December 12, 2011 10:02 pm

‘Steel City’ Pittsburgh develops a soft side

Luke Ravenstahl stumbles a bit when asked about the dark period in his city’s history when steel lost its lustre and thousands of mill workers lost their jobs.

The 31-year-old mayor was a baby when steel plants from Pennsylvania to Ohio to Michigan shut, creating the so-called “rust belt” in the US. He is among a generation, the first in a century, to have no memories of the industry that once dominated this city.

Today, only 8.5 per cent of Pittsburgh’s jobs are in manufacturing. The rest of the economy is rooted in healthcare, education, financial services, robotics and information technology. No steel mill touches the skyline, but there is Google, which has taken over the penthouse of a former biscuit factory and employs 150 people writing software.

That diversity translates into 6.4 per cent unemployment in the Pittsburgh metropolitan statistical area, notably lower than the national rate of 8.6 per cent. These days, Pittsburgh is seen as a model for urban economies.

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Commercial rents have climbed. House prices have held steady. Visitors stop in Pittsburgh, including Barack Obama in search of good news in a presidential campaign year, to praise its resilience.

“Folks from Cleveland have come to Pittsburgh. People from Lexington, Kentucky, have come,’’ Mr Ravenstahl says. “They ask the same question: how did you do it? Well, this didn’t happen overnight. This was strategic and this took time.”

Pittsburgh once produced as much as half the nation’s steel, but by 1979 foreign competition and technology had caught up with it. The city bled jobs. Along the banks of three rivers that course through the city, businesses tied to steel’s supply chain died. By the mid-1980s, there was “a sense of desperation”, says Sabina Deitrick of the University of Pittsburgh.

Enter Tom Murphy, the son of a steelworker who ran for mayor in 1993 and promised to create jobs and end city centre blight. Union pickets turned out to jeer “Mr Technology’’ for ignoring the empty mills.

He was searching for work that would fit national and international forecasts. Factories were fine, but Pittsburgh needed research, financial and service sector jobs to survive. “It was about changing the culture. It was about figuring out who we would become,” says Mr Murphy, who held office for 12 years.

Local universities, most notably Carnegie Mellon and the University of Pittsburgh, attracted and advised new business. Community colleges were expanded to retrain workers. City Hall sought federal and state aid to update its international airport. Foundations toiled to create cultural and sports districts and reclaim the riverfront. Murphy’s tenure was called “a roller-coaster of governance’’ by a local newspaper, but Pittsburgh looks better for the ride.

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Today, the city boasts cycle trails, rivers churning with speedboats and kayaks, and acres of parkland. Vast rusting former steel works gave way to shopping and entertainment centres. Skyscrapers housing the headquarters of eight Fortune 500 companies, including US Steel, anchor the city; the University of Pittsburgh Medical Center, a healthcare provider with 48,000 workers, is the single largest employer.

The reinvented Pittsburgh is much smaller than the old Steel City: its population stands at 305,000, less than half of the 660,000 who lived there in 1979. Yet it still supports a symphony, two theatres, rock clubs and art galleries. A professional baseball park rises from its riverfront, within walking distance of two stadiums where American football and hockey teams play. Its architecture and streets seem to have movie-star quality. A Batman movie was filmed there this summer, the latest Hollywood project since 2007 lured there by a tax-credit incentive.

The city still has its share of challenges: its budget is reviewed by a state oversight board following a brush with bankruptcy in 2003. Public transportation was scaled back and the school system faces stark teacher cuts.

But in 2009, Pittsburgh made a sort of global debut by hosting the G-20 economic summit. That year, Forbes magazine ranked it as a top city for job growth. Since 2005, The Economist magazine has it first in the US for liveability.

Pittsburgh is now relying on a different generation of innovators. Lenore Blum, a professor at Carnegie Mellon is searching for ideas with Project Olympus, an academic incubator that links students and investors. Dynamics, which develops payment technology for credit and debit cards, is a multimillion-dollar turnover company that was one of Project Olympus’s first student projects. This year, Jeff Mullen, its chief executive and a graduate of Carnegie Mellon business school, made a commitment to stay that will enhance Pittsburgh’s technology transformation.

Dynamics recently accepted a $35m financing offer from Bain Capital Ventures, despite offers from investors who hoped the company would move California, and will double its workforce to 60 employees. “We aren’t Silicon Valley – but not a lot of places can be Silicon Valley,’’ says Ms Blum. “Pittsburgh is a real city, a real region ... and we’re Middle America, doing what we can.’’

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