Even the Super Bowl Can't Defend Pittsburgh From a Recession

Somebody call the New York Times. The national economic meltdown has finally come to Pittsburgh, a city-region where you’ll want to be on the day the world ends because you’ll still have several years to live.

Sunday’s Super Bowl game between the mighty Steelers and the upstart Arizona Cardinals – teams representing regions going in exactly opposite socioeconomic directions since 1950 – has eclipsed all non-sports news coming from Pittsburgh.

Pro football, which Pittsburgh continues to excel at despite 60 years of economic decline, brutal population loss and criminally inept public sector mismanagement, is a seasonal religion every fall no matter how well the Steelers do. But when the Steelers make it to the Super Bowl, as they did this year for an NFL record seventh time, the region and its 2.3 million people are paralyzed by a religious fervor that can be culturally embarrassing.

“Go Stillers” signs appear everywhere. Secretaries, retail clerks and TV news anchors wear black-and-gold Steelers garb on game Fridays and during the playoffs. If Ben Roethlisberger game jerseys had collars, an embarrassing number of professional men would wear them under their suits. The Pittsburgh public schools have instituted a two-hour delay Monday morning in an effort to thwart what should be a severe epidemic of the usual morning-after-Steeler-Sunday-night game flu among teachers. Eat n’ Park, a venerable and highly profitable family restaurant chain that ordinarily wouldn’t close if a meteor struck downtown Pittsburgh, has won enormous goodwill because it’s decided to close at 3 p.m. on Sunday so its several thousand employees can not only watch the Super Bowl but have several hours to prepare the sacred sandwiches and dips and dress up for it. If the Steelers lose, the whole town will be on a suicide watch till March.

Even the Steelers’ success on and off the field could not defend Pittsburgh from the recession forever, however. For the last two months national publications that should have known better (like the Times) came to Pittsburgh, looked around at its service sector-university-government economy, and declared that it was some sort of model for other city-regions because it was apparently recession proof.

Of course, reality turned out to be not so kind. Pittsburgh’s unemployment rate and stable housing prices were relatively better than the national figures only because its deindustrialized economy was already so stagnant that it never experienced fast job growth or a recent real estate boom and therefore couldn’t go bust.

The latest regional numbers, as reported by, a useful web site devoted to documenting the economic reality of the Pittsburgh region as well as boosting it, showed job losses accelerating in December for the second straight month.

Compared to December of 2007, Pittsburgh had 7,500 fewer jobs in December 2008. November’s revised numbers, according to PittsburghToday’s Harold Miller, showed a net loss of 1,600. These numbers, while negative, are minuscule in a region with over 1.1 million jobs. In December jobs were up slightly year-over-year in health care, higher education, professional and business services, mining and construction, Miller reported, but about 10,000 lost jobs in leisure and hospitality, retail and manufacturing offset those gains.

Miller, per usual for a professional civic booster, looked for and found a few relative silver linings in Pittsburgh’s permanently gray clouds: The job loss – 0.6 percent in December – was small compared to Detroit, which has lost 5 percent of its jobs in the last year. And compared to Cleveland – Pittsburgh’s rival in all things, including pro football, population loss and the rate of post-industrial economic decline – the former Steel City did better.

The capital of Steeler Nation lost only 1 manufacturing job in 2008 for every 5 lost by the Cleveland, a city whose hapless Browns finished 4-12. But even if the Steelers – who are narrow favorites – whip the Cardinals Sunday and win their sixth Super Bowl in seven tries, it won’t do much to protect Pittsburgh from eventually being hurt harder by the national recession/depression.

LAPD Getting it Right

Though California state government may be truly dysfunctional, one much-maligned institution has managed to reinvent itself and flourish this decade: the LAPD.

The town that once conjured up images of Bloods and Crips shooting it out as an indifferent and racist police force sat by has seen homicides drop 41%, rapes by 37% and aggravated assaults by a whopping 63% over the last six years. In 2008, Los Angeles had the fewest property crimes since 1959 and the lowest level of violent crime since 1969 - amazing given the plight of the economy. And the benefits are being felt in the city's toughest neighborhoods: Compton, with 65 gangs crammed into 10 square miles, saw its lowest number of homicides in 25 years last year. All this has happened despite a much lower number of cops per capita - and a much larger area to patrol - than New York.

Police Chief Bill Bratton deserves a huge amount of the credit for this amazing transformation, but the department has also remade itself in the image of the diverse city it serves. Over a decade ago, the LAPD was 80% white. Today that number is 38%, with 41% of the force composed of Latino officers, 12% black, 7% Asian. Almost 20% of officers are women.

The LAPD has put a lot of effort into fixing its poor image in the communities where it was most detested - admitting to its checkered past in minority communities. And its strategies are working.

Housing Price Shifts Vary by US Region

Here's a look at the monthly Office of Federal Housing Enterprise Oversight monthly housing price index by US Census Region. The OFHEO index gives us a little different geographic cut than the popular S&P Case-Shiller Housing Index. We can see the extreme fluctuations in the western US, especially in the Pacific states. These are seasonally adjusted numbers current as of October 2008. The black line, depicting the national composite, finishes at 204 - indicating a doubling of housing prices since 1991, but a fall of 8.8% since its peak in April 2007.

The 8.8% national decline is interesting considering the larger declines depicted by the metropolitan focused Case-shiller index.

Judging by these numbers, the housing prices in the 8 states of the West South Central and East South Central Regions appear to be most stable. The Great Plains states fare remarkably well, and the east coast states are falling in line with the national average. Interestingly, end-to-end growth in the Pacific region ends up about the same as the stable south, yet it took a much more turbulent path to reach that point.

According to OFHEO, the data "is obtained by reviewing repeat mortgage transactions on single-family properties whose mortgages have been purchased or securitized by Fannie Mae or Freddie Mac since January 1975." Here's more on the OFHEO housing price index methodology.


Laughing During 'Gran Torino'

Recently, I saw Clint Eastwood’s extraordinary new film, 'Gran Torino' in Hollywood. Set in a declining Detroit neighborhood, the movie chronicles the unlikely relationship retired auto worker Walt Kowalski (Eastwood) forges with his new Hmong neighbors.

Walt is cranky, surly, and bigoted while still possessing a certain rough-edged charm. His dialogue is laced with racist terms and stereotypes that would mandate a lengthy “sensitivity training” seminar if he came of age in a different era.

And yet, the audience laughed and laughed loud. Here, in one of the nation’s most multi-ethnic cities with a history of racial tension, blacks, whites, Asians and Latinos were chuckling as Walt bemoaned “gook food” and cringed at his neighbor’s ways. Twenty years ago, Walt’s language would have appeared less ironic, perhaps being interpreted as a sign of how a sizeable percentage of white Americans viewed minorities. To laugh at Walt then would appear to be laughing with him rather than at him.

But in 2009 America, on the cusp of a black president arriving in the White House, a character like Walt feels safely anachronistic – his views seem fringe like. What seemed funny to the audience is that people like Walt still exist. What is so satisfying about 'Gran Torino' is how it eschews political correctness and decides to speak to an audience that it figures will laugh at Walt rather than with him. It assumes that Americans watching the film are smart and tolerant enough to get the joke. And they do.

I’d be curious to know how audiences reacted to the movie across the country.

Calling Pittsburgh Depression-proof is a Journalistic Felony

A guest-post from Bill Steigerwald in Pittsburgh:

If the New York Times went to Berlin in 1936 to write a story about how that city was "Depression-proof," would it forget to mention that Germany was being run by a bunch of Nazis? If it went to Pyongyang tomorrow would it go ape over that city’s tidy orderliness without noting that North Korea was a totalitarian hellhole? If the Times bureau in Moscow reported on wheat production in Ukraine in 1933, would it overlook the government-designed famine that was killing - oops, sorry, let's not go there.

Seriously, is it too much to ask for a little Journalism 101 from America’s Rag of Record?

On Wednesday the Times, following a similarly lame piece of Chamber of Commerce journalism done by the Cleveland Plain Dealer on Nov. 23, did a glowing Page 1 story ("For Pittsburgh, There's Life After Steel" by David Streitfeld) about the Pittsburgh region's alleged imperviousness to the national recession.

You see, cities that have pioneered deindustrialization, shed huge chunks of population and shifted to service economies that run on curing sick people, college kids and government bureaucrats, as the former Steel City basically does, are now recession-proof, the rationalizing goes, because they’ve essentially been in low-grade recessions for decades.

Anyway, the Times – like the Plain Dealer and the parade of other national media that periodically traipses to this great town to gawk and glorify Pittsburgh’s many natural and man-made assets – forgot to tell its trusting readers that the city of Pittsburgh (where the Steelers and young Mayor Luke Ravenstahl play) is bankrupt and essentially in state receivership.

Nor did the Times note that Pittsburgh’s ever-dwindling, ever-aging, relatively poor and under-educated population (down in the city to 310,000 from 650,000 about 50 years) is subjected to crippling high taxes and deprived of basic city services like reliable snow-plowing.

Nor did it note that Pittsburgh's city schools spend more than $20,000 per student per year yet are hemorrhaging students annually.

Nor did it note that the city has wasted scores of millions of tax dollars on failed Downtown retail redevelopment schemes, subsidized professional sports stadia and a series of mass-transit boondoggles like our under publicized “Tunnel to Nowhere,” a 1.2-mile, $435-plus-million light-rail tunnel under the Allegheny River.

It's tragic enough that the Times’ national editors think that an over-taxed, chronically mismanaged city that has been deindustrialized, depopulated and abused by its political rulers for 70 years is favorably situated to deal with recession.

But to not devote one paragraph to the shameful failings and idiocies of Pittsburgh's public sector is a journalistic felony. Somebody please show the Times' editors how to Google the word "Potemkin."


How Much do they Really Drive in Houston?

Our friend Tory Gattis pointed out yesterday at Houston Strategies that conventional wisdom (and the US DoT Federal Highway Administration) are wrong. Quoting a recent report by New Geography contributor Wendell Cox:

In fact, this data is incorrect. The FHWA 2006 data indicates that the Houston urban area has a population of 2,801,000. According to the United States Bureau of the Census, the population of the Houston urban area was 4,353,000 in 2006.... Actually Houston’s driving is about average: If the urban area population is corrected to agree with the Bureau of the Census data, per capita driving in the Houston area is slightly below the national average for large urban areas. Houston would rank 19th out of 38 urban areas, with daily per capita driving of 23.2 miles, compared to the national average of 23.9 miles.

Even if you're not interested in Houston or that potential gaffe, check out Wendell's report for a table of per capita vehicle miles driven for 38 urbanized areas over 1,000,000 population.

Skepticism Towards Congestion Pricing in San Francisco

If there’s one place in America most likely to adopt congestion pricing, you would think it would be San Francisco. The combination of affluence, deep-seated environmentalism and a tradition of progressive politics would lend itself to adopting the program. But even residents there are skeptical.

Congestion pricing is the practice of charging commuters a fee for driving through a congested downtown area during peak commute times. In San Francisco, they are discussing a payment of between 50 cents and $5 to be assessed to drivers who commute between 6–9 a.m. and 3–6 p.m. The argument is that by doing so, you reduce congestion and raise public coffers to be poured into public transportation. In London, traffic was reduced 21% and public transit increased 36% when congestion pricing was adopted (it’s also been adopted in Singapore and Stockholm).

But SF is no London when it comes to public transportation. Anyone who has ever stuffed themselves into a city bus headed for points westward after work knows it is not nearly as reliable or as comfortable as “the tube.” It seems like there would have to be a rise in the standards of public transportation there to really make it effective – and money for that would not be available for some time given California’s budget circumstances.

Case-Shiller Index, Housing Price Correction Continues

Today's latest release of the Standard and Poor's Case-Shiller Housing Price Index indicates a continued price free fall across the board. Hyper-inflated markets such as Miami, Los Angeles, Washington, DC, San Diego, and Las Vegas continue to come back to earth. Check out the chart.

Even Charlotte, Denver, Dallas, and Atlanta, which seemed to be holding their own after never seeing a huge price escalation, seem to be sliding again since July. Cleveland seems to have stabilized, but Detroit continues its drop into a black hole. Home prices in Detroit have fallen to almost 14% below levels in early 2000.

Follow this link for a bigger version of the chart.

State Budget Woes

A new report from the Center on Budget and Policy Priorities highlights the increasingly precarious fiscal situation faced by state governments confronting the ongoing economic downturn. According to CBPP, "at least 44 states faced or are facing shortfalls in their budgets for this and/or next year, and severe fiscal problems are highly likely to continue into the following year as well."

The scope of these emerging deficits varies greatly. Mississippi currently has a budget deficit of around $33 million, which "could reach as high as $70 million-$80 million by the end of the fiscal year." On the high end of the spectrum, California faces the daunting prospect of a $15 Billion deficit for the fiscal year ending June 30, with the potential for "another $25-billion-plus for the next fiscal year," if nothing is done to bring the shortfall under control.

The process of bringing budgets into balance should be the source of much political turmoil over the next year. In Minnesota, which has a predicted two-year deficit of $6 Billion, legislators are beginning to spar over the potential tax increases and budget cuts. On Dec. 26, Gov. Tim Pawlenty announced $271 million in "emergency cuts," with a large share coming from aid payments to local governments. Legally required to have a balanced budget, as are many states, legislative leaders in Minnesota face the prospect of a challenge "so ugly that a special summer session will be needed to finish the budget." In New York, which faces the "largest deficit in state history," Governor David Patterson recently presented an "austerity budget," calling for cuts in state aid to local governments, education funding, and property tax rebate programs. Looking at all potential options to fill the gap, Patterson has also "appointed a commission to look into leasing state assets," including bridges, roads, and parks. The privatization of state assets and infrastructure as a means to raise funds is also being considered in Minnesota and Massachusetts, which faces a FY2009 deficit of over $2 billion.

With states potentially facing a combined deficit of $350 billion through FY2011, the pressure to make difficult policy decisions is sure to increase, as are requests for outside aid. Already, there are calls for the federal government to step into the fray, with governments across the nation "lining up to ask President-elect Barack Obama and the new Congress for hundreds of billions of dollars to plug holes in their budgets". Gov. Ted Strickland of Ohio, facing a two-year deficit of $7.3 billion, is "preparing a pitch for three chunks of money," to be delivered to the states to support education, infrastructure, and aid to the poor. CBPP also argues that there is a need for federal assistance, in order to "lessen the extent to which states take pro-cyclical actions that can further harm the economy." Facing an increasingly challenging economic situation which may limit the options at their disposal, it appears that states will look to the incoming Obama administration to find ways to stop "the bleeding."


Railcars as Economic Indicators

With the nation locked in the firm grips of recession, one indicator of our country’s import demand and manufacturing capacity is being stockpiled in Montana. Just south of Great Falls, along the Missouri River, Burlington Northern Santa Fe (BNSF) Railway Co. is stockpiling flatbed container cars – a lot of flatbed cars. By some accounts, there are about 1,500 railcars, or 1.5 percent of the North American flatbed fleet and roughly 5 percent of the BNSF fleet, parked between Great Falls and Helena suggesting that Americans are buying and importing less from foreign manufacturers and manufacturing less for foreign consumption. If and when they are brought back into rotation will depend on freight demand – driven by American consumption.