*PQ_spr16_46-113.qxp_Layout 1 2/16/16 10:05 AM Page 75 PITTSBURGH TODAY PITTSBURGH TODAY & TOMORROW REGIONAL ANNUAL REPORT n order for citizens to make the best possible decisions about the future of their region, they need a foundation of reliable information and a clear understanding of the issues. Providing that information—through statistical comparisons and in-depth journalistic reports—is the mission of Pittsburgh Today, one of the nation’s oldest regional indicators Iprojects, which is part of the University of Pittsburgh’s University Center for Social and Urban Research. In this special annual report—Pittsburgh Today & Tomorrow—we assess how Pittsburgh is doing compared with 14 other regions in key economic and quality of life measures. We also examine key 2016 issues affecting Pittsburgh, and we’ve asked a group of leaders to offer an idea they believe will improve our region. To view Pittsburgh Today’s regional indicators and journalistic reports, visit pittsburghtoday.org >> pittsburgh quarterly | spring 2 0 1 6 75 2 *PQ_spr16_46-113.qxp_Layout 1 2/16/16 10:05 AM Page 76 TO DAY TOMORROW PITTSBURGH & 8 BY THE NUMBERS: Unemployment Unemployment rate, by MSA 1) minneapolis 3.2 2) denver 3.4 benchmark avg 4.6 11) pittsburgh 5.0 14) baltimore 5.5 15) detroit 5.9 0%1 2 3 4 5 6 data source: Bureau of Labor Statistics, seasonally adjusted rates, November 2015 they include the intermediate activities that allow companies to do business. Accounting, legal services, engineering servic- ECONOMY es, computer systems design, and business financing are just a subset of the services tallied in this sector. So when these moderate growth in store industries are growing, one can be confident that broader for metro pittsburgh in 2016 business expansion is at hand. by Stuart Hoffman A positive follow-on result from broad service sector expansion is an apparent uptick in consumer confidence. Pittsburgh’s Leisure & Hospitality employers are hiring at a pace nearly double the year-over-year national average etropolitan pittsburgh is a picture of stability entering 2016. Job growth is outpacing the (+5.5 percent vs. +3.0 percent), after lagging national and regional averages over the prior two years. In Pittsburgh, Pennsylvania state average, and the unemployment rate for the seven-county region is steady near 5 where tourism dollars contribute to, but are not a heavy percent. 2015 brought a resurgence in labor force driver of, job creation, Leisure & Hospitality hiring occurs M growth, providing local employers a wider pool of talent from which when local earnings are spent at local businesses. The region’s to fill their ever-expanding payroll needs. Pittsburgh will manage hiring push demonstrates that consumer spending habits steady gains throughout the coming year thanks to continued con- will carry plenty of momentum into 2016. sumer spending. Although wage growth stalled over the past year Instilling less optimism regarding Pittsburgh’s economic despite a healthy labor market, low gasoline and energy prices will potential in 2016 is the state of its heavy industry support consumer spending in 2016. Employment is under no threat sectors. Manufacturing, Transportation & Warehousing, and Construction sectors all saw flat to lower payrolls than a year of decline, which will allow consumer spending trends to continue under an umbrella of consumer confidence, supporting economic ago. The weakness in these relatively high-paying sectors will health and modest expansion overall. limit income gains, and therefore the potential for consumer Service industry employers are carrying the load by a wide mar- spending to accelerate from its current healthy pace. This gin in terms of supporting hiring across the region. Education & weakness is contrary to national trends, which showed mod- Healthcare is the largest segment across Pittsburgh’s service sector, est growth throughout 2015. Even the Pennsylvania statewide and arguably its most iconic. And job growth here finished 2015 at a average for Transportation & Warehousing employment was up last year, indicating that there are at least some opportuni- year-over-year pace as strong as any since 2001. This pace is a clear improvement versus 2013 and 2014 job growth results. Also ending ties for Pittsburgh employers within the industry to push for a 2015 on a positive hiring note were Professional & Business Services, greater share of regional business activity in 2016. and Financial Activities. Both indicate economic sustainability, as >> 76 pittsburgh quarterly | spring 2 0 1 6 2 E 2 *PQ_spr16_46-113.qxp_Layout 1 2/16/16 10:05 AM Page 77 Average weekly wages Job growth Percent change in average weekly, 2nd quarter 2014-2nd quarter 2015, by MSA Percent change in total non-farm jobs, December 2014-December 2015, by MSA 1) boston 5.0 1) charlotte 3.3 2) kansas city 4.5 2) indianapolis 2.7 benchmark avg 3.0 1.7 benchmark avg 8) 2.7 pittsburgh 11) pittsburgh 1.2 14) cincinnati 2.0 14) richmond 0.5 15) 1.7 cleveland 15) kansas city 0.3 0% 1 2 3 4 5 0% 0.5 1.0 1.5 2.0 2.5 3.0 3.5 data source: The Quarterly Census of Employment and Wages, Bureau of Labor Statistics, seasonally adjusted rates, November 2015 data source: Bureau of Labor Statistics know your region pittsburghtoday.org 1 *PQ_spr16_46-113.qxp_Layout 1 2/16/16 10:05 AM Page 78 ECONOMY >> worrisome from an overall housing balance perspective, as tame The next leg of the U.S. economy’s expansion will occur in an price growth clearly indicates that enough homes exist to satisfy environment of gradually rising interest rates. In December the Pittsburgh residents’ buying interests. However, a lack of home- Federal Reserve began normalizing interest rates from the near-zero building leaves the region’s construction industry with a lack of levels that had been in place throughout the nation’s recovery from upside potential entering 2016. Regional commercial construction The Great Recession. Rising interest rates—or “tightening” mone- projects will keep the industry from experiencing any dramatic drop- tary policy—usually portends slower economic activity, as business- off in employment levels, but new growth from the residential side es face higher borrowing costs and consumers face higher interest seems out of reach in the near term. payments on existing debt, especially with credit cards. But this Pittsburgh’s long-time trend of population declines is in the time is different. Even with several more interest rate hikes from the early stages of a turnaround. With new industrial development, Federal Reserve per year over the next two years, interest rates will housing market stability, and broad urban development ongoing, remain historically low. Borrowing costs will remain attractive for Pittsburgh is well positioned to attract and retain young workers for businesses that have valid expansion opportunities to finance, and years to come. Reliable education, healthcare and financial industry the U.S. consumer has weathered far higher interest rates and con- employers are firmly entrenched and will support workforce devel- tinued to spend in the past. Pittsburgh will be no different in its abil- opment for the foreseeable future. Pittsburgh is well positioned to ity to continue to grow in this evolving economic environment. benefit from gas drilling activity in the Marcellus Shale formation Continued decent national economic activity, largely undeterred as over the longer term, once natural gas prices regain some sem- interest rates rise, will provide support for local firms which rely blance of normality. But in the near-term, energy employment will upon selling goods and services to customers outside the region, continue to decline in our region and nationwide. Skilled workers helping to keep Pittsburgh’s expansion intact. already experienced in this industry will find Pittsburgh’s low living Pittsburgh’s housing market remains driven by healthy demand costs attractive, and migration trends are likely to see a boost over alongside a clear lack of supply impetus. Single-family residential the coming decade as a result. n permit issuance finished 2015 well below year-ago levels, which fol- lowed modest declines in 2014 as well. A lack of new building is not Stuart Hoffman is PNC’s chief economist. *PQ_spr16_46-113.qxp_Layout 1 2/16/16 10:05 AM Page 79 PITTSBURGH TODAY Keeping international surviving the tangled graduates visa process is a challenge lexandra oliver had been country is one of the biggest obstacles to retaining interna- a writer, editor, researcher, art critic, tional graduates in a region where bolstering the thin for- lecturer, curator, community organiz- eign-born population is a priority for local government, er and entrepreneur. She earned her businesses and economic development groups. Ph.D. in Pittsburgh. She had a job offer in Pittsburgh and wanted to stay Southwestern Pennsylvania has in the city where, she said, she Wanted: struggled to attract immigrants for “found a niche.” A more decades. Only 3.6 percent of the diverse But Oliver is Canadian, and region’s population is foreign-born. region Afor international graduates like her, getting legal permission Yet, international students flock to live and work in the United States can be a difficult and to its universities. The region ranks uncertain journey. 15th out of 118 metro areas in the For all of her education and experience, it took the number of F-1 visa holders, the most common student visa help of immigration experts and attorneys, the will and issued to foreign students in the U.S., according to a 2014 resources to survive months without being able to legally report by the Brookings Institution. work, persistence and luck to win the prize she sought— About 59 percent of international students in an H1-B visa, the most common work visa for recent Pittsburgh major in science, technology, engineering and graduates.