Monday, November 06, 2017

Unemployment in Pittsburgh... high or low?

An under-appreciated recent headline was that in September the Pittsburgh region’s unemployment rate to dropped to 4.8%. One headline noted that 4.8% represents a 9 year low here. For the region, looking at just the local unemployment rate is at best half the story if you want to think about what it means for future growth. The thing is, regions really compete with each other for investment and workforce. Just because the unemployment rate is high, or low here can’t really tell you much about whether workers are being pulled into the region, or pushed out. Things might be great, or horrible here, but economic conditions could be worse or better elsewhere.

Which is just a quick preamble to update a chart I don’t see too many others caring about other than me. This is not a chart of Pittsburgh’s unemployment rate, but a chart of the difference between the regional and national unemployment rate back through the 1970s. The lack of interest in this chart always has me a beet curious. It really is the relative unemployment rate, far more than the unemployment rate itself, that will be causal to how worker migration trends play out for a metropolitan area. But without opining more, here is the latest version:

What you see is that Pittsburgh had a 7+ year long run (January 2007 – May 2015) when the regional unemployment rate dipped significantly below the national unemployment rate.  It is no coincidence that corresponds very closely to the 7-year run when net population migration into the Pittsburgh region turned positive for the first time in a very long time (another topic there). Since August 2015, the regional unemployment rate has shifted, and has remained above the national rate. Unsurprisingly, most data show that net population migration again has more people leaving the region compared to the number arriving. 

So it is quite true that local labor force conditions are more favorable than in the past. I'd argue that compared to most past periods, the shadow overhang of underemployed or discouraged workers here is much lower now as well. That means the 4.8% we are measuring is probably a tighter labor market than some previous periods since the mid-1980s when the regional unemployment rate has been comaprably low. Other regions look back and compare the status of the workforce in the period before the 'Great Recession' of 2007/8 and its aftermath. For Pittsburgh, you long had to factor in the extended impact of job loss in the 1980s. The workers who lost their jobs in the 1980s and who remained here remained an impact on local labor supply and wages for an extended period of time. I'd argue their impact lasted decades, but at this point it really has to be the case that most of those workers would be retired and out of the active workforce. Still, at 4.8% in September, Pittsburgh's unemployment rate was a palpable 0.6 percentage points above the 4.2% for the nation that month. Makes it harder for local employers to pull workers here if they are facing solid labor markets elsewhere. Also, October data for the nation show another drop, so this gap will be harder to close.