak back to a pre-shale baseline. You would have thought that after the bulk of the jobs had gone, the loss would begin to slow down, which is not the case here.  It reinforces what I said in the earlier post that in the end it will not just be the shale jobs that go away, but the coal jobs the shale boom eviscerated. If true, we are heading down to a new baseline that is lower than where we started.


Thursday, May 19, 2016

Latest city population data

ICYMI, population estimates just out for the city of Pittsburgh show a decline between 2014 and 2015 of 1,374*.  If true it represents the biggest annual population loss in almost a decade (since between 2006 and 2007 to be precise). I think Edward Tufte might take issue with the PG's accompanying illustration of the data, so here are a couple other breakdowns of the number.

First is just an update of graphic I have put up in the past showing the evolution of the time series of Census estimates for the city over time.

So basically a recent peak in the middle of 2013.  If you are curious what showed a more rapid jump in the city's population earlier this decade, I have gone into that in the past in more detail here, but the short version was there were some errors in reporting of the population of a single dormitory-like residence with a large number of college students.  But it was just an error, though it was quite a headline at the time when the city's population trend first showed a positive number. Turned out, coincidentially, or luckily, to be true in the following years, but it was not true at the time.

What may be more useful is a time series of annual change in the city's population over the last decade or so.  That looks like this:

Going back even earlier, net annual losses in that 3-4K range were pretty typical going back a frightfully long time, but from around 2004 to 2013 you see a solid trend moving positive.  Hard to continue it though and for now a qualitative break to the downside over the last 2-3 years.  True, a lot of caveats with this particular data, so we will see going forward.

*PG article current says the annual loss is 1,313, but my subtraction shows the loss is 1,374??


Wednesday, May 18, 2016

How Fracking brought Abba back to Pittsburgh

What is the most important economic news you will not read elsewhere? For Pittsburgh that is. Check out the ship that might just save Pittsburgh:

The news is that the World's Largest Liquefied Ethylene Carrier is now under construction in China. Check out the impressive Navigator Aurora which now appears to be underway and scheduled to be delivered to its new owner in London later this month. Obscure news mentioned only here, on an obscure and barely read blog? Maybe.  Turns out it might be the single most important news impacting Pittsburgh into the future. The new ship is purpose-built to transport liquefied ethylene gas over the ocean. Ethylene is widely used across the chemical industry and is produced from natural gas, something the US is finding itself in greater and greater surplus.

All should know by now that natural gas prices have collapsed as a result of that growing surplus. Prices of natural gas produced in Pennsylvania has dropped even further below market prices elsewhere in the US.  With that price collapse the employment across Pennsylvania in all things shale has collapsed even further.  Personally I expect that by the time the fall comes, there will be little room left to store the natural gas being produced in the United States, and at least spot prices will enter a unpredictable twilight zone. So things look bad for all those predictions of any local, regional or statewide economic boom powered by shale gas development.

But there is one big hope for natural gas markets in the future.  Last month, the first export of natural gas left the east coast for European customers. Some believe that ever more exports could drive up demand for shale gas, and by backstopping market prices will refuel the shale boom once envisioned. Whether exports will ever be big enough to have the effect some want, and what greater US exports will mean to prices worldwide, is a topic for another day. But if there is any hope for that scenario, ships like the Navigator Aurora will be its catalyst.

Here is the real interesting point. The new ship is not going to be a new free-agent looking for clients in the growing worldwide market for ethane/ethylene. It is being bought under what I presume is a long term contract to bring natural gas solely from the US East Coast to a single ethylene cracker owned by the Borealis company in the Stenungsund, Sweden. I have to believe that the investment in the ship and plans for supplying the cracker plant in Stenuncsund would all not have gone forward if there were not some very long term contracts in place to supply what is probably Marcellus Shale-produced natural gas for export.  So yes, the land of Abba (that would be the Styx of Scandinavia for the record) is likely to be a bigger consumer of shale-gas than Pittsburgh (writ large) is for some years to come.

Yes, maybe, maybe, in a decade at a minimum, a similar ethylene cracker might start up in Beaver County, but for a long time there at least there will be fare more ethane being consumed in Sweeden than. The extensive agglomeration of chemical industries around Stenungsund may already be greater than what remains of what once once a far more extensive chemical industry cluster in Pittsburgh.  Even if the Beaver County plant proceeds at full steam, it will be decades before there Pittsburgh rebuilds anything like the cluster of chemical industries there. Will natural gas and ethane markets in a quarter century resemble anything like what they are today? I wonder.

But the ironic punch line of it all.  Even as shale-gas induced employment in Pennsylvania collapses, there are certainly jobs at shipyards in Shanghai, ship brokers in London, and blue collar workers across Scandinavia looking to benefit far more over the coming decade or longer from the shale boom around us. I read something about the world being flat and all.


Sunday, May 15, 2016

Um, building permits in the city of Pittsburgh anyone?

I know things are quiescent here, but somebody out there ought to have noticed this.  I'll skip the preamble and go right to the bottom line (up front, as it were). Check out the latest data point in this annual time series total units in residential building permits for the City of Pittsburgh.

Let that last # sink in for a minute. If correct then there is big news in that little spike for 2015? That or at least a sign the local hagiography industry is sputtering? More than that, it is potentially quite a historic number. Why? The bulk of that number comes from 9 potential buildings with 100+ units each on average, something that has likely not been planned within the city for an undetermined period of time.  I will hazard a presumption that residential building permits were not exactly jumping off the charts through the 70s and 80s - a period when the city's population was dropping pretty rapidly - you might have to go back several decades at least to find a comparable level of new (potential) residential construction.

It is one of those metrics that means more or less than may seem obvious.  This all is from data collected by the Census Bureau on residential construction permits, so theoretically a great leading indicator of construction activity in the near future. The huge spike in building permits issued in 2015 could be indicative of a lot of new units coming online soon, and possibly of a population spike (spike-let? if that is a word) to fill said units.   If you look back over the last 20 years, the next two largest numbers (367 in 1999 and 641 in 2002) each reflected notable events in Pittsburgh real estate history. One is likely for plans for the initial Summerset development and the earlier Downtown residential units that boomed in the new century, respectively.

OK, deep breath.

One huge caveat (yes all real data has caveats, live with it) that may at the very least make the spike less extreme in context than it appears..  This data is self-reported by individual municipalities, so it really just reflects data the city of Pittsburgh sends to the Census folks each year. The data has a breakdown of building permits issued by size of structure and also the total estimated construction value.  I have pointed out in the past the curious anomaly that the data for the city of Pittsburgh showed zero new building permits for multi-unit buildings with 4 or more units for any year between 2005 and 2013.  Since casual observation can come up with examples to dispute those zero values, so you have to assume something was amiss in the data itself. I think the city kind of missed reporting building permits on larger construction for many years, even though the data should have been included..  I also think that datum of 100 for 2013 is revised and a bit to round for me - wortth checking,  You can read some of my musings on this issue in this old post here. Others have opined that the building permits in the city also not reflect renovation activity leading to new habitable residential units as well. So some of the past data may not be as low as it appears, but it is hard to imagine the reality gets close to that 2015 data no matter.

So take it all, like all extreme data points, with a grain of salt, but still at the end of the day it is hard to miss that 2015 is a big number compared to any year in the past. Even if all those units don't actually get built, is the filing of so much construction activity an economic metric of note for the city unto itself?

See, I didn't make you read all the way to the end to get to the punch line. There is a secret question however?  Why was I even looking at this data this week?