PITTSBURGHGerardo Sciulli was a welder from a small town in the Abruzzi region of Italy. So when he emigrated to America in 1970, he chose this place; its vibrant steel mills assured him plenty of work. He settled with his family in Oakland, a half-square-mile neighborhood east of downtown.

Today, the steel mills are gone, and Oakland is the seat of Pennsylvanias health care industry. It contains a complex of interconnected hospitals, a medical school, doctors offices, and towers of University of Pittsburgh medical labs (which bring in some $450 million in federal grants every year). UPMCthe huge local health care provider, which is expected to pull in $10 billion in revenue this yearowns 16 hospitals in the metro area and is the largest private employer in the state.

All of which made a strong impression on Marc Sciulli, Gerardos 29-year-old son. By the time Marc started college, he knew he wanted a career in health care. Now, after his first few years as a hospital pharmacist, he earns nearly double what his father did (more than $80,000 a year), owns his own home, and plans to make his life in the city. I think just living in Oaklandbeing around the hospitals and the collegespushed me in that direction, he says.

Health carewhich adds thousands of jobs in hospitals, nursing homes, and doctors offices each yearis at the center of this recovery. The sector pulls in federal Medicare dollars to serve the regions aging population and research grants from the National Institutes of Health. It offers middle-class positions to nurses, technicians, accountants, computer programmers, and other professionals. UPMC may not replace the steel industry, but it has taken over the old U.S. Steel building downtown, and its logo looms large atop the citys skyline.

Health care is the leading-edge of a nationwide trend. The number of jobs in this sector is climbing steadily, in contrast to the erosion in so many other areas of the economy. Since the Great Recession began in December 2007, health care jobs are up nationwide by 10.5 percent. Compare that with all other nonfarm jobs, which are still down 4.3 percent, even after recent gains. If the health care economy hadnt grown during that period, the national unemployment rate would be 8.8 percent, a full point higher than it is, according to calculations by the Altarum Institute, which tracks the industry. If health care jobs had plunged like those in other sectors, U.S. unemployment would be a staggering 10.8 percent. Employees like Sciulli kept the country afloat. In the short term, think of the health sector as being a stimulus program: It just keeps generating jobs and money, says Charles Roehrig, director of Altarums Center for Sustainable Health Spending.

But the long term may not be as rosyfor Pittsburgh or for the country. The growth in the health care sector also produces ever-growing costs. Health spending, nearly 18 percent of the U.S. economy, is contributing to personal bankruptcies, driving up the cost of domestic labor, and crowding out other government priorities (infrastructure, say, or education). Thats a problem in Pittsburgh, too, where the city has spent the last nine years in a form of municipal bankruptcy, after retiree pensions and employee health benefit costs crushed the budget.

Its an example, in miniature, of what could happen nationally. Federal health entitlement programs alone are projected to balloon from less than 6 percent of gross domestic product today to more than 10 percent in 2037, according to the Congressional Budget Office, when they will exceed spending on all other government functions except Social Security. About half of that increase can be blamed on our aging population and the expanded benefits under the 2010 Affordable Care Act, but the other half represents what health economists call excess cost growththe annual increases in spending for each persons care. A health system this pricey wont be able to keep adding good jobs like Sciullis without acting like ballast. Its a good thing for now, but as the economy begins to recover and we dont need those health care jobs, were going to be desperate to reduce the growth rate in health spending, Roehrig said. Because we just cant afford it. The health care boom that is propping up the American economy, could eventually come back to haunt us.

Through the mid-70s, Pittsburgh had a vibrant economy. Steel mills in and around the city offered high salaries and plum benefits to workers right out of high school. Then international competition torpedoed steel prices, and the industry collapsed. Nearly all of the regions mills closed within a five-year period. Unemployment rose to more than 18 percent, and union membership fell. Growing up, I didnt know anybody who didnt work in the steel mill, and now I dont know anybody who does, says George Fechter, 66, an entrepreneur who invests in health care start-ups. Working-age people quickly left town. In the early 1980s, they moved out using U-Hauls. Later on, they were moving out due to hearse.

Hospitals moved into the economic vacuum. Allegheny County, which includes Pittsburgh and many of its suburbs, now has the second-highest proportion of seniors of any county in the nation with a population over 1 million (after Floridas Palm Beach). All those Medicare beneficiaries gave local hospitals a solid base of paying customers. A few smaller community hospitals closed, but many survived. UPMC, a nonprofit affiliated with the University of Pittsburgh, began expanding rapidly, buying up hospitals in the region and building up high-revenue specialties such as organ transplantation and oncology.

People in town like to credit the economic recovery to the combination of eds and meds. In addition to the big hospitals, Pittsburgh is home to two major university systemsPitt and Carnegie Mellon Universitywith grant-winning research programs, along with more than a dozen other colleges. The University of Pittsburgh, with its medical school, has been a big breadwinner for the city. It hired a former top NIH official, and Pitt now ranks fifth in the country among universities collecting NIH grantsmore than Yale, Duke, or Stanford.

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Health Care: Great for the Economy Today, Terrible Later