Looks can be deceiving. And so can economic rankings of regions if you don’t study them carefully.
Last month, the Milken Institute issued its list of “2005 Best Performing Cities.” A quick reading would lead you to believe that Pittsburgh performed poorly – the Pittsburgh metro region ranked 141 out of the 200 largest metro regions in the country on a weighted index based on job growth, wage/salary growth, and high-tech growth.
But take a look at the regions that did worse: Silicon Valley ranked 185 (yes, that's right, 15th from the bottom), Boston ranked 157, and Cambridge ranked 142. In other words, on this index Pittsburgh is doing better than both Silicon Valley and Boston/Cambridge.
One reason that Pittsburgh didn’t do well in the ranking? It was based on both five-year averages (for 1999-2004 or 1998-2003, depending on data availability) and one-year averages (2003-2004 or 2002-2003). Since Pittsburgh entered the recession at a slower pace than other regions and emerged from the recession more slowly, the one-year figures during the 2002-2004 period are biased against Pittsburgh. The five-year measures are a better indicator of how the region’s economy is performing compared to others.
In fact, the Pittsburgh region's five-year job growth was higher than Silicon Valley, San Francisco, Cleveland, Chicago, Boston, Seattle, New York, Portland, Dallas, Philadelphia, Denver, and a long list of other cities. And it wasn’t far behind Atlanta and Minneapolis. Silicon Valley has fewer jobs today than it did in 1996. Boston has fewer jobs than it did in 1998. But Pittsburgh has more.
And most importantly, the Pittsburgh Region has enjoyed quality job growth – Pittsburgh's five-year wage and salary growth was higher than Silicon Valley, Seattle, and Portland.
In terms of high-technology industries, Pittsburgh really shone: It ranked 72 out of 200 in growth in high-technology GDP (gross domestic product) over five years – on par with Minneapolis and San Diego, and ahead of Austin, Boston, Charlotte, Denver, Portland, Seattle, St. Louis, and Silicon Valley.
The good news? The Pittsburgh region has enjoyed strong growth in the kinds of quality jobs that attract and retain young people, particularly in high-tech sectors. Over the past five years, our region has significantly outpaced the U.S. economy in creating jobs in science and technology occupations and in high-skill health care positions. And the Pittsburgh region has retained more production jobs than many other regions. Unfortunately, those facts are hidden inside the overall job growth figures.
So much for the “rust belt.”
Define best-performing
Back to the rankings: if Pittsburgh is doing so well compared to all of these other great places, how did it end up ranked #141 on the list? Here is the looks-are-deceiving part of this.
Most of the "Best Performing Cities" are in Florida. But they’re not places such as Miami, Orlando, and Tampa. Instead, they include Palm Bay-Melbourne-Titusville, Cape Coral-Fort Meyers, Naples-Marco Island, and Deltona-Dayton Beach-Ormond Beach. Most of these regions are growing jobs simply because they are growing population through retirement and tourism. Milken's report notes that among the top 20 best performing cities, "most have experienced a robust recovery in tourism that is driving job growth in leisure and hospitality services.” Further, "many have a growing population of retirees who are spurring growth in the health care services sector," and "each has population growth that supports employment gains in home construction and related consumer industries."
The majority of jobs in any region are in the sectors dependent upon population such as retail, personal services and education. The Pittsburgh region’s population has not been growing, which leads to slow growth in these population-dependent jobs. And other regions that appear to be growing rapidly in terms of total jobs may be creating mostly low-wage jobs in retail and services, not the desired high-quality jobs that will attract and retain young people.
Moreover, during the past five years, the U.S. economy as a whole has lost production jobs, partly due to three factors: the recession, greater productivity, and increased worldwide competition. Therefore regions with more manufacturing businesses will have had slower overall job growth during the past few years. The recent State of the Industry Report from the Pittsburgh Technology Council, which shows job losses in technology sectors between 2002 and 2004, reflects this short-term trend.
Lesson learned: looks can be deceiving and upon closer inspection and analysis of the Milken report, the Pittsburgh region looks good.
Harold Miller is president of Future Strategies, LLC, a Pittsburgh-based consulting firm.
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