Fort McPherson. Atlanta, GA MSA. Drivers of Economic Growth February Prepared By: chmuraecon.com

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1 Fort McPherson Atlanta, GA MSA Drivers of Economic Growth February 2014 Diversified and fast-growing economies are more stable and are less sensitive to external economic shocks. This report examines recent economic trends and industry structure in the Atlanta-Sandy Springs- Marietta, Georgia Metropolitan Statistical Area (MSA) and can inform local leaders and decision makers who are formulating development strategies. Looking at individual indicators in isolation can mask larger trends so we present key drivers of economic growth which together give a more complete picture of the regional economy. Since the labor market recovery began in the second half of 2010, job growth in the Atlanta MSA has been at or above the national trend; this above average employment growth suggests a healthy regional economy. In more positive news for the area s labor market, average annual wage growth has exceeded national wage growth for 10 of the last 12 quarters. While the unemployment rate in the MSA has been above the national average since the recession ended, the jobless rate in the Atlanta MSA was only 0.2 percentage points above the national average as of November Industries in the health services sector and professional, scientific, and technical services sector have added jobs at a healthy pace in the MSA over the past five years while employment in the construction and manufacturing sectors has declined over the same period. Prepared By: chmuraecon.com This publication was prepared under cooperative agreement with the Chmura Economics & Analytics, with financial support from the Office of Economic Adjustment, Department of Defense. The content reflects the views of Chmura Economics & Analytics and does not necessarily reflect the views of the Office of Economic Adjustment.

2 FORT MCPHERSON Source: Bureau of Labor Statistics Unemployment Rate The unemployment rate in the Atlanta MSA tracked below the national average until Since the national recession began in December 2007, the unemployment rate in this region has exceeded the national rate as the region s labor market was severely damaged by the recession. In November 2013, the unemployment rate for the Atlanta MSA was 7.4%, 0.2 percentage points higher than the national rate of 7.2%. While high unemployment in a region reflects labor market weakness, the declining unemployment rate in the Atlanta MSA indicates improvement in the area s labor market. The data in the chart above should be used cautiously. For example, a declining unemployment rate may reflect the fact that the labor force is declining (people are leaving the region) rather than an improving labor market. Annual Employment Growth Year-over-year employment growth in the Atlanta region exceeded employment growth in the nation in the four years leading up to the national recession. When U.S. employment began contracting on a year-over-year basis in 2008, the Atlanta MSA posted larger year-over-year declines in employment. The labor market began to recover at the national and local levels in the second half of 2010 and employers in the Atlanta region began adding jobs at a healthy pace. In the 3rd Quarter of 2013, employment posted a 2.5% year-over-year increase in Atlanta compared with a 1.6% increase in employment nationally, suggesting that the region s labor market recovery is gaining momentum. Above average employment growth is a sign of strong regional growth. February 2014, Page 2

3 Source: Quarterly Census of Employment and Wages, Bureau of Labor Statistics Income Growth On a year-over-year basis, average annual wage growth slowed sharply during the national recession. During the recession, year-over-year average annual wage growth in the United States exceeded growth in the MSA. As of the 3rd quarter of 2013, the average annual wage for the Atlanta MSA was $53,397 which is slightly higher than the U.S. average annual wage ($50,151). Since the recovery began in the 3rd Quarter of 2009, year-over-year growth in average annual wages in the area has tracked national wage growth. The four quarters in 2011 when growth in Atlanta exceeded growth in the United States were the exception to this. As of the 3rd quarter of 2013, average annual wages expanded 3.6% in the MSA on a year-over-year basis compared with a 3.0% gain in the United States. Wage growth in Atlanta has exceeded national wage growth for 10 of the last 12 quarters. Above average annual average wage growth suggests that the regional labor market is healthy as it implies employers have to pay higher wages to attract and retain qualified employees. Employment posted a 2.5% yearover-year increase in 2013 Q3 February 2014, Page 3

4 Source: Quarterly Census of Employment and Wages, Bureau of Labor Statistics Employment by Sector Industry structure in a region is a determiner of its economic diversity. Examining the share of total employment by industry between the region and the nation sheds light on differences in the industry structure between the two economies. Industry data in this section are classified using the North American Industry Classification System (NA- ICS) which is a system developed cooperatively between the United States, Canada, and Mexico and is used by businesses and government to classify business establishments according to type of economic activity. Between 2002 and 2012, the U.S. economy added 3.4 million total jobs, a cumulative growth of 2.7%. The Atlanta MSA added about 51,600 jobs during this period for total employment growth of 2.4%. During 2002 to 2007, employment expanded 8.3% in Atlanta compared with 5.6% growth in the United States, while the MSA saw a 5.4% drop in employment from 2007 to 2012 as the recession took its toll on the MSA s labor market. National employment fell 2.7% over the same period. While the MSA shed jobs from 2007 to 2012, several sectors posted expansions in employment during that period including health care and social assistance (+23,300 jobs) and professional, scientific, and technical services (+4,990). Over the same period, both of these sectors added jobs at a healthy pace in the United States. Construction (-51,200 jobs) and manufacturing (-28,500) posted large drops in employment in the region from 2007 to 2012; at the national level, employment in these sectors also declined sharply. The Atlanta region added about 52,000 jobs from February 2014, Page 4

5 United States Total Employment by 2-Digit Industry for the United States and the Atlanta-Sandy Springs-Marietta, GA MSA Employment Employment Cumulative Change Mix Accommodation and Food Services 10,237,864 11,443,640 11,846, % 3.5% 15.7% 9% Administrative and Support and Waste Management and Remediation Services 7,697,658 8,471,255 8,065, % -4.8% 4.8% 6% Agriculture, Forestry, Fishing and Hunting 1,163,646 1,173,546 1,196, % 2.0% 2.8% 1% Arts, Entertainment, and Recreation 2,157,558 2,348,410 2,366, % 0.8% 9.7% 2% Construction 6,882,004 7,754,975 5,762, % -25.7% -16.3% 4% Educational Services 11,142,513 11,917,406 12,083, % 1.4% 8.4% 9% Finance and Insurance 5,703,674 6,022,531 5,595, % -7.1% -1.9% 4% Health Care and Social Assistance 15,100,751 16,962,044 18,668, % 10.1% 23.6% 14% Information 3,505,905 3,177,571 2,817, % -11.3% -19.6% 2% Management of Companies and Enterprises 1,695,526 1,839,594 2,004, % 8.9% 18.2% 2% Manufacturing 15,262,246 13,875,235 11,951, % -13.9% -21.7% 9% Mining, Quarrying, and Oil and Gas Extraction 506, , , % 20.8% 57.7% 1% Other Services (except Public Administration) 4,300,203 4,493,614 4,585, % 2.1% 6.6% 3% Professional, Scientific, and Technical Services 6,741,355 7,738,957 8,003, % 3.4% 18.7% 6% Public Administration 7,137,286 7,310,788 7,271, % -0.5% 1.9% 6% Real Estate and Rental and Leasing 2,085,923 2,200,969 1,988, % -9.7% -4.7% 2% Retail Trade 15,083,231 15,574,781 14,930, % -4.1% -1.0% 11% Transportation and Warehousing 5,163,229 5,384,705 5,104, % -5.2% -1.1% 4% Unclassified 206, , , % -18.0% -13.9% 0% Utilities 842, , , % -0.3% -4.0% 1% Wholesale Trade 5,617,702 5,987,455 5,656, % -5.5% 0.7% 4% Total 128,233, ,366, ,684, % -2.7% 2.7% 100% Atlanta-Sandy Springs-Marietta, GA MSA Accommodation and Food Services 171, , , % -0.8% 18.8% 9% Administrative and Support and Waste Management and Remediation Services 165, , , % -6.0% 5.1% 8% Agriculture, Forestry, Fishing and Hunting 3,677 2,788 1, % -37.6% -52.7% 0% Arts, Entertainment, and Recreation 23,209 27,363 27, % 0.6% 18.6% 1% Construction 118, ,701 83, % -38.0% -29.7% 4% Educational Services 157, , , % 0.6% 28.0% 9% Finance and Insurance 103, ,385 98, % -10.4% -4.3% 4% Health Care and Social Assistance 185, , , % 10.7% 30.0% 11% Information 104,734 86,505 78, % -8.7% -24.6% 4% Management of Companies and Enterprises 54,831 39,625 42, % 8.3% -21.8% 2% Manufacturing 177, , , % -16.3% -17.7% 7% Mining, Quarrying, and Oil and Gas Extraction 1,650 2, % -55.9% -44.4% 0% Other Services (except Public Administration) 60,930 61,111 57, % -6.4% -6.1% 3% Professional, Scientific, and Technical Services 143, , , % 3.1% 16.5% 8% Public Administration 107, , , % -2.3% 9.0% 5% Real Estate and Rental and Leasing 40,161 45,137 39, % -13.3% -2.6% 2% Retail Trade 251, , , % -7.3% -0.4% 11% Transportation and Warehousing 127, , , % -3.6% 0.5% 6% Unclassified 6,221 2,311 9, % 293.4% 46.1% 0% Utilities 11,040 11,229 10, % -9.0% -7.4% 0% Wholesale Trade 142, , , % -10.0% -8.1% 6% Total 2,158,433 2,336,985 2,210, % -5.4% 2.4% 100% Source: Quarterly Census of Employment and Wages and Chmura Economics & Analytics February 2014, Page 5

6 Top and Bottom 10 Industries From 2007 to 2012, the ten industries with the largest employment growth at the 6-digit NAICS industry code level included several industries in the education and health services and professional and scientific services sectors. The top 10 industries added 40,700 jobs in the MSA over this period compared with total employment loss of 126,900 in Atlanta from 2007 to Atlanta-Sandy Springs-Marietta, GA MSA Industries with Largest Employment Growth ( ) NAICS Industry Change % Change Payroll Services 6,762 >100% Offices of Physicians (except Mental Health Specialists) 5,268 15% Colleges, Universities, and Professional Schools 4,919 14% General Medical and Surgical Hospitals 4,584 7% Corporate, Subsidiary, and Regional Managing Offices 4,171 11% Home Health Care Services 3,418 48% Computer Systems Design Services 3,139 22% Custom Computer Programming Services 2,994 18% Warehouse Clubs and Supercenters 2,873 20% Wired Telecommunications Carriers 2,541 12% Source: Quarterly Census of Employment and Wages and Chmura Economics & Analytics From 2007 to 2012, the ten industries with the largest employment losses at the 6-digit NAICS industry code level included two industries in the information sector and two in the retail trade sector. The bottom 10 industries shed 40,400 jobs in the MSA over this period while employment fell by 126,900 in Atlanta from 2007 to Atlanta-Sandy Springs-Marietta, GA MSA Industries with Largest Employment Decline ( ) NAICS Industry Change % Change New Single-Family Housing Construction (except For-Sale Builders) -5,172-65% Elementary and Secondary Schools -4,716-3% Newspaper Publishers -4,667-55% Data Processing, Hosting, and Related Services -4,616-49% Water and Sewer Line and Related Structures Construction -4,164-64% Family Clothing Stores -3,643-33% Commercial Printing (except Screen and Books) -3,611-33% Commercial and Institutional Building Construction -3,451-27% Other Building Material Dealers -3,185-55% Engineering Services -3,164-15% Source: Quarterly Census of Employment and Wages and Chmura Economics & Analytics February 2014, Page 6

7 Frequently Asked Questions Q: What can I learn from the unemployment rate chart? A: Information obtained from the unemployment rate chart provides insight into the health of the labor market. It answers questions such as: Does the region exhibit higher or lower unemployment than the nation, which reflects whether workers are relatively easy or hard to find? Does the region s unemployment trend (increases and decreases) mirror that of the nation s? If the region s unemployment rate does not mirror that of the nation, then positive or negative events in the region are causing the divergence. How has unemployment been affected by recession periods? Regions that are more dependent on the manufacturing and construction industries tend to see more volatility around recessions. Q: Are there limitations to using the unemployment rate to draw conclusions about the health of the region s labor market? A: Yes. The unemployment chart should be used with caution. For instance, a declining unemployment rate may reflect the fact that the labor force is contracting (people are leaving the region) rather than an improving labor market. In addition, the unemployment rate is considered a less reliable measure than changes in employment because the unemployment rate is estimated from several sources such as initial unemployment claims while employment figures are benchmarked once a year to almost a full universe of employment obtained from tax filings. Q: What is the source of the unemployment rate data? A: At the regional level, these data are estimated based on several sources of data such as initial unemployment claims and is reported by the Bureau of Labor Statistics, see Q: Why is change in employment in a region important? A: Employment growth is the broadest and most timely indicator of the general health of an economy. Q: What can I learn from the change in employment chart? A: Information obtained from this chart provides insight into the overall health of the region and answers questions such as: Is the region facing a greater decline in employment than the nation? Are changes in employment levels cyclical? How is employment affected by recession periods? Q: What is the source of the data used in the change in employment chart? A: Employment data are derived from the Quarterly Census of Employment and Wages (QCEW) provided by the Bureau of Labor Statistics, see www. bls.gov/cew. The most recent one or two quarters of data are preliminary. The total number of employees per firm is reported monthly, updated quarterly, and includes both full-time and part-time workers. The number of employees is based on the number of covered workers who worked during or received pay for the pay period that included the 12th day of the month. Virtually all workers are reported in the state in which their jobs are located. QCEW employment data represent both private sector and government employment. Excluded workers include members of the armed forces, the self-employed, and railroad workers covered by the railroad unemployment insurance system. February 2014, Page 7

8 Q: What can I learn from the change in average annual wages chart? A: Information obtained from this chart provides insight into the changes in overall wealth of a region and answers questions such as: Are average wages in the region growing faster or slower than average wages in the nation, which reflects how the standard of living for the region s workers is changing relative to the nation? How is average annual wage growth affected by recession periods, which reflects the stability of the underlying mix of industries in the region? Q: What factors impact average annual wages? A: Average annual wages in a region are impacted by the local mix of industries and the cost of living. Q: What is the source of the data used in the change in average annual wages chart? A: Wage data are derived from the Quarterly Census of Employment and Wages provided by the Bureau of Labor Statistics, see Wages and salaries per firm are reported quarterly and include bonuses and some stock options that were exercised. Wages and salaries are grouped by place of work, not residence. Thus, total wages in a region include all the people who work in that region but not people who live there and work elsewhere. Average annual wages are equal to the total wage earned divided by the average employment. Average annual wage data are nominal and have not been adjusted for inflation. Q: Why does industry structure matter? A: Industry structure in a region is a determiner of its economic diversity. Examining the share of total employment by industry between the region and the nation helps to explain differences in growth rates, volatility around recessions, average wages, and the growth rate in average wages. Q: What is NAICS? A: The North American Industry Classification System (NAICS) was developed cooperatively between the United States, Canada, and Mexico and is used by businesses and government to classify business establishments according to type of economic activity. The NAICS code comprises six levels, from the all industry level to the 6-digit level. The first two digits define the top level category. In this report, we provide employment at the 2-digit level (i.e., by industry sector) and top 10 and bottom 10 industries measured by 10-year employment growth at the most detailed 6-digit level. Q: What is the source of the 2- and 6-digit level NAICS industry data: A: Chmura Economics & Analytics derived the data from the Quarterly Census of Employment and Wages (Bureau of Labor Statistics) as well as other sources. February 2014, Page 8