Meet the Author

Timothy Dunne |

Vice President

Timothy Dunne

Timothy Dunne is a former vice president and economist of the Federal Reserve Bank of Cleveland.

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Meet the Author

Kyle Fee |

Economic Analyst

Kyle Fee

Kyle Fee is an economic analyst in the Research Department of the Federal Reserve Bank of Cleveland. His research interests include economic development, regional economics and economic geography.

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12.02.11

Economic Trends

Pittsburgh’s Labor Market in the Recession and Recovery

Tim Dunne and Kyle Fee

Over the course of the recent business cycle, labor markets within the Fourth District have experienced distinctly different patterns of contraction and expansion. In particular, Pittsburgh experienced a milder recession, measured in terms of job loss or unemployment rates, than the nation and the three other major metropolitan areas in the Fourth District—Cincinnati, Cleveland, and Columbus. Pittsburgh’s recovery has also been more robust.

Pittsburgh’s unemployment rate is currently considerably lower than the nation’s unemployment rate, (7.5 percent versus 9.0 percent), and it has been lower throughout the recession and recovery. More striking, however, is the fact that Pittsburgh has recovered (on net) the employment it lost since the start of the last recession. This stands in stark contrast to the nation as a whole, where employment is almost 5 percent below pre-recession levels, and to Cleveland, where employment remains 7 percent below pre-recession levels.

This employment recovery reflects, in part, the muted recession that Pittsburgh experienced. At the depth of the recession, Pittsburgh lost only 3 percent of its payroll employment, roughly half of the nation’s loss and well below the employment losses seen in Cincinnati and Cleveland. Still, Pittsburgh has also seen a more rapid recovery than the nation or the other major metropolitan areas in the Fourth District.

Looking across the 50 largest metropolitan areas in the country, Pittsburgh is one of a handful of metro areas that have shown a net expansion in employment since the start of the last recession, albeit a very slight one. The other metropolitan areas where employment rose are all located in the south central part of the United States. Included are Austin, Houston, New Orleans, Oklahoma City, and San Antonio.

Pittsburgh’s relatively strong labor market performance may also reflect the strength of the state’s overall labor market performance, which was better than the nation’s. Looking at Pennsylvania’s employment with Pittsburgh’s employment subtracted out, we see that Pennsylvania outside of Pittsburgh experienced less employment loss than the nation in the recent business cycle but still performed somewhat worse than Pittsburgh during the recession. Moreover, Pittsburgh’s recovery has clearly been more robust than the rest of Pennsylvania. So, Pittsburgh’s relative performance does not simply reflect a “state effect.”

A natural question is whether the difference in Pittsburgh’s labor market performance was driven by its industrial structure. That is, did Pittsburgh perform better than other parts of the country because the city specialized in industries that overperformed during the business cycle? To examine this issue, we decompose the differences in employment growth between Pittsburgh and the nation into the fraction due to differences in industry specialization and the fraction due to differences in industry growth rates. The latter term accounts for differences in employment growth which are due to differences in industry-specific growth between the metro area and the nation.

Payroll Decomposition, December 2007–October 2011

Pittsburgh
City–U.S. Difference
(percentage points)
+4.7
Percent to growth differences
81.5
Percent to share differences
18.5

Source: Bureau of Labor Statistics.

The difference in employment growth rates between Pittsburgh and the nation was 4.7 percentage points from December 2007 to October 2011. About one-fifth of the difference in growth is accounted for by industry specialization, as Pittsburgh had a higher share of employment in industries that grew faster or shrank less during the recession and recovery. However, industry specialization plays a secondary role compared to differences in industry growth, as four-fifths of the growth difference is accounted for by industry-growth differentials. Pittsburgh performed better largely because specific industries in Pittsburgh grew faster (or declined less) than those industries in the nation as a whole.