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After holding up fairly well last year, region's economy limps through the spring. And with 1,200 Kaufmann's cuts to come, there's concern about whether fall will be much better

Sunday, May 19, 2002

By Jim McKay, Post-Gazette Staff Writer

Stuart Hoffman, PNC Financial Services Group's chief economist, pegged this year as a slow one for job growth in Pittsburgh even before Kaufmann's parent company decided to eliminate 1,200 administrative jobs Downtown.

	The decision by Kaufmann's parent company to eliminate 1,200 jobs Downtown has done little to revive an already-sagging economy. (Robin Rombach, Post-Gazette)

At best, Hoffman figured, the six-county region would add 3,000 or 4,000 jobs this year as the economy shook off the effects of recession. That's down from the 6,000 jobs created last year and the decade-high 20,000 created in 2000.

Then came May Co.'s announcement that it would merge the administrative functions of Pittsburgh-based Kaufmann's with those of its Filene's stores in Boston by the end of this summer.

"You don't have to be an economist to recognize the impact of losing 1,200 good-paying jobs in the heart of Downtown," Hoffman said. "There's no question this is a temporary setback for our efforts to grow jobs."

It doesn't help that the Kaufmann's announcement in April came on top off a first quarter that saw the six-county area already running 13,000 jobs below the year-ago pace, fueled by recent layoffs at embattled US Airways, Adelphia Communications' business telecommunications unit and the former IT Group, the Monroeville environmental services concern recently purchased in bankruptcy.

Indeed, while it's true that local business payrolls expanded last year even as they fell nationally and in 23 of the nation's 38 largest metropolitan areas, they've been contracting since last summer and don't seem to be showing much sign of rebounding.

Local chemical companies, for example, expect to do little if any hiring this year as they nurse their wounds from the recent recession.

Nova Chemicals, the Canadian company that maintains U.S. operations in Moon and employs 900 locally, cut 50 jobs at facilities in Beaver County last year and remains under a hiring freeze implemented in November. And at PPG Industries, which last month said it would trim its worldwide work force by 1,000, hiring is "very sporadic," spokesman Jeff Worden said.

Similarly, metals giants Alcoa and U.S. Steel may have weathered the worst of a global slump but neither expects to add workers. Alcoa is projecting its local work force of 1,800 to hold steady for the remainder of 2002, and the same is true for U.S. Steel, which employs 7,400 in the region.

It doesn't make for a happy time for what typically is a joyous occasion for graduating college seniors.

With this year's graduates receiving nowhere near the offers they did just a year ago, many are applying to graduate school rather than face unemployment, said Barbara Juliussen, associate director of career services at the University of Pittsburgh. Hiring at Pitt is down 30 percent from last year, with students in the computer sciences having a particularly tough time.

The story's the same at Carnegie Mellon University. In past years, CMU graduates with expertise in computer science would receive as many as five or six offers; now they get none, forcing them to master the art of the traditional job search, said Judy Mancuso, associate director of the university's career center..

"In the age of the dot.com boom," Mancuso said, "employers wanted warm bodies. They were so hungry for this type of talent.

"Now students are having to learn that it's a job to get a job."

To be sure, it's not all gloom and doom.

American Eagle Outfitters Inc., for instance, keeps expanding its Marshall headquarters staff as it adds stores and works to integrate its new Canadian operations. The company, which had to lease additional space nearby to make room for the growing staff, expects to hire as many as 20 to 25 of the Kaufmann's employees being let go by May.

Another growing retailer, Dick's Sporting Goods, also recently unveiled plans for a headquarters expansion near Pittsburgh International Airport that ultimately could accommodate up to 1,300, up from 450 in two buildings at the RIDC Park West in Findlay.

Downtown mutual fund giant Federated Investors has about 40 job openings in Pittsburgh, mainly in its investment side, while PNC Financial Services Group, which last year pared some local jobs, currently has about 100 local openings posted on its internal Web site for such positions as loan processor and teller.

Even with cost-cutting under way at each institution, the region's two biggest medical concerns, UPMC Health System and West Penn Allegheny Health System, anticipate some employment growth in the fiscal year that begins July 1.

More broadly, the National Association of Purchasing Management-Pittsburgh's gauge of local business economic activity has risen the past three months, suggesting recovery is well under way.

And the Pittsburgh Technology Council reports that local entrepreneurial activity is up considerably, with the number of predominantly high-tech positions posted on its Web site "higher than it has been in past years," in excess of 800, said spokesman Kevin Lane.

Neither is the jobs picture bad for all graduates. Local college seniors majoring in accounting, business and marketing are managing to find good jobs in the Pittsburgh market, Pitt's Juliussen said.

The pickings are particularly good this year, she said, for students in the university's pharmacy program -- they're landing $85,000-a-year jobs at retail pharmacies locally and throughout the country. "Our [pharmacy] graduates can put on blindfolds, throw a pin at a map and get a job anywhere," she said.

Despite signs of improvement, the impact of the Kaufmann's layoffs will be hard to avoid.

When they hit this summer, they likely will push the region's jobless rate up a tenth of a point, which based on March's rate of 5.2 percent would raise it to 5.3 percent, said Roberta Wilson, a labor market analyst for the state Department of Labor & Industry.

The impact of the cutbacks will, of course, be closely felt by Kaufmann's departing employees and their families, and the restaurants and other merchants clustered around the department store's Smithfield Street headquarters. Kaufmann's may see its own sales fall, since the departing administrative employees were among the Downtown store's best customers.

The first wave of layoffs will take place July 12, when 347 employees of the department store's credit center will be eliminated, including 43 executives and 278 debt collectors plus other staff. The rest of the cuts will take place by August.

Aside from personal hardships of the employees involved, income lost to the regional economy will be partially offset by unemployment compensation benefits, which have been extended by the federal government to 39 weeks from 26 weeks.

"In the short run, three to five years, this can easily be absorbed and we can grow past this problem," Hoffman said of the job loss. "But for the second half of this year, it's going to be a big hole to fill."

It is difficult to pinpoint the exact economic impact of the Kaufmann's decision. There will be taxes lost to the city and county, but how much is hard to determine without knowing where each employee lives and how much he earns -- information that Kaufmann's declines to share.

Fallout also will be hard to measure. The Port Authority, for example, believes most of the Kaufmann's workers probably take mass transit to and from work and, if they don't get other jobs Downtown, fare revenue may fall.

"Certainly there's a potential loss of revenue and ridership," transit spokesman Robert Grove said. "We really offer great service to Downtown so people who use that service tell their family and friends. It's hard to put a price on that."

Retail, however, is not typically considered to have the same impact in job creation as manufacturing does. When a community loses a steel plant, for example, it also loses related jobs with suppliers.

Chris Briem, an economic forecaster with the University of Pittsburgh's Center for Social and Urban Research, figures the loss of 1,200 Kaufmann's jobs is roughly equal in impact to the loss of 800 jobs at LTV's Hazelwood coke works, closed in 1998.

He did a "back-of-the-envelope calculation" using a multiplier of three for the steel plant and a multiplier of two for the Kaufmann's jobs that gave both an impact of approximately 2,400 jobs.

Since the Kaufmann's jobs are administrative, he gave them more weight than he would give to retail clerks on the theory that store floor jobs are usually quickly replaced by other retailers.

"If you told me we were losing 1,000 sales clerks, it would not be so much of an issue. They'll pop up somewhere else," Briem said. "That's not the case here with the headquarters staff. Those jobs are going to go away."

Hoffman and Briem both gave the news a certain positive spin. The decision by May to eliminate Kaufmann's headquarters says nothing bad about the competitiveness of the Pittsburgh region.

While Hoffman declined to discuss the wisdom of offering financial incentives to May to stay, he said it would make sense for local government to get a full explanation of why the decision was made.

"I think they'll find that it's not a blight on Pittsburgh or this market, but simply a business decision where you've got some consolidation you need to do and in this case we came out on the short end of it."

Post-Gazette staff writers Len Boselovic, Joyce Gannon, Pamela Gaynor, Donald I. Hammonds, Teresa F. Lindeman, Patricia Sabatini and Pamela R. Winnick contributed to this story.