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Forum: Pittsburgh can carry on

What will a national recession mean for the region? Maybe not what you think

Sunday, October 14, 2001

By Christopher Briem

As economic consensus and media pundits converge on the prediction that a new recession is upon us, the question is what will a national recession mean for the region. Maybe not what you think, at least not for the regional economy in Pittsburgh. In the past, the local economy has proved to be surprisingly resilient in face of adversity. Some of that history may tell us what to expect as economic indicators point downward.

 
  Christopher Briem teaches urban economics at the University of Pittsburgh and is an economist at the university's Center for Social and Urban Research. 
 

At the core of the regional economy are health care, education and government jobs that are likely to be far less affected by a national recession than industries elsewhere. Some industries such as higher education are even countercyclical to a degree, seeing positive impacts during economic downturns. Many stay in school longer or choose to return to school when job prospects are relatively bleak. The goal will be to take advantage of adversity and not slow efforts to attract people to Pittsburgh and convince them there are advantages to staying long term.

What is going on elsewhere often does not apply to what is going on here. In particular, it is always dangerous to extrapolate national economic trends without accounting for the uniqueness of the Pittsburgh region. The steel crisis decades ago was only partially explained by the larger structural shift across the United States in heavy manufacturing industries. The circumstances of the local steel industry, heavily concentrated and focused almost entirely on older blast furnace technology, meant that the magnitude of change here far exceeded what was happening elsewhere.

Pittsburgh pulled itself quickly out of the worst of the steel trauma and when it did in the early 1990s, the nation was experiencing a short recession. Anyone who tells you that people have been leaving the region continuously over the last several decades is only partially correct. Most years have seen a significant level of net migration from the region, with the sole exception being the early 1990s. Then the national recession probably limited the job offers that were pulling people from the region. The result was a short period when the census measured net migration into the region.

Likewise the situation now. It may not be the best of circumstances but there is reason to believe that many who would have otherwise considered moving elsewhere may now stay in the region and many who have moved away because of ephemeral but lucrative jobs in Silicon Valley will start to find their way back to Pittsburgh.

The ultimate bust may seem to be the eclipse of Internet industries. Economic development policies here worked tirelessly to build up those firms here, either by promoting their growth from within the region or attracting them from elsewhere. Certainly there are many dot.coms here that are likely to have contributions only to case studies in bankruptcy. The ironic truth is that the failure of Pittsburgh to form a large core of Internet startups means that there are far fewer of those jobs to lose now.

The announced layoffs in San Francisco dot.coms are probably well past 100,000 this year alone. More are on their way. That magnitude of high-tech job losses cannot conceivably ever be reached here. High tech is not dead, just changing as all industries do. Evolution of an embryonic industry is not cause for alarm but a normal part of the life cycle of firms and industries. Other emerging industries such as biotechnology are still mostly in developmental stages. If recession dries up venture capital, new technology might be delayed but not stopped.

Even our elderly population may be a boon to the region's economy. As bad as things were in the middle of the 1980s, they likely would have been even worse if the older residents had left with their younger relatives. That population that stayed now brings into the local economy billions of dollars of retirement benefits, spending from accumulated savings and health care expenditures that would otherwise be elsewhere. That provides the region with a core stability that is needed now.

There will certainly be pockets of industries and occupations that will have excessive downsizing. An extended downturn in travel nationally that can only adversely affect the large group of airline employment here is just one example. In the short term the bad news may make headlines but it's the long term that really matters. Like the steel workers before them, the key to surviving in a time of slower economic growth is flexibility. Worker retraining was once a vital part of addressing the labor crisis caused by steel layoffs. That may be part of the answer to any fundamental restructuring that is forced upon us now.

The local economy is far more diverse than it was just 20 years ago. Then the dominance of a few core industries, and even a few firms within those industries, exacerbated the adjustment that had to take place here. The competitiveness of the region in making steel dropped along with a global shift in steel production capability. Those compounded effects now are part of our collective memory and the indelible history of the region. Nonetheless, that adjustment did take place. While economic growth here has often failed to keep pace with expansion nationally, it has been able to bounce back quickly from severe shocks.

By any measure, the Pittsburgh economy now is far more capable of handling changes that will be required in the future.



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