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For Pittsburgh, this recession is nothing in comparison to '80s
Tuesday, March 17, 2009

There's no doubt, times are tough. But Pittsburghers who really want to dwell on the negative should hark back to the early to mid-1980s during the collapse of the steel industry here.

That's when the region was facing an "unprecedented abyss," as University of Pittsburgh economist Christopher Briem puts it.

While almost no one believes the current recession has hit bottom yet, conditions aren't expected to get anywhere near as bad for Pittsburghers as they did some 25 years ago.

"It is difficult to imagine the miasma of the 1980s being repeated," Mr. Briem said. "Many industries would have to collapse all at the same time" for this region to experience the hardship that defined the early 1980s, he said.

How much worse was it back then?

The region's unemployment rate peaked at 18.2 percent in January 1983, with 212,400 people out of work. In Beaver County alone, which lost at least five major steelmaking plants, the jobless rate hit a staggering 28 percent -- higher than for many states during the Great Depression, Mr. Briem noted.

In contrast, the jobless rate stood at 6.5 percent for the seven-county Pittsburgh region in January, representing some 80,000 unemployed.

Before the current recession ends, the area jobless rate is expected to peak at around 8 percent with some 100,000 people out of work, according to forecasters at PNC Financial Services Group in Pittsburgh.

"That's certainly a big number, but about half the peak in the early 1980s," PNC chief economist Stuart Hoffman said.

For Pittsburgh, the severity of the 1980s recession was exacerbated by the region's storied roots in steel.

The woes of the '80s "were a culmination of many decades of the region not really diversifying into other industries," Mr. Briem said. "Pittsburgh didn't do a lot of other things because we were so good at making steel for so long. Everything was geared toward steel: the work force, the supply network, the entire economy."

The region's suffering was compounded by the loss of relatively high-paying jobs.

"We created a blue-collar middle class in the steel industry. Wages were quite high and unions had sweetheart contracts," said Pittsburgh historian Joel Tarr, a professor at Carnegie Mellon University.

"A lot of people lost the status in life that they had."

Back then, the region lost about half of its manufacturing jobs in just a couple of years. The volume of jobs lost coupled with the speed with which they disappeared was virtually unprecedented, Mr. Briem said.

"The only analogy I found was in Seattle," he said, which lost tens of thousands of jobs in the aerospace industry in the late 1960s and early 1970s.

One major difference there, however, was that many of the losses were tied to a cyclical downturn in the aerospace industry and jobs later returned. In Pittsburgh, the losses were structural and jobs disappeared for good.

"If there is one lesson that came out of the 1980s in Pittsburgh is that you need to diversify," Mr. Tarr said. "When you have such a large concentration of jobs in one area, you put yourself at more risk."

Today, the region is dependent on a much broader base of industries, which has been a major stabilizing force on the area's economy, Mr. Hoffman said.

In addition, housing is more affordable in Pittsburgh today than it was 25 years ago, he said.

For one thing, double-digit inflation in 1979, 1980 and 1981 kept home prices from falling. Mortgage rates were higher, too, with a 30-year fixed-rate loan averaging around 14 percent to 15 percent versus about 5 percent today.

"It may be false praise," Mr. Hoffman said, "but the economy in southwestern Pennsylvania is a far cry better than it was in the '80s."

Patricia Sabatini can be reached at psabatini@post-gazette.com or 412-263-3066.
First published on March 17, 2009 at 12:00 am