Posted by: Josh Lehner | January 21, 2015

Oregon Employment, December 2014

With the December jobs report, another year is in the books for Oregon’s economy. Preliminary estimates show December was another big month (more on that in a minute) but for the year overall, 2014 was actually quite strong. 43,500 jobs on an annual average basis for a growth rate of 2.6%. Both of which are the strongest since 2006. However, more importantly, progress continues to be made across the broader measures of the labor market, see the Economic Recovery Scorecard. While Oregon’s economy, number of jobs and the like have never been larger, we know that the economy is still not fully healed some 7 years after the onset of the Great Recession (primarily due to it being a financial crisis.)

With that being said, December brought to close a solid year in terms of the Total Employment Gap. The unemployment rate remains in the high 6 percent range, but labor force participation is increasing and those working part-time but want full-time work is slowly declining. The Total Employment Gap closed nearly 2 percentage points in 2014, the best year so far in recovery, but the state still is just about 60 percent of the way recovered.


On the monthly jobs figure, December’s gain of 8,200 seasonally adjusted along with strong October and November figures makes the 3 month average the best on record according to our friends over at Employment. Good news, no doubt. However our office has some very technical concerns about these numbers. In particular the seasonal factors used by the Bureau of Labor Statistics, which presets the monthly seasonal factors a year or so in advance. For a recent example, think back to June when the preliminary estimates said Oregon lost 4,300 jobs over the month and everyone freaked out. Well June’s revised (and preliminary benchmarked) data shows gains of 1,500 jobs. At that time our office pointed out that the seasonal factors did not make sense and it was highly unlikely the state lost that many jobs. Today we’re talking about the reverse of that. No doubt the economy has improved, and job growth has picked up. However the headline monthly employment numbers are likely overstating the growth purely due to the seasonal factors from BLS. To try and make this clear, below I show the job gains over the past year from both the not seasonally adjusted data and the seasonally adjusted data.

The differences here work out to over 500 jobs per month. These numbers should be the same, and after annual revisions and benchmarking, they will be. However in real time the data do differ, due to the preset seasonal factors. The story isn’t these technical issues. Let me make that clear. However, don’t be surprised that once revisions are taken into account Oregon saw good, strong job growth to end 2014 but maybe not quite record setting.

All told, 2014 has been a good year for the economy and labor market. Much progress has been made as the state has finally regained all of its lost jobs due to the Great Recession, middle-wage job growth returned and the like. Our office expects 2015 to more of the same, with some expectations for better wage growth as well.

Posted by: Josh Lehner | January 15, 2015

2015 Outlook: Reaching Full Employment

This week we already took a look at the middle-wage job outlook in Oregon. Today we’ll introduce a new measure called the Total Employment Gap and examine when Oregon may hit full employment, or when the labor market is fully healed. Get caught up to speed with the Economic Recovery Scorecard.

What the Total Employment Gap illustrates is how far away the economy is from full employment. There are a few differing and technical definitions of what full employment is and the term is also generally used interchangeably with the so-called natural rate of unemployment, or the non-accelerating inflation rate of unemployment (NAIRU). However for these purposes, we are defining it in a broad sense to mean the condition where all or nearly all persons willing and able to work are able to do so, which is also the level of employment rates when there is no cyclical unemployment. The Total Employment Gap was originally developed by IMF economist Andrew Levin (see HERE and HERE for more) at the national scale.

Now, to answer this question, economists have historically turned to just examining the unemployment rate itself, relative to the natural rate of unemployment to gauge the health of the labor market. With the U.S. unemployment rate now at 5.6 percent and many economists’ estimates of the natural rate of about 5.5 percent, the old style of analysis would indicate that the economy is getting tight and is relatively healthy. However, we know that this time really is different than anything we have seen since the Great Depression. Labor force participation rates are down substantially, the share working part-time but want full-time work remains really high, plus the other measures such as the number of long-term unemployed and the like still indicate the economy is not all the way back to being healthy. Economists realize all of this and are trying to assess the amount of slack or under-utilization in the economy. Fed Chair Yellen has been pointing to many of these variables for years (Tim Duy has the Yellen Charts) and the Fed has gone so far as to introduce a new labor market conditions index to try and assess the labor market’s health. In the same vein, what Levin’s work on the Total Employment Gap does is try to incorporate these other factors that we know are going on into a clear and concise measure to gauge the strength of the economy. I find his work quite useful and informative and it really does incorporate some of these broader labor market issues economists are discussing. So much so that I have created an Oregon version of the Total Employment Gap. See footnote [1] for more on the methodology.

First I want to go over a measure that is both very important and misleading: labor force participation. It’s important because more workers, or more potential workers can raise the overall productive capacity of the economy. Conversely, fewer workers can shrink the capacity of the economy. However in today’s economy, the overall labor force participation rate can be misleading because of how it is mathematically computed and the demographics in the U.S. and in Oregon. Just look at the graph below, where I have plotted both the actual LFPR and one that is fixed at 2000 rates for each age cohort, from which I simply adjust for demographics over time [2]. From the start of the Great Recession through today, the adjusted LFPR was expected to decline 2.4 percentage points. Thus it is not an intellectually honest argument to say that the actual LFPR decline of 3.8 percentage points over the same period is due to an underperforming economy, because the rate is falling due to aging, regardless of the strength of the economy.ORLFPRAdj

However, one can compare the differences between the actual LFPR with the adjusted estimates to get a sense of the participation gap in the economy. This participation gap is something that is missed when just examining the headline unemployment rate. So, combining the participation gap with the cyclical unemployment rate and underemployment rate — those working part-time but want full-time work — results in the Oregon Total Employment Gap.


According to this measure, Oregon’s labor market, and economy, is just over half-way back to pre-Great Recession levels. Looking across the host of metrics in the Economic Recovery Scorecard, that seems about right as well. The unemployment rate, currently at 7 percent in Oregon, is relatively near the natural rate of unemployment for the state, likely around 6 percent or so, if the U.S. is more like 5.5 percent (unfortunately this is more art than science.) The underemployment gap is slightly smaller today, however many more Oregonians today are working part-time but want full-time work than prior to the Great Recession. However the largest contributor to Oregon’s Total Employment Gap is the labor force participation rate gap as discussed above. In November, this gap accounted for about two-thirds of the Total Employment Gap (3.1 of the 4.7 percentage points.) Historically Oregon’s LFPR was much higher than the typical state, however it has fallen significantly further in recent years, and is currently well below the national rate. That being said it has likely overshot to the downside and while it is rebouding in recent months, our office’s forecast expects it to increase even further over the next few years, slowly closing that participation gap.

All told, Oregon is likely about two years away from reaching full employment, based on our office’s latest forecast. Economic growth — jobs in particular — accelerated in 2013 and have held steady at about three-quarters throttle throughout 2014. Similar rates of growth are expected for 2015 and 2016, although the gains are becoming more broad-based in nature (e.g. middle-wage jobs, stronger growth outside of Portland, and the like.) Stronger job growth is resulting in the labor force response our office had hoped for/expected and along with an improving economy and tightening labor market, should come better wage gains, which may be the last piece of the puzzle to fall into place before most Oregonians believe the economy is all the way back.

[1] Unemployment Gap is actual unemployment rate relative to the Congressional Budget Office’s estimate of NAIRU plus 0.75% due to Oregon’s higher unemployment rate. Participation Gap is actual labor force participation rate relative to 2000 rates adjusted for demographics. Underemployment Gap is full-time equivalent number of Oregonians working part-time for economic reasons as share of labor force relative to 2.0%, a full employment estimate level.

[2] These are just our office’s estimates and others do exist. The Oregon Employment Department’s report on LFPR has their own. The White House’s Council of Economic Advisors’ report last year on LFPR has a round-up of many national estimates, including their own as well. Overall the same general trends are evident in these various estimates, even if the very specifics do differ.

Posted by: Josh Lehner | January 13, 2015

2015 Outlook: Middle-Wage Jobs

This week we’ll take a look at both the middle-wage job outlook in Oregon, and examine when the state may hit full employment, or when the labor market is fully healed. Get caught up to speed with the Economic Recovery Scorecard.

Our office defines the much-discussed category of middle-wage jobs as follows, based on our job polarization work (see full report, see short update.) It is important to point out that this analysis focuses on occupations and not industries of employment. Job polarization is occurring at the occupational level and is present across nearly all industries and firms. From our report:

Although [middle-wage jobs] still represent a majority of the workforce, their share of the job market is shrinking rapidly. For the past three decades, employment growth has become polarized, with the majority of job gains occurring at the high and low extremes of the wage distribution. The primary factors contributing to this polarization, including the effects of both technology and globalization, are expected to continue throughout this decade.


Middle-wage jobs accounted for over 8 out of every 10 job losses during the Great Recession in Oregon and only a small minority of the job gains through 2013. However 2014 was a much better year with middle-wage job growth of 2.7 percent, along the lines of overall job gains in the state. This means Oregon has regained 40 percent of its lost middle-wage jobs so far, even as the overall number of jobs in the state is currently at an all-time high. This is the typical business cycle pattern seen in each of the past 3 recessions where many middle-wage jobs are eliminated during downturns and are not replaced to the same degree as both high- and low-wage jobs during the subsequent expansion. What is the outlook for these jobs more broadly, especially considering the processes of polarization are expected to continue?

Key Middle-Wage Outlook Points

  • Middle-wage jobs are not going to be eliminated completely. Polarization results in a smaller share of middle-wage jobs as growth is strongest at the high- and low-ends.
  • Much of the recessionary losses and recent gains can be tied to two occupational groups: construction workers and teachers. As the housing market continues its rebound and as public sector budgets improve, so too will middle-wage jobs.
  • Key question is how fast (or slow) will polarization occur this decade. It is likely to be muted in the near term as cyclical gains in housing and government support jobs, however there remain structural impacts due to globalization and technology. The error bars in the graph below show jobs under various polarization scenarios.
  • Middle-wage jobs in Oregon are expected to reach pre-Great Recession peak numbers in 2017. However at that time they will represent 61 or 62 percent of all jobs, whereas back in 2007 they accounted for 66 percent of all jobs. Even under a reasonable, best-case scenario, the share will not return.


Additional thoughts on the drivers of middle-wage job growth from our report.

While the upper middle-wage jobs can be considered as being driven by population growth, these lower middle-wage jobs can broadly be considered as business support occupations. Administrative Support, Sales and Transportation all act as suppliers of labor and services to other businesses or employees. With increases in business operations, including headquarters, the demand for such occupations will increase even if technological advancements continue to eliminate a portion of these jobs. This provides an opportunity for continued investment into activities that foster both an entrepreneurial business climate and also recruitment and retention efforts of existing firms. The loss of significant headquarter operations in Oregon over recent decades has decreased the demand for some of these business support firms and workers.

All told, the outlook for the number of middle-wage jobs in Oregon is relatively bright today. Growth will likely be slowest among the production and admin/office support occupations but for the rest, 2015, 2016 and 2017 should all be pretty good growth years as the cyclical gains continue as the recovery becomes more broad-based in nature. However, over the longer term, the relative share of jobs is expected to continue to decline as high- and low-wage jobs see stronger growth.

Posted by: Josh Lehner | January 12, 2015

Ron Swanson Inflation

We’re going to start Monday off with something fun. Tomorrow starts the 7th and final season of NBC’s Parks and Recreation, which is one of my favorite shows. Ron Swanson, the libertarian Parks Department Director not only is comedic gold but has many fascinating personality traits. Chief among them are his eating habits and his lack of trust in fiat money (he has no bank accounts and stores his money in gold.) Now that the aging middle-manager is approaching retirement, I was wondering how well he is set-up for the next phase of his life. In particular, what has the price of gold done to his household budget and how have commodity prices impacted his favorite foods? (There’s quite a bit to analyze here. I did this for fun recently. Ask my wife.)

Ron is possibly best known for his love of breakfast foods, specifically bacon and eggs. Unfortunately for him, the real price of bacon and eggs in the Midwest is about as high as it has ever been. 2 lbs of bacon and 2 dozen eggs retails for about $14 today, up from around $10 for much of the past 20 years. However, even with the recent uptick in grocery store prices and decline in gold prices, the cost of bacon and eggs as measured in ounces of gold is still considerably lower than in recent decades.


Another Swanson favorite is the Turn ‘n Turf. Here, similar to bacon and eggs, the real price has increased considerably in recent months. Prices are back to the mad cow disease scare days of the early to mid-2000s. However Ron’s long-run game of investing in gold is still paying off for him so far, as Turn ‘n Turf measured in ounces of gold is still lower than in much of recent years.SwansonTurf

However, while the libertarian Ron may dislike the government in principle, his household budget is being squeezed from all sides. The costs of his favorite foods are increasing, while the price of gold is falling, however so are his real wages. Local government wages in Indiana are effectively flat in the past decade and down about 3 percent in recent years. As such, Ron needs to spend a higher share of his current income on his food than ever before.


To sum up, Ron is currently in pretty good shape although recent trends are worrisome. He faces two major risks to his outlook for both his current lifestyle and his retirement.

First, commodity price swings can wreck havoc on not only food prices but also the overall value of his assets since he is clearly not diversified in his savings and investments. Food prices are notoriously volatile, but do represent a risk nevertheless. However the price of gold is the lynchpin for Ron’s savings and lifestyle. So far his gold investments over the years have served him well, however the price of gold is falling — down about one-third in the past couple of years — but it still remains higher than in the 1980s and 1990s. Second, while public sector budgets are coming back, local government employment in Indiana isn’t growing (about 5% below pre-recession levels) and wages are falling. Furthermore, while many states’ pension funds are underfunded, Indiana’s appears to be in worse shape than the typical states according to a Morningstar report. Ron may be living the good life now in a cushy middle-manager job, big gold investments and a new family, however the outlook is highly uncertain.

Posted by: Josh Lehner | January 7, 2015

Economic Recovery Scorecard

Next week we’ll take a look at the outlook for the much discussed middle-wage jobs, plus a broader outlook on when the Oregon economy may hit full employment. In advance of those reports, today we’ll take stock of Oregon’s (and the nation’s) recovery across a host of economic measures, in a new chart called the Economic Recovery Scorecard.

Many headline economic numbers have reached pre-Great Recession peak levels, including jobs, income, state GDP, exports and the General Fund. However you can’t eat GDP and we know all is not well with the economy, even if it truly is getting better. Our office has highlighted some of the bigger picture issues with the economy in recent years, including the long-term unemployed, the urban-rural divide and middle-wage jobs. To take the analysis a step further, our office is introducing the Economic Recovery Scorecard which examines the recovery across 39 individual economic measures. While the top line data are back to peak, or at historic highs, how do each of these other measures compare? The chart shows how far each of these measures has recovered from the depths of the recession through the most recently available numbers. Click on the graphic for a larger, easier to read version.


What Oregon and the nation have regained in recovery is not exactly the same as what we lost. Differences abound across nearly all measures. One example is the number of jobs. Overall the economy has fully regained the number of lost jobs due to the Great Recession. However we have not regained the same jobs that we lost. Traded sector employment is about 70 percent regained in Oregon, while the broader middle-wage jobs are about 40 percent regained. Continuing further, public sector budgets are back but local government education employment (largely teachers) is just 10 percent recovered. So even as the total number of jobs is currently at an all-time high, the specific nature and types of employment clearly is not. Similar stories across metrics can be told if one focuses on the housing market, or demographics, or any other swath of the economy. The headline numbers are largely back, but the specific underlying components are still at various stages of recovery.

Additionally, our office is not expecting all of these measures to get back to peak levels, regardless of the strength in the economy. Some, such as the overall labor force participation rate, are down in large part due to demographics. (Plus some due to a weak economy, more on that next week) Given the way LFPR is measured (share of total population 16+), there is a high probability it will not regain its peak rate circa 2000 until the Baby Boomers are not longer with us. That’s due to the definition of the measure and demography, not about this particular economic expansion. Other measures, like the share of young adults living at home, the number of counties or states back to their employment peak, or even middle-wage jobs (a lot of construction workers and teachers) will take time to recover, even with a relatively stronger economy. Provided a sufficiently strong recovery that lasts, which so far we are getting for the most part, our office’s expectation is that these measures will recover. Not overnight, but in time they should/will get back.

Below is an analog U.S. version of the Economic Recovery Scorecard. Nearly all measures are the same, however there are a few differences due to data limitations and the like. This concept could also be used for other states, to look at employment across industries, or across states, or counties within states and the like.


Stay tuned next week as we’ll talk about the outlook for middle-wage jobs in Oregon and also when the state can reasonably expect to get back to something along the lines of full employment.

Posted by: Josh Lehner | December 31, 2014

Graph of the Week: Unemployment Rates Across Metros

Like any individual economic measure, the unemployment rate is flawed. It can go down for bad reasons (people give up looking for work) and up for good reasons (more people looking for a job.) That’s why it is important to not just look at the unemployment rate itself, but the underlying components as well. As Danielle Kurtzleben notes over at Vox, the metros across the county with the largest unemployment rate declines are also losing labor force as well. Even if the number of jobs in the local economy remains flat, but more unemployed people drop out of the labor force, the unemployment rate goes down even though many would argue — myself included — that is not a signal that the economy improved.

To get a better gauge of how pervasive these patterns are across the country, and here in Oregon, I plotted the latest data across all U.S. metros. The horizontal axis shows the unemployment rate decline over the past year, while the vertical axis shows the labor force change. There is quite a wide range of labor force behaviors for any given unemployment rate change, as seen in the graph.

MSAUnempRate1114Broadly speaking, the metros best off are those in the upper left-hand quadrant. Their local unemployemnt rate is declining and they are adding to the labor force. That means that not only are more people looking for a job, possibly raising potential economic growth even further, but they are adding jobs at an even faster rate than they are adding people. 5 of Oregon’s 6 metros fall into this group, while Medford is just barely losing labor force over the past year. None of the state’s metros, nor the state for that matter, have seen as large of an unemployment rate decline as the nation overall (the yellow star) but we are also seeing larger labor force gains. To me, even though the economy is still not fully healed and likely won’t be for another couple years (more on this in the near future), the pattern of growth and the rate of growth is encouraging. The job growth acceleration of 2013 has held all through 2014 and we are seeing the labor force response (and population growth) that you would expect to have. All told, 2014 was a big improvement in the Oregon economy and the fundamentals are starting to exhibit their normal dynamics.

Lastly, the worst outlier down in the right-hand corner is Atlantic City where the labor force cratered nearly 5 percent year-over-year and the unemployment rate still rose 0.3 percentage points. Given the ongoing struggles with the gaming industry (see our report) there is at least a plausible story to tell for Atlantic City.

Posted by: Josh Lehner | December 29, 2014

2015 Outlook: Measure 91

One of the more interesting and yet unknowable questions in the year ahead is what the impact of Measure 91 will be for Oregon. The basics of the vote itself and the direct implications for Oregonians have been well covered. However, the broader and bigger impact on the state’s economy and public resources are not known. The revenue estimates are fairly modest in size — relative to the size of the state budget — and the track record of such estimates in Colorado and Washington are somewhat mixed. That does not mean the impact won’t be felt, as it will. Bringing a largely illegal activity into the legal marketplace will have many benefits including the tax revenue but also additional jobs that will now have legal protections as employees can be covered under the unemployment insurance system for example, plus new (legal) businesses, operations, the regional impact in places like Southern Oregon and the like. Of course, as with all vices, not every aspect is positive and there are some downside risks associated with legalization, even if the research consensus is that marijuana is a safer alternative than other options.

However, from an economist’s perspective the two most interesting aspects are consumer preferences and potentially problematic market distortions. As for consumer tastes, what is the substitution effect of legal marijuana and how will it impact, say, alcohol and tobacco sales. Are these products purely substitutes? To what degree are they complements? University of Oregon professor Ben Hansen gave a very good and informative presentation at the Oregon Economic Forum a couple months back. Among other items, he discussed how not only are other types of products substitutes for marijuana, but how the various markets for marijuana itself can be substitutes, these include both the medical and recreational markets but also personal cultivation.

Along these lines, one interesting but also potentially troubling development is the differential between Colorado’s medical and recreational marijuana markets, due to different tax structures. In essence, due to higher taxes on recreational marijuana, it is less expensive to buy medical marijuana in Colorado. As such the state has not seen a big switch into the recreational market from medical patients and even seen medical sales increase. However, Colorado has seen a switch from the black market into the legal market (be it medical or recreational). That’s the big win from both an economic and societal point of view, bringing the illegal market into the legal one.

However these market distortions between medical and recreational can be problematic not only in terms of rules, costs and regulations but also in terms of achieving the desired outcomes or goals. Consumers will likely figure out the best option for themselves (below is a hypothetical example using Oregon’s medical application fees and Colorado’s price differentials) however that may not be the best outcome for the state overall. That’s why the work the OLCC is currently undergoing is so important — to figure out what those outcomes should be and how to set up the rules and marketplace to best achieve them.


Lastly, one additional tidbit that was somewhat surprising — to me at least — was the overall lack of clear connection between the voting results of Measure 91 and the local medical marijuana population already in the state. Besides the obvious that cultural or societal preferences and ideology has swung significantly in favor of marijuana legalization, regardless of the local medical population, there are a few additional possibilities for these results. One, particularly for a place like Josephine County with a very large OMMP patient population and yet only voted 50-50, could be that the largest medical marijuana market participants did not want to rock the boat, so to speak. They may be relatively content with the existing market and not wanting to shift the landscape for something unknown. Another possibility may be that these two populations aren’t the same. The voting population may be significantly different than the medical marijuana population. Another may be that while OMMP patients are equivalent to about 2 percent of the adult population in Oregon, that may not be a large enough share to influence overall voting patterns. Regardless, these results are interesting to see and the Oregonian has a nice interactive map of voting results across the state, even down to the precinct level in some places.


Stay tuned for a few more posts on the 2015 outlook in the coming weeks, plus a new economic recovery scoreboard that tracks progress across a whole host of measures.

Our office has received a number of comments, questions and requests about the impact of Measure 91 in Oregon, so I thought I would write down a few thoughts and concerns from our perspective heading into the new year. To be clear, so far our office has not been involved in the process at all. As with all initial revenue estimates, those are done by the Legislative Revenue Office (plus there were outside estimates as well) and since the Measure 91 revenues do not go to the General Fund (which is largely our focus) we have not been involved at this point.

Posted by: Josh Lehner | December 16, 2014

Oregon Employment is Back …. to Pre-Recession Peak

Oregon just passed a big milestone in the recovery, having regained all of its lost jobs from the Great Recession. As we wrote last month: “Of course, reaching pre-recession levels is not an end goal, but it is an important milestone.” See that report for a good, big picture summary of the recovery so far. The bonus good news is that our office can now retire this graph comparing job losses across recessions. We have made it out. Even a hair quicker than expectations and ahead of the 1980s recovery. Of course the economy is still not firing on all cylinders, even if the recent data flow is more positive and encouraging.


Furthermore, our office can now start talking again about the strength of the net expansion. That is, how many jobs are we adding above and beyond pre-recession peak levels. It’s been 3 years since we have showed this graph, but it’s dusted off now, upgraded to the latest version of Office and ready to go. In 5 of the previous 6 expansions, Oregon’s net growth has outpaced the nation. The exception being the 1980s recovery when Oregon lost 4 times the number of jobs as the typical state (in percentage terms) and even then, we nearly caught up. In 5 of the previous 6 expansions in Oregon, the state has added 15% or more in terms of total jobs, above and beyond pre-recession levels. The exception being the housing boom recovery, which was by far the weakest and most lackluster expansion on record, prior to the Great Recession. This recovery has been slower still. However it appears to be gaining speed both in the second tier metros across Oregon and, more broadly, nationwide. The economy is now on the upswing and Oregon is growing faster than the average state, per our usual pattern. Yes, Oregon still lags the average state relative to pre-recession peaks, however that gap is closing fast and Oregon has already made up 60% of the gap.


Lastly, how do these strong job reports relate to the kicker given we are so close today? The short answer is that we are still not forecasting a kicker, even with big employment reports the past 2 months. The reason is we have stronger job and stronger wage growth built into the forecast already. Our office is also expecting a big April for income tax collections. The combination of stronger growth and a big April bring us nearly to the kicker threshold, but not over it. To breach the threshold we would need to see exceptional growth. Yes, these jobs reports, if they are correct, are exceptional, however we have yet to see a corresponding jump in withholdings out of paychecks. Withholding today is growing faster than much of the recovery, however not quite as strong as the job numbers indicate. At least not yet. Our office is still in a wait and see mode regarding the kicker.

Posted by: Josh Lehner | December 12, 2014

Household Debt Deleveraging, State Edition

One very important economic measure is that of household debt (relative to income) and it’s impact on consumer spending and economic activity more broadly. As economists have discussed quite a bit in recent years, the typical American household became overburdened by their debt during the housing boom. This became even more apparent once the bust came, with falling employment and income. As our office has pointed out previously, the process of household deleveraging has been underway both nationally and here in Oregon, even at the county level. Unfortunately the underlying debt data by state is not readily available like it is at the national level. However, our friends at the Federal Reserve Bank of New York have quietly rolled out an update to their data for 2013q4. Below is a snapshot of this household debt, relative to income for each state. It is important to point out that about three-quarters of household debt is mortgage debt. Thus states with higher home prices, or a higher share of households with a mortgage, tend to have higher overall debt burdens, even relative to income.


More importantly, how have these numbers changed over the years? Are households across the country really back at sustainable levels of debt? A couple of points. First, yes, household debt overall and relative to income is lower than during the housing bubble era. Second, much of this improvement has come in mortgage debt, however it is not like households have made double payments in recent years. We know a significant portion of the decline is due to foreclosures. The silver lining to losing the house is you also lose the debt. Third, with very low interest rates the costs of financing debts is also very low. The Fed’s debt service and financial obligation ratios are at or near all-time lows. So the effective level of debt, measured by what a household has to pay to finance it, is even lower today than the headline numbers indicate.StateHHDebt99to13

All told, after falling for five straight years, the debt to income ratio in the typical state held steady in 2013. In fact, more states’ debt to income ratio increased by more than 1 percentage point than decreased by a similar amount for the first time since 2007. These new, state level numbers do indicate and back up the national trends. It does appear that the process of household deleveraging has ended.


Posted by: Josh Lehner | December 11, 2014

Education, Migration and the Service Class

Beyond the commonly heard refrain that the Great Recession has ushered in a new, larger educated service class, which turns out to be largely untrue, another common worry is that of the type of migrant (or degree field, like STEM, humanities, etc) that cities attract. Is your regional economy attracting enough of the “good” degrees?

Well, what constitutes “good” is certainly open to interpretation. However, below I compare educational attainment, degree field and migration across the largest MSAs in the country. I use the IPUMS-USA 2013 ACS micro data. Due to data limitations, I use only in-migration (and rates) and not net migration. This is unfortunately but also something I cannot readily fix at the moment and the two measure are highly correlated in most cases. Additionally this is just one snapshot in time.

The first graph shows there is a positive relationship between local educational attainment and in-migration rates of college graduates. What’s interesting here from a Portland perspective is that PDX’s migration rates are equal to cities with much higher educational attainment. Overall Portland is pretty average in terms of educational attainment, relative to other big cities, however our migration trends are very strong.

EducMig2013The second graph divides the college graduates into two camps: those with a Business, STEM or Health degree and those that have a degree in a different field. This is a rough cut to separate degrees and while not perfect, does provide a reasonable starting point. I think. Here, Portland has an above average concentration of All Other degree and a below average concentration in Business/STEM/Health degrees. This result is very similar to previous work done by EcoNorthwest for the Portland Business Alliance. Note: You add together the x and y-axis values to get total bachelor’s or higher share of population.

DegreeType2013Third, combining these two calculations shows in-migration rates by broad degree group across the largest metros in the country. Here is easy to see which cities have high (or low) migration rates. Portland is significantly above average for both broad degree groups (5th highest in-migration rate overall). Although it is weighted more towards the All Other. For those that are worried about degree field, the good news is that while Portland is currently below average for educational attainment in Business/STEM/Health degrees, the growth and migration differential is such that ground is being gained on the other large metros.

MigDegree2013Apologies for the death by scatter plot.

This post initially included some additional state level work on jobs requiring a degree vs those that do not. Our office will continue to work on this topic and republish it, along with a better, more clear explanation of what our findings really show.

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