Sunday, September 25, 2016

Lawrenceville Redux

The PG appears to have a short series on the past and present of Lawrenceville, a Pittsburgh city neighborhood written about even in the Financial Times (April 24, 2009: Diamond in the Rust) and many other media venues in recent years.  Trust me more will be written on the causes, impacts and eventual end of the transition of Lawrenceville before it is over.  For me one key point is that very little of the history of Lawrenceville of late can be separated from what once was, and what became of St. Francis Hospital. With full disclosure it was also my place of birth.

Just a few years ago, the solicitations I myself received attest to the plans that at least some companies wanted to frack the land underneath the neighborhood, which I found amazing because the neighborhood still had some of the highest population densities in the region. Would the Lawrenceville story be the same as it is today if any form of that drilling had proceeded? A counterfactual that will be left to conjecture.

Still, the biggest change in Lawrenceville over the last 2 decades has been the demographics.  Just a decade ago, some still looked to Central Lawrenceville as one of the oldest neighborhoods in the nation. So old that the area was identified as a Naturally Occurring Retirement Community (which has its own acronym now: NORC).

But now the story is about the youth inhabiting the neighborhood, and indeed that is the crux of it all.  From the Nullspace archives(2015: All things Larryville - long past inflection), here is the time series that says it all:

Of course the other story of Lawrenceville is real estate, which is the same story as the demographics really.  People do live in houses and all of that.  But for one story of property appreciation in the neighborhood just take a look at the price history of 5309 Duncan St which was sold, looks like via a foreclosure, for a pittance in 2010, then sold for more than an order of magnitude higher (but still only for $26K) in 2011 and then for $225K in 2013 and I can only speculate that its current market value is somewhat higher.  Makes you want to go back and look at all the complaining about the values set in the last countywide property assessment in Allegheny County.  The map showed big jumps in property values in Lawrenceville for sure, but I will bet the values (which remain in place today under the county's base year system) are a fraction of most market value transations. 
The bottom line is something else. As much as the story seems one of the here and now, be assured that the redevelopment story in Lawrenceville has built upon a lot of work in the past.


Wednesday, September 21, 2016

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. 


Tuesday, September 20, 2016

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.


Sunday, September 18, 2016

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. 


Tuesday, September 13, 2016

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. 


Tuesday, September 06, 2016

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.


Monday, September 05, 2016

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%. 


Thursday, September 01, 2016

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.