Posted by: Josh Lehner | July 28, 2014

U.S. Growth, Update on the States

Besides just stronger national growth, another way for top line U.S. job figures to improve is for more states or regions to share in the recovery. Back in December I noted that the Northeast and Midwest were growing much faster than their housing boom rates, while the South and West were lagging (in particular given low population growth and the housing bust). Expectations were that the South and West would accelerate moving forward, but in order for national figures to improve the Northeast and Midwest would need to hold onto those stronger rates of growth. So how are things looking today? Well, the acceleration has come along the West Coast and in the South but much of the Northeast and Midwest has slowed down. Map of Census Regions and Divisions.

RegGrowth0614

This leaves us with a national job growth figure that is slightly stronger so far in 2014 than in recent years but much of the movement in the U.S. employment picture is happening below the surface, down at the state and county level. As seen below, the number of states experiencing job growth of 1 or 2 or 3% hasn’t really changed. However this is due to the shifting nature of job growth across the country. The only states to see sustained acceleration in job growth (improvements of 1 percentage point or more, relative to 2011-12 rates) are Delaware, Florida, Nevada and Oregon. The latter three of which were hard hit by the housing boom and bust and as housing rebounded in 2013, growth picked up. However these states’ improvement was offset by deceleration of 1 percentage point or more in Alaska, Michigan, N Dakota and Virginia. As evidenced in the graph below, the geographic footprint of the recovery really is not broad based with just a dozen or so states experiencing job growth of 2% or more.

StateShare_0614However, the one portion seeing stronger rates of growth, and acceleration are the large metropolitan areas, see here for more details.

MetroSize2013

The questions becomes, whether or not we expect the medium, small and rural economies to pick up and whether or not the large metros can continue to grow at 2% or more in terms of employment. I think the answers are yes, and yes, from a fundamental point of view — ignoring potential macroeconomic shocks. As housing and government continue to improve (the two large weights on the recovery) this will help medium, smaller and rural economies as these industries play a disproportionately large role here, relative to bigger cities. In terms of the large metros, many of those good economic things you hear about — agglomeration effects, knowledge spillovers, clustering, etc. — happen in specific locations, which are usually bigger cities. These impacts, along with the continued urbanization of the population result in a relatively bright outlook for the country’s largest metros.

Posted by: Josh Lehner | July 24, 2014

Oregon Spider Chart, June 2014

This Graph of the Week is an update on the Oregon spider chart. See here for more on the construction of the graph which follows the pioneering work by the Atlanta Fed at the national level.

As a reminder the chart tracks progress across a wide variety of labor market indicators. As each measure improves from its recessionary trough (the red dot, 0%), the line moves outward from the center. Once the measure reaches the gray, dotted line, that indicates it has fully regained the level (or rate) last seen prior to the Great Recession.

The two sentence takeaway is: Labor market leading indicators continue to improve and over the past year employer behavior has picked up nicely. However, employee confidence and utilization measures — the feel good nature of the economy — are still just about half-way back to pre-recession levels.

OregonSpider0614

One minor tweak this round is the substitution of Marginally Attached Workers for U-6. U-6 is the combination of U-3, MAW and PT for Economic Reasons. Showing both of these additional components that make up U-6 provides a bit more detail to the underlying currents in the labor market. As such, one can see that PT for Economic Reasons has declined (improved) substantially over the past year (really the past 6 months), while those MAW have increased. We know that the decline in the unemployment rate has not been entirely for good reasons, with the labor force shrinking, some of these dropouts are likely showing up in the larger number of MAW (those who want a job but have not looked recently). So even as U-6 falls, there are both good reasons (fewer PT for Economic Reasons) and bad (more MAW).

Posted by: Josh Lehner | July 23, 2014

Metro Size and Growth, An Update

Just a quick update on employment growth by metro size, similar to previous work (HERE and HERE). This takes a look at county level employment data (QCEW through the end of 2013 was released recently) and categorizes it using the USDA rural-urban continuum codes.

The largest metros (the 51 largest have a population of 1 million or more) have seen the strongest gains in recovery [1]. The second set of metros have seen some acceleration and the nonmetro (rural) counties have seen deceleration over the past year.

MetroSize2013

In terms of how these growth rates look from a historical perspective, I took today’s rural-urban codes and applied the same categorizations back to 1980 (so a place like Las Vegas which is big today but not then, is still classified as a large metro). What stands out are the largest cities outperformed other locations both in the late 1990s boom and today. However smaller cities and rural areas performed just as well, if not better than, big cities in the 1980s and somewhat during the housing boom.

MetroSize8013

The question is what is the normal pattern of growth? Is is the 1980s and housing boom years where most areas grow about the same? Or is it the mid to late 1990s and so far in the 2010s where larger cities outperform? It’s certainly an open ended question, but most outlooks call for continued urbanization of the population and for metro areas to outperform rural economies in general. This is at least partially due to the fact that all those good economic things — agglomeration effects, knowledge spillovers, clustering, etc — happen in certain locations, which are usually bigger cities. The case could also be made that the housing boom was an equalizer in which small and medium sized metros outperformed due to stronger population growth and the associated housing demand and activity that went along with it. This stronger growth also may have pulled some away from the larger cities at the same time. In this version of the story, today’s pattern of growth is simply a return to the expected one, which was interrupted by the housing boom where inflated asset prices/wealth may have impacted location decisions.

It is also interesting to note that only the largest cities have seen growth rates return to pre-recession levels, while the others lag. This is at least partly due to the nature of the Great Recession in which housing and government have been large weights on the recovery. These jobs also play a disproportionately large role in many medium, smaller and rural economies than in big cities. Not because these areas have so many of these types of jobs, but rather because of lower levels of industrial diversification, that generally occur in bigger cities (ballet dancers, advertising firms and the like).

[1] Breaking these big cities down into more groups reveals the same trends. Large cities with populations of, say, 4 million or more compared with those with populations of 1-4 million have the same employment trends over the Great Recession.

Posted by: Josh Lehner | July 18, 2014

Jobs, Labor Force and Population

Much attention is being paid to measures of labor market health like the labor force participation rate and the employment to population ratio, with good reason. However, I would caution drawing too many conclusions based on the top line comparison between the U.S. and Oregon. The reason being Oregon does have a larger Baby Boomer cohort than the average state and retirees continue to move to Oregon, thus the state is aging faster than some other areas. This has big implications on measures like LFPR and the employment to population ratio. To be sure, that does not mean the state is doing great, but neither is it doing horribly either. As with many things, the truth is somewhere in the middle and Oregon is largely following national trends once you account for demographic changes locally.

First, let’s take a look at the labor force participation rate by age cohort in Oregon relative to the U.S. As detailed thoroughly a few weeks ago, Oregon used to have a LFPR higher than average, however since 2005 those gains have vanished and the state now trails the national average in recent years. What caused the relative decline? The graphs below compare Oregon’s LFPR by age cohort to the nation. For prime working age adults in Oregon, they are participating in the labor force just as much, if not slightly more, than their national peers. Where Oregon really differs from the U.S. is in the 65+ age cohort. Not only is this group becoming bigger and bigger as the Baby Boomers age, but Oregon Baby Boomers have a lower participation rate than the national average. This, appears to be a major driver in the overall change in Oregon’s relative LFPR position. This is also not much of a concern, provided these individuals want to be retired and out of the labor force and not forced out. The concern our office has with these figures are among those prime working age groups. Oregon used to enjoy a strong LFPR advantage relative to other states. While population growth and migration continue to result in an above average growth rate here for Oregon, which overall is a good thing for longer run economic growth, the state is no longer seeing both above average growth and above average participation.

LFPRvsUShoriz

On the employment side of the ledger, the story is largely similar. For an upcoming housing report, I have been examining employment trends in 25-44 year old Oregonians (those in the so-called “root setting” years) as these ages are when many individuals get married, have kids, buy a home, enter the heart of their career and the like. However, this also means I have this data readily available. Here too you can see that Oregon’s employment to population ratio for all adults largely tracked the U.S. overall but then lags a 2-3 percentage points in recent years. Given sample size concerns, it is unclear just how much is fundamental change vs data issue changes.

EPop16plusWhere you see similar trends to the U.S. are among the younger prime working age Oregonians. The year to year volatility I would chalk up to sample size concerns with the underlying Current Population Survey data, however the trends here are clear.

EPop2544

The younger adults are OK in terms of employment trends relative to the nation, although that does not mean things are OK overall given the low ratio today. With a stronger economy, the ratio should be higher, back up around the 80 percent mark seen in previous expansions.

This does mean, however, that Oregon’s lower employment to population ratio is due to those 45+ years old. This is the bigger concern given that it is not purely due to those in and around retirement age. Primarily the decline and lack of improvement can be seen among those 45 to 54 years old, relative to the nation. It is possible it is at least partly an industry mix issue with industries like construction and manufacturing bearing the brunt of lost jobs in the Great Recession, however that cannot be the whole story. Clearly these job losses are impacting LFPR as seen above (the dark blue line, for those 45-54 years old, has seen the largest relative decline since 1990).

So putting all of this together, what is the outlook? With an improving economy will come more jobs, and likely at least a little more labor force participation. However these gains are likely to be short lived as the longer run demographic changes will weigh on these top line figures that count all adults. It is important to remember that most of these changes are demographic and/or structural and focusing on the prime working age cohorts, the economy really is, and will be, improving.  See here for more on our office’s outlook.

LFPREmpPop0614

Posted by: Josh Lehner | July 16, 2014

Quick Takes: June Jobs, Housing & Poverty

Back in the office after a week away and just wanted to give a few quick takes on recent figures.

Quick Take 1: June Jobs

Whoa. 4,300 lost jobs in June? Is the recovery, as weak as it has been, over? Fortunately, as Mark said in The Oregonian article, “The truth is, unfortunately, a little more boring.” First, withholdings out of Oregonians’ paychecks continue to grow solidly, indicating steady job growth and the state’s coincident indicators are all improving. So this is highly unlikely the first step toward the next recession, but that does not mean job growth didn’t slow or that there were even some job losses. However, the magnitude of the job losses is, well, interesting. Check out this table. In June of last year, Oregon added 5,800 jobs from May to June on a not seasonally adjusted basis, which translated into small job losses on a seasonally adjusted basis. From May to June of this year, the state added 9,600 jobs over the month (two-thirds are many), but the state lost 4,300 jobs? Hmm…

JuneJobsTable

You can chalk this up to the seasonal factor, which one uses to convert the monthly changes into seasonally adjusted changes based on the normal fluctuations — trying to extract the signal from the noise. Like Mark said, boring stuff. Here are the June seasonal factors for each year since 1990. Two things stand out. First 2013 seasonal factors were higher than recent years (thus helping prop up the seasonally adjusted changes a year ago). Second the 2014 seasonal factors appear to be quite low, thus helping to deflate the seasonally adjusted changes today.

JuneJobsGraph

So what’s the truth? Hard to say exactly at this point, but so far, based on just one interesting data point, there are no broad worries about the recovery continuing. If one applies seasonal factors more in-line with historical values, then the state’s employment was likely flat over the month. Not great news, but better, and as The Oregonian‘s headline says, the recovery is far from complete and that is true.

Quick Take 2: Housing and Construction

Construction bore the brunt of the preliminary job losses in June and even after adjusting the seasonal factor to something more in-line with historical figures, the industry likely did lose jobs (just not as many). The ratio of construction workers to housing starts is still elevated (see here). The relative strength shown in the ratio likely has to do with nonresidential construction projects like the second phase of the Intel expansion, office building renovations, MAX construction and the like. Housing starts are relatively flat, but if one or more of these larger nonresidential projects winds down, then there could be weakness in the employment figures.

Speaking of housing and the latest RMLS report, here is a quick update on housing affordability. If one is able to save up and put a large down payment into the loan, the market – even with strong home price appreciation – is still affordable, if you can find a home with the limited supply. However, with just a small down payment (thus paying mortgage insurance and a larger loan balance), the median home in the Portland MSA is at the very high end of affordability relative to median family income. The record levels of affordability seen just two years ago are gone, with strong price gains and higher interest rates, but in the bigger picture, affordability is back to the levels seen in the late 1990s.

HousingAffordability0614

Quick Take 3: Poverty Hot Spots

The U.S. Census Bureau recently put out a report on high poverty areas across the country. As written about in The Oregonian, Oregon saw a large increase in such areas from 2000 to 2010. While the Census report provides a high level look at this issue across all the states, I just wanted to highlight some great work that Oregon’s Department of Human Services did last year on the same topic. You can see the report here: High Poverty Hotspots. One can scroll each county in the state and see details regarding some of the local socioeconomic characteristics of these hotspot areas along with SNAP and other DHS/OHA service data. The DHS report does a really good job of detailing these changes and highlighting the areas of the state that are experiencing high poverty levels.

 

 

 

Posted by: Josh Lehner | July 10, 2014

Oregon’s Coincident Index

Each month the Federal Reserve Bank of Philadelphia releases a coincident index for all states. The coincident index is comprised of four underlying variables and is designed to track current economic conditions, thus it is neither a leading or lagging indicator. As seen below, the vast majority of states across the country are seeing improving economic activity in recent months.

 

Diving into the four underlying components yields the following for Oregon. Both employment and real wages in the state are continuing to grow. The unemployment rate, while holding fairly steady in the past few months, continues to improve slowly since the Great Recession. Manufacturing hours worked have fallen slightly in recent months from about 41 hours per week to 40 hours, which is not out of line with the previous expansion. So far, each variable is looking good or at least improving. When they all move sideways together or we see stronger declines in one or two, that is when it may be time to worry. Today we’re still looking good.

OregonCoincident0514

Posted by: Josh Lehner | July 9, 2014

Oregon Exports, 2014q1

Following a slowdown in that extended from the summer of 2012 through fall 2013, Oregon exports are now growing again. In dollar value, Oregon’s exports in the past 12 months are now just 2.5 percent below their all-time peak reached back in the summer of 2008 and are currently at a post-Great Recession high. [Data through May 2014 shows exports just 0.9 percent below peak levels on a 12 month sum basis.]

Exports14q1

On net, the increased exports over the past year are entirely due to high-technology products, largely destined for Asian ports (63% of the gain) or Costa Rica (17%). Of course this masks over the changes in other industries. Strong gains in machinery, transportation equipment and food products were offset by declines in agricultural, chemicals and waste products. Even as agricultural exports are down slightly on the year, they have maintained their higher level than in the past, likely due to higher commodity prices in recent years.

Exports have increased to 20 of Oregon’s top 25 destination markets over the past year. However, in a broader perspective, nearly all of the gains in the past couple of years have been to China and Canada, Oregon’s 2 largest markets. Out of the state’s top 5 destination markets, however, only exports to Canada are currently at an all-time high.

ExCountr14q1

Exports to China continue to be dominated by high-tech products, which are growing again, in addition to gains in machinery, chemicals and transportation equipment. Canadian exports are increasing with growth evenly split between metals and machinery and all other industries, including gains in high-tech and chemicals.

ExChinaCanada14q1

Posted by: Josh Lehner | July 1, 2014

Structural Unemployment and Underqualified Applicants

Economists worry quite a lot about structural unemployment. Essentially this boils down to unemployed individuals who do not have the skills required for the available jobs, so they remain unemployed (or drop out of the labor force). Solving structural unemployment problems is much more challenging. It requires retraining workers, possibly including relocation, which is both time consuming and expensive. If much of the economic slack is cyclical or frictional then solving the problem is easier. The answer is stronger economic growth, usually with fiscal and/or monetary policy. Stronger growth results in more sales for businesses who need to hire more workers.

In Oregon, we have the latest job vacancy survey from the Oregon Employment Department to try and see what exactly is going on in the labor market. Breaking down the needs of businesses, in particular what they cannot find, with what the workforce is offering in terms of available employees is important and can help shed some light on the different types of unemployment in the state. Our friends over at OED Research (thanks Jessica and Nick) were kind enough to share some of the difficult to fill job data by occupation.

Overall there is not much of a relationship between unemployment rates and the share of jobs that are difficult to fill. Occupations with both high and low unemployment rates have a wide range of difficult to fill jobs. Overall this is actually encouraging. No one sector or occupation is sticking out like a sore thumb. Much like the previous discussion on the Beveridge Curve — where research found no evidence of labor market divergences along age, educational attainment, region, or industry lines — the issues appear to be broader in nature, a general malaise rather than a specific one. The reason this is good news is that it points more toward cyclical or frictional unemployment, or low levels of aggregate demand, and less toward the dreaded structural unemployment.

Dif2Fill2013

Broadly speaking — our office, not OED — the reasons jobs can be difficult to fill can be roughly divided into 1/3 due to underqualified applicants, 1/3 due to employer issues (low wage, work conditions, etc) and 1/3 due to other reasons. I think it is the first group — our so-called underqualified applicants — that are the most interesting. If the labor force is not providing enough, good applicants to fill positions, then it becomes a much broader issue in terms of the labor force, education, workforce training, etc. Employer issues are important to track as well, but they may be more easily improved with higher pay to entice more applicants, as one example.

Focusing just on the realm of underqualified applicants yields the following. Here you do see some patterns. First, occupations with high unemployment rates — indicating a large pool of candidates from which a business can hire — report lower levels of underqualfied applicants being the reason jobs are difficult to fill. Occupations with low unemployment rates — indicating fewer potential workers — report that finding a qualified workers is more challengeing. This is the pattern one would expect to see. When there are lots of workers to choose from, finding a qualified worker is not the problem. When there are few workers to choose from, it is. Again, this generally points to low levels of economic growth being the primary culprit and not structural unemployment.

Second, when looking at the occupations by wage group, the pattern of job polarization is also apparent. In the first graph, the high-wage (green) occupations are generally easy to fill overall, however when it comes to the specific reasons, it is primarily due to underqualified applicants. This makes sense given that high-wage occupations are high-wage largely because they require a specific skill set, or specialized knowledge or training that is not as widely available. Low-wage occupations have higher unemployment rates but do not have difficulty with underqualified applicants. These occupations face other challenges to fill like low wages. Middle-wage jobs are more dispersed across unemployment rates, difficulty to fill and the reasons for this. However they are generally somewhere between the positions of the high- and low-wage occupations.

JobPol_Dif2Fill2013Overall, underqualified applicants are not the primary reason jobs in Oregon are difficult to fill. When they are a larger barrier, it largely has to do with specific skill sets, which is likely the case in both good times and bad. Unemployment still remains too high but much like the Beveridge Curve research, the slow rate of hiring cuts across many categories and points more towards an overall lackluster recovery than any specific industry, occupation or region. Now that job growth is accelerating in Oregon, and some of the hardest hit industries are improving, expectations are for the number of unemployed to continue to decline, but for a good reason: more jobs. To be sure, some of the damage from the Great Recession is permanent and some workers do face structural challenges. Providing opportunities for training is very important for the workforce overall, but particularly for those facing these structural issues.

Note 1: The unemployment rate for each occupational group is the 12 month average from April 2013 through March 2014, based on the underlying Current Population Survey data.

Note 2: Construction is somewhat of an outlier in terms of difficult to fill jobs and those due to underqualified applicants. Given the industry fell 36 percent (38,000 jobs) due to the housing bust, it can be hard to say there are not workers available. However, this may be one area in particular that long-term unemployment is an issue. Job finding rates for the long-term unemployed are very low and only increasing slighlty in recent years. Given construction fell first and declined further than most industries, there are likely many more long-term unemployed construction workers, which firms are not hiring in great numbers.

Note 3: Our office has recently been using the Current Population Survey more frequently (HH formation, Stay-at-Home Parents, etc). The sample size in Oregon is small, so some of the specific figures do need to be taken with a grain of salt, relative to Census or ACS data. However the general patterns are clear, and likely correct. For example, occupational unemployment rates for the U.S. overall that BLS does publish, are shown below, and indicate the same pattern as the Oregon figures above.

USOccUR

Posted by: Josh Lehner | June 26, 2014

Oregon Employment, Bubble Graph

This edition of the Graph of the Week brings back an oldie but a goodie: the bubble graph. This shows each industry’s employment change in Oregon over the past year (horizontal axis) and over the past 3 months (vertical axis). You want to be in the upper right hand quadrant, meaning jobs have been added both in recent months and in the past year. The diagonal line indicates equal growth rates over both time periods. For example, the red star which represents total nonfarm employment in Oregon has increased 2.6 percent over the past year and 2.6 percent over the past three months at an annualized rate, thus is falls on the line. Most industries are in the upper right hand quadrant — that’s good — and about half are above the diagonal line as well — that’s even better as it indicates these industries are accelerating.

Overall most industries are in a good place in terms of growth rates, and given that the state is getting there, it is expected to see this acceleration.

 

BubbleEmp_0514

Posted by: Josh Lehner | June 24, 2014

A Follow-Up to Stay-at-Home Parents

I have fielded a lot of questions and feedback on the recent Oregon Stay-at-Home Parents report our office issued last week. For the record, we have copy-edited the report and reissued it on the previous post, although no substantive changes have been made. What follows is a roundup of a few of the major themes from the feedback.

First, the biggest question and/or surprise was the relative lack of stay-at-home fathers. Just 1 in 100 prime working age dads say they are staying home specifically to care for the family. 1 in 5 mothers cite the same reason. Here it is important to keep in mind a few things.

  • Nearly 10% of fathers are at home for any reason — that is, they are not in the labor force — but most cite other reasons for that, other than taking care of the kids. Some of this may just be a reporting/question item in which men are more likely to cite, for example, a bad back or poor economy instead of looking after the kids. As Pew Research found, society is much more supportive of mothers staying home than fathers doing so, thus lending some credence to a potential social stigma.
  • If one includes the number of unemployed fathers as well, the overall number rises to about 16% of all dads that are not at work, thus presumably at home. This works out to a 6.4% unemployment rate for fathers in Oregon, which at first blush seems low given the time period (2011-13). However a similar measure at the national level (all adults, not just prime working age) is 5.6%, which is close.
  • However, from an economic point of view, the reason for being at home matters. Not that unemployed fathers or those enrolled in school do not like being at home, but they are also more likely to work, provided the opportunity. Thus the impact on the broader society trends is likely minimal, relative to the economic conditions.
  • Even in two parent (or two adult) households, when one parent works and the other does not, the vast majority of the time it is the dad who works (more on this below).

The second major theme was surrounding the composition of households in Oregon, how do two parent households compare and the like. If one were to do a proper study on households in Oregon, a more careful examination of Census or American Community Survey data would be much preferred. However, to save time and given I have the detailed Current Population Survey data readily available, what follows is indicative of the broader patterns seen in the state. The precise figures should be taken with a grain of salt, given the sample size for the CPS is smaller than the ACS.

With that being said, here is a quick overview of household composition and employment in Oregon over 2012 and 2013. The vast majority of one parent households are single moms and the vast majority of both single moms and single dads do work. Only a minority of single parents do not work at all. In terms of two parent households, both parents work in a majority of them. However when just one parent works, it is nearly always the father (about 83% of the time).

HHConstruction201213

Lastly, the Council of Economic Advisors just released a new report (PDF) for President Obama’s Working Families Summit yesterday (June 23rd). There are lots of good facts and figures on working parents, share of household duties, child care costs, family leave and the like.

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