Forecast for Calhoun County was an OK year

Transcription

1 Forecast for Calhoun County 2013 was an OK year George A. Erickcek Brian Pittelko W.E. Upjohn Institute for Employment Research January 16, 2014

2 Thanks to Our Sponsors 1

3 Outline Most think that the economy is stronger than it looks only 74,000 new jobs in December The state economy continues to be driven by the car industry Calhoun County had a positive but disappointing year Forecast: more employment growth 2

4 GDP grew by 4.1 percent in the third quarter, and the forecast is positive Percent change in GDP (average annual rate) The last quarter of the year is expected to be slow as businesses work off unwanted inventories

5 Capacity utilization has not yet fully recovered but business confidence is up 70 Purchasing Managers Index for Manufacturing and Industrial Capacity Utilization 85.0 PMI (>50 = expansion; <50 = contraction) Manufacturing PMI Capacity utilization Percent utilization (%) 4

6 Employment conditions have improved; however, the number of job seekers per opening is still double what it was in

7 Employment has been slow to recover Employment Index (100 = Trough) Current Months from the trough 6

8 Yes, we are coming off a bad one Recession Employment Loss in Recession Employment Gains in Expansion Net Change Current -7,464 6,299-1, ,593 4,933 3, ,242 9,287 8, months since the trough and we are still off more than a million jobs in the nation. 7

9 Unemployment is falling, but there are still too many long-term unemployed workers Unemployment rate U.S. Unemployment Rate and Long-Term Unemployment In December, the unemployment rate dropped because 347,000 individuals left the workforce Unemployment rate Percentage unemployed 27 weeks or more Percentage unemployed 27 weeks or more 8

10 Consumers appear to be holding more debt and not feeling that good about it Consumer Confidence and Change in Consumer Debt Billions ($) Index: 1995 = Consumer debt Consumer confidence 0 Source: Conference Board and the Federal Reserve. 9

11 Interest rates and inflation are moving upward but are still at historically low levels 7.0 Interest Rates and Inflation 6.0 Annual percentage rate year Treasury bill 30-year mortgages 3-month Treasury 12-month change in CPI-U

12 There isn t a lot of demand for loans Net percentage of respondents Federal Reserve Senior Loan Officers Survey: Demand and Lending Standards for Commercial and Industrial Loans by Medium-to-Large Firms Reporting tightening standards Reporting stronger loan demand Q Q Q Q Q Q1 11

13 So let s sum up The economy is expected to grow faster in 2014 than last year, but will still be below what we want The major problem is the lack of demand as seen in our capacity utilization rates and loan demand This means the number of job seekers per job will remain too high Don t expect anything from Congress and the Fed will slowly and I mean slowly tighten the money supply But there is something else as well 12

14 Starting in 1981 and continuing until today, most of the nation s income growth has been earned by the top 5 percent Household income ($000s) Income Level Quintiles, 2012 Dollars Lowest Second Third Fourth Lower limit of top 5 percent Source: Census Historic Income. 13

15 Why does it matter? Inequality limits consumer expending and, hence, slows the economy Research suggests that historical trends in upward mobility are declining Consumer confidence surveys indicate that households future expectations are at record lows 14

16 What should be done? That is the question Very little political will to make the tax code more progressive Increasing educational opportunities is a standard response but it is a long-term solution Current efforts are to increase the minimum wage 15

17 The state s minimum wage of $7.40 has not changed since Minimum Wage, , Nominal Wage ($) Michigan US 16

18 In real terms, the minimum wage has not kept its value 10 Minimum Wage, , Real Oct 2013 $ Wage ($) Michigan US

19 Worries: So should we increase the minimum wage? Negatively impact employment Recent research indicates that this may not be the case Some individuals who earn the minimum wage do not live in low-income households. This is true. My preferred solution is to increase the Earned Income Tax Credit Bottom line: this issue will not go away 18

20 Turning to Michigan 2013 Employment Growth Estimates: total jobs created, up 1.4% 17,570 manufacturing jobs, up 3.3% U of M s Forecast is positive 66,730 additional jobs in ,050 additional jobs in 2015 Source: University of Michigan. 19

21 During the past four quarters, the state s employment has increased by 64,400 Employment Change, 3 rd Quarter 2012 to 3 rd Quarter 2013 Total Construction Manufacturing Wholesale Retail Transportation & utilities Information Financial Business & professional Education & health Leisure & hospitality Other services Government Implied manufacturing multiplier is 3.9 which is a bit too high Employment (in 000s) Source: Michigan Labor Market Information, CES. 20

22 Auto sales continue to pick up and are forecast to drive past 16 million units in million units in Source: BEA. 21

23 The auto outlook is promising The current fleet on the road is old, very old 11.4 years Incentives are back New selections there will be 40 new launches in 2014 Financing is available 22

24 Construction activity has a long way to go 60,000 Number of Building Permits Issued* 50,000 40,000 30,000 20,000 10, Total units Single family *2013 is an estimate Source: U.S. Census. 23

25 Calhoun County Modest employment gains and a declining unemployment rate Lagging retail market Still, it has out-performed comparison MSAs Talent attraction remains a challenge Forecast: continued growth 24

26 Employment gains have been modest: 370 jobs in the four-quarter period, 0.7% increase. Mining, Logging, Const. Employment Change, Q to Q Manufacturing Trade, Transport., and Util. Financial Prof. and Business Education & Health Leisure & hospitality Other Services Government Given a 2.3 employment multiplier, manufacturing employment can be credited for powering the entire economy forwared Source: BLS CES. 25

27 The lack of linkage between manufacturing and trade is troublesome 250 Employment Change, Q to Q Manufacturing Leisure & hospitality Mining, Logging, Const. Trade, Transport., and Util. Financial Education & Health Prof. and Business Other Services Government Source: BLS CES. 26

28 The good news is that county s unemployment rate is dropping; the bad news is that it is for the wrong reason Unemployment Rate for Calhoun County Source: BLS LAUS and Upjohn Institute. 27

29 Unfortunately, too many people have been dropping out the labor force Year November-to-November Change Labor Force Change Employment Change Unemployment Change , , Source: MI Labor Market Indicators, Local Area Unemployment Statistics. 28

30 Employment in the county is still 1,500 short of its pre-recession employment levels 110 Total Employment Index (2000=100) The county lost 4,400 jobs during the recession and 85 gained 2,800 jobs, so far in the recovery United States Michigan Calhoun County Source: BLS LAUS and Upjohn Institute. 29

31 Employment in the county s service sector has hit a plateau Private Services Employment Index (2000=100) United States Michigan Calhoun County Source: BLS LAUS and Upjohn Institute. 30

32 The county manufacturers have added 1,500 jobs since the recession 105 Manufacturing Employment Index (2000=100) United States Michigan Calhoun County Source: BLS LAUS and Upjohn Institute. 31

33 Employment gains are clearly auto driven Employment Change, Q to Q Food Printing Chemical Plastics & Rubber Nonmetallic Mineral Primary Metal Machinery Fabricated Metal Transportation Electrical Equip. Misc. Source: BLS QCEW. 32

34 Construction activity is still flat Construction Permits Issued, Calhoun Co Total, All Structure Types Single Family Houses Source: U.S. Census. Year to date, November

35 And evidence suggests that housing prices are stable at best FHFA Housing Price Index (1995=100) Battle Creek Source: FHFA Housing Index. 34

36 Comparison Analysis Comparison Areas: Altoona, PA Anderson, IN Jackson, MI Johnstown, PA Lebanon, PA Mansfield, OH Monroe, MI Muncie, IN Springfield, OH Wausau, WI Williamsport, PA 35

37 Comparison Criteria All one-county metropolitan areas Within Midwest region Not college town or state capitol All within 15% population of Calhoun County (plus Jackson) 36

38 All of the comparison areas are experiencing lackluster employment growth Percent Change in Total Employment, Jan Nov 2012 through Jan Nov 2013 Battle Creek, MI Comparison Average Anderson, IN Williamsport, PA Lebanon, PA Altoona, PA Muncie, IN Jackson, MI Johnstown, PA Springfield, OH Monroe, MI Wausau, WI Mansfield, OH -1.1% -0.1% -0.2% -0.3% -0.5% -0.7% 0.0% 0.6% 0.3% 0.2% 0.1% 1.0% 1.6% -1.5% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% Source: BLS. 37

39 Calhoun County s manufacturing sector is doing better than average... Percent Change in Manufacturing Employment, Jan Nov 2012 through Jan Nov 2013 Battle Creek, MI Comparison Average Springfield, OH Monroe, MI Jackson, MI Altoona, PA Anderson, IN Muncie, IN Mansfield, OH Lebanon, PA Wausau, WI Williamsport, PA Johnstown, PA -1.9% -2.1% -0.2% -0.7% -0.9% 0.7% 1.8% 1.7% 1.6% 1.1% 2.7% 2.7% 4.7% -4% -2% 0% 2% 4% 6% Source: BLS. 38

40 ... as are its service sectors Percent Change in Service Providing Employment, Jan Nov 2012 through Jan Nov 2013 Battle Creek, MI Comparison Average Anderson, IN Muncie, IN Williamsport, PA Johnstown, PA Altoona, PA Jackson, MI Lebanon, PA Monroe, MI Wausau, WI Springfield, OH Mansfield, OH -1.1% -1.1% -0.3% 0.0% -0.2% -0.2% -0.4% -0.6% -0.6% -0.7% 0.1% 0.7% 1.6% -1.5% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% Source: BLS. 39

41 The Calhoun County unemployment situation is slightly better than average Average Unemployment Rate, Jan Nov 2013 Battle Creek Comparison Lebanon, PA Wausau, WI Altoona, PA Springfield, OH Williamsport, PA Monroe, MI Mansfield, OH Jackson, MI Johnstown, PA Muncie, IN Anderson, IN Source: BLS. 40

42 This is an ongoing challenge for all smaller MSAs attracting talent Bachelor s Degree or Higher, Age Battle Creek Comparison Wausau, WI Williamsport, PA Muncie, IN Johnstown, PA Monroe, MI Altoona, PA Springfield, OH Lebanon, PA Mansfield, OH Jackson, MI Anderson, IN Percent of age group Source: ACS

43 Nevertheless, knowledge-based entrepreneurship is a strength of the county Self-Employed Professional, Scientific Technical Employed Battle Creek Comparison Monroe, MI Anderson, IN Mansfield, OH Jackson, MI Springfield, OH Williamsport, PA Muncie, IN Altoona, PA Lebanon, PA Wausau, WI Johnstown, PA Percent of industry Source: ACS

44 Just a reminder that education matters 70 Annual Income by Educational Attainment 60 Income ($000 s) Less than HS High school Some college Associate's Bachelor's Graduate Source: IPUMS USA

45 Change in the number of job Utilities Construction Manufacturing Wholesale Trade Retail Trade Transport. And Warehousing Information Finance and Insurance Real Estate Prof., Sci., Tech Management Admin, Support, Waste Educational Services Health Care and Social Asst. Arts, Ent., and Rec. Accommodation and Food Other Services Public Administration postings, 2012 to 2013 Job Posting Index, 2012 to 2013 All Industries Ratio to total growth Source: Burning Glass Labor Insight. 44

46 Job postings for knowledge-based workers Grand Rapids Kalamazoo Monroe Battle Creek Jackson Muskegon Ann Arbor Holland Lansing Detroit Flint Saginaw Benton Harbor Bay City lag in nearly all MSAs in the state Job Posting Index, 2012 to 2013 Architecture and Engineering Occupations Ratio to total growth Source: Burning Glass Labor Insight. 45

47 Kalamazoo Monroe Grand Rapids Jackson Detroit Ann Arbor Lansing Muskegon Saginaw Battle Creek Flint Holland Bay City Benton Harbor Battle Creek is not a magnet for geeks Job Posting Index, 2012 to 2013 Computer and Mathematics Occupations Ratio to total growth Source: Burning Glass Labor Insight. 46

48 On to the 2014 and 2015 forecast Not so fast, how good was your last year s forecast? The focus group blew it again! 47

49 So, how did we do last year? The group was too optimistic Calhoun County Estimated and Forecasted Employment Growth for % 3.0% Total Goods-producing Service-providing Government 3.2% Percent change 2.5% 2.0% 1.5% 1.0% 1.7% 1.0% 2.0% 1.4% 0.7% 1.2% 0.9% 0.5% 0.0% Forecast Estimate Source: Upjohn Institute. 48

50 Recent business reports have been robust Bleistahl Cosma Castings Michigan Denso Janesville Acoustics Post Cereal TRMI Inc 49

51 2014 and 2015 Employment Forecast for Calhoun County 3.0% 2.5% Total Goods producing Private services Government 2.4% Percent change 2.0% 1.5% 1.0% 0.5% 1.0% 1.5% 1.4% 2.0% 1.6% 0.7% 1.6% 1.7% 0.9% 0.1% 0.0% -0.5% -0.3%

52 Last words 2013 was a good year for Calhoun County Still, the drop in the area s unemployment rate was due largely because individuals were leaving the workforce The link between the area s manufacturing sector and its service sectors is very weak, suggesting strong retail leakage from the county Again, I believe 2014 will be a better year however, this has been the fourth year in a row that our forecast has been too robust 51

53 Forecast for Calhoun County 2013 was an OK year George A. Erickcek Brian Pittelko W.E. Upjohn Institute for Employment Research January 16, 2014