Posted by: Josh Lehner | January 9, 2012

Expansion Employment Growth

Given that the economy has been in expansion for two and one half years (per NBER dates) and since early 2010, employment at the national level has continued to increase, the questions and framework for thinking about the economy now turn toward the strength of the expansion, along with other concerns such as drivers, drags, sustainability, duration, risk of recession and the like. However, we first take stock of where we are today, relative to previous expansions. The following graphs compare the employment growth following each recession since 1953 at both the U.S. and Oregon levels.

Note that the Trough in all of the following graphs is defined as the lowest point for Total Nonfarm Employment during each business cycle, not strictly NBER dates. For the current expansion, Oregon’s trough date is Dec ’09 while the U.S. date is Feb ’10.

For the U.S. overall, Total Nonfarm Employment has grown about as quickly as the previous two expansions (following the 1990 and 2001 recession), however the Private Sector growth is nearly identical to the expansion following the 2001 recession. Today the major drags on economic growth (and employment) are Housing and Government. While during the expansion following the 2001 recession Housing was firing on all cylinders, Manufacturing was a major drag and never really added back the lost jobs. So while one can identify the major issues today affecting the economy, it can be easy to forget that each cycle has its own issues, both good and bad.

The Oregon versions of the same graphs show a largely similar picture, however, whereas the US’ current expansion is following a post-2001 recession path, Oregon is following a post-1990 recession path.

It is clear that Oregon’s employment picture is recovering at a glacial pace and the current expansion in Oregon is as bad as the state has seen. Total Nonfarm Employment in the state is on its slowest recovery post-WWII, and the Private Sector is adding jobs at the same pace as it did following the 1990 recession.

In our view, two of the main reasons for the slow recovery are Manufacturing and population growth. The outright decline (and relative decline) of Manufacturing in the economy is one of the contributing factors to the jobless recoveries the U.S. economy has experienced in recent decades. During previous post-WWII recessions, manufacturing employees were temporarily laid off, or furloughed, due to decreased demand however when the expansion started these workers were rehired for their same positions to fill the new orders. As Manufacturing employment declines (and its share of total employment falls) this cyclical recovery within the industry has less of an effect on total employment and the rebound is less pronounced. Another major issue facing Oregon in recent years is low population growth rates. Oregon’s population growth typically outpaces the national rate, sometimes substantially so, and the fact that the state has had three years of less than 1.0% growth is a negatively contributing factor. Our office’s most recent population forecast projects another two years of sub 1.0% growth (2012 and 2013). Two reasons for lower than normal population growth: lack of economic opportunities and the housing market. People tend to move to where there are jobs, however today jobs are relatively scare everywhere. Oregon’s in-migrants overwhelmingly come from California and when Oregon’s economy is doing better than California’s the number of migrants increases while when the opposite is true the level of migrants slows, however it does remain positive. Second, the housing market issues slow migration as well. It becomes more difficult to sell a house when the mortgage is underwater or equity is very low compared to an environment where home prices are rising.

Finally, this last graph simply illustrates the fact that even with the string of lackluster employment reports over the past nine months, Oregon’s employment growth this expansion is on par with the U.S. growth – due largely to Oregon’s strong job gains in late 2010 and early 2011. While Oregon typically has more pronounced business cycles than the U.S., the current employment expansion is not following this high beta pattern, however the state is not lagging behind the nation either.


Responses

  1. […] Here are two charts; They are indexed to the trough of the antecedent recession. (Via OOEA) […]


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