Oregon Office of Economic Analysis

Based on previous research, Portland is driving statewide employment growth and the other metropolitan areas in Oregon have yet to fully share in the recovery. There have been pockets of employment gains around the state, however nothing to the extent that the state’s largest MSA has seen. Given that Seattle and Washington largely follow the same pattern, I was curious to see how the other large MSAs around the country were doing and how the Northwest cities compared. It turns out that all 29 of the largest metros in the country (those with populations greater than 2 million) have turned the corner from their recessionary lows. There is substantial variation as the the severity of the local employment losses, however each city has seen at least some employment growth in recent years.

I had already been working on this and then on Tuesday the Urban Institute published a new research report on the largest 100 MSAs in the country and how they have fared over the Great Recession. Overall the Urban Institute does great research however I was surprised to find that they identified 12 out of the 29 largest MSAs as either “Down, Not Out” or “Vulnerable” based on their employment in recent years. The other categories available are “Resistant” and “Resilient” which are for cities that have seen employment growth in this recovery. Based on the graph and work above, how can this be? It sure seems like each of the top 29 MSAs have seen growth. It turns out that it is based on their methodology and the dates used for calculating employment losses and gains.

The Urban Institute uses the NBER’s official recession dates to calculate employment changes (Dec 2007 – Jun 2009). As we know the nation overall and most states continued to lose jobs well past Jun 2009 as it is another jobless recovery. It was not until Feb 2010 that the nation overall hit its employment trough and began adding jobs. Changing or tweaking the beginning and ending dates used in the calculations can affect the outcome of the research. Given that not all regions have the same business cycle, I prefer to use each individual area’s employment peak and trough to define its labor market recession. The graphs above are calculated based on when each city reached its highest employment level pre-recession and then losses are counted until the city reaches its minimum level and begins adding jobs on a sustained basis. Applying these two different methodologies does yield somewhat different results as I would say that all of the largest metros in the country have bounced back, at least somewhat, so far this recovery.

The fact that the very largest cities have seen growth got me thinking how cities of other sizes have done as well. Taking the Bureau of Labor Statistics data for all available MSAs yields the following results (there are over 370 MSAs). As seen in this first graph, large cities are the minority. 72% of all MSAs have less than 200,000 workers (2011 data) and 84% have less than 400,000 workers.

Calculating employment changes based on each individual city’s employment levels reveals that the median city in each grouping has experienced a relatively similar recession: steep losses followed by slow growth.

However, if one were to use hard dates for all cities instead of allowing each city’s particular peak and trough dates to be flexible, the picture is not exactly the same. (See the full set of slides for more information) The purpose here is not to criticize the Urban Institute’s research as it is overall a good report, however having been in this particular data set already, it helped me see different areas that I had missed before. One area in particular are the dates when different cities fell into recession or began their expansion. The following graphs shows how each cohort of cities – again based on their employment size – fares relative to the national pattern.

It does not appear that city size had any particular affect on when an MSA began losing jobs as the Great Recession was an equal opportunity disaster. However, within these groups there is always variation and those cities that experienced a larger housing boom and bust typically went down first. However, on the upswing, larger cities turned the corner first. Two factors that likely play larger roles here are Economies of Agglomeration and the exposure to Housing and Government. Smaller cities have a larger exposure to both Construction and Government – as a share of their workforce – not because they have so many of these jobs, rather because they do not have as many other jobs (advertising and law firms, as two examples) to offset these industries, which one finds in the larger metros. Given the severity of the housing downturn and the state and local government austerity in recent years, having more of your local economy in these two sectors would likely result in a deeper recession or slower recovery.

Given all of this, it now means many small and medium sized cities are now playing catch-up in terms of growth. As of June 2012, 17 cities (~4.5% of all MSAs) have yet to reach a definite employment bottom – meaning they’re still losing jobs. 15 out of these 17 are cities smaller than 100,000. 8.6% of the smallest MSAs (< 50,000 workers) and 6.4% of the second smallest MSAs (50,000 – 100,000) have yet to see any sustained employment gains.

Finally, since I have all these wonderful statistics on cities by size, how do Oregon’s MSAs compare? The following graphs illustrate each Oregon MSA relative to its U.S. cohort. The red bars represent the median city nationwide in that size category.

The graph’s a little hard to read however if you click on it, it will show better detail on a new tab. Overall, Corvallis is outperforming its small metro peers and Portland is slightly more volatile than its peers, however on net, just about the same as other large cities. Where Oregon really differs from the median are in the small to medium sized metros. Bend and Medford took a substantial hit during the recession – largely the aftermath of their substantial housing downturns – and have only come back slightly from their employment lows. A similar story can be told for Eugene and Salem, however not quite as severe as Bend and Medford. Stepping back and examining Bend, Eugene and Medford’s employment series it appears that they’re continuing to bounce along the bottom with no real sustained growth, however from their lowest points each city has seen 1 or 2% employment growth. Salem is somewhat of a different story as it declined about the state average during the recession, gained a few jobs from its recessionary lows, however is now losing jobs again in the most recent six months. Salem still has seen net employment gains from its low point however the recent trend is certainly negative.

One of the items discussed recently with the Governor’s Council of Economic Advisors is to what extent the forecast calls for growth in the state outside of Portland. Given our office forecasts at a statewide level, we usually make no explicit assumptions about the various regions within the state. So far Portland has gained more jobs than the statewide figures show, meaning all other counties combined have continued to lose a few jobs in the past 2+ years. As the housing market begins to recover and local governments begin to stop cutting back further as their budgets stabilize or even improve, these two items should lessen the two main drags on economic growth, leading to some employment growth in the small and medium sized cities in the state. Expectations are not for  strong growth, however a sustained upturn is significantly better than the current pattern of bouncing along the bottom.

For a full set of slides, including many more graphs not shown here, please click here: Top MSA Employment

P.S. This also fits in nicely with Matthew Yglesias’ piece on Portland over at Slate.