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U.S. Employment Tapers Off – Another False Start?

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After three months of solid job growth, BLS released what seems to be a bad April Fool’s Day joke in the form of the March jobs report. After adding jobs at an average monthly rate of 246,000 for December 2011 – February 2012, total nonfarm payroll employment rose by only 120,000 in March.

In light of projections by analysts that job gains would exceed 200,000, this report begs the question, “Are we seeing another false start in job growth, as we did in the first half of 2010 and 2011, or was the March report just another bump in the seemingly endless road to full recovery?”

On Monday (April 9), the DJIA lost 130 points, or 1%. Is that a real answer to the question or just a partial answer?

On a positive note, jobs were added in the Leisure and Hospitality (39,000); Private Education and Health Care (37,000); Manufacturing (37,000); Professional and Business Services (31,000), and Financial Services (15,000) sectors.

Many of the jobs in the Manufacturing and PBS sectors are primary jobs, i.e. they bring outside wealth to the community and they create more support jobs than other sectors. It is good news when jobs are added in the Tourism sector because the industry touches most regions. Increased tourism jobs are an indicator that people have greater disposable income – and they are spending it.

Increased jobs in the Financial sector may be a sign that the woes of the industry may be behind us – with an emphasis on “may”. And then there is the Private Education and Health Care sector. Depending on our perspective this sector may be viewed as a perpetual job creation machine or nothing more than a bureaucracy builder.

The losers were Retail Trade (33,800) and Construction (7,500) sectors.

So is the latest report an April Fool’s Day joke? Employment growth is likely to continue, but not likely at the rate of 2250,000 jobs a month that is needed to significantly lower the unemployment rate.

 

©Copyright 2011 by CBER.

LEHD and Quickfacts – Commerce City – A Community with Atypical Demographics

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Are you a data geek looking for a fix? If so, have you tried the LEHD or Census Quickfacts databases?

The two databases contain information from the U.S. Census Bureau and the Bureau of Labor Statistics. They are combined in a way that allows data geeks, public and private leaders, and others to learn more about their local population and workforce and see what makes their local economy work (or not work).

To illustrate this point, let’s take a look at five examples of information that can be gleaned for Commerce City, Colorado. (Those in the Denver MSA think of Commerce City as the home of the refinery located along Highway 270.)

Example 1
In Colorado 24.5% of the workforce has earnings of $1,250 per month or less, 36.1% have earnings of $1,251 to $3,333 per month, and 39.5% have earnings of more than $3,333 per month.

In Commerce City 17.1% of the workforce has earnings of $1,250 per month or less, 34.2% have earnings of $1,251 to $3,333 per month, and 48.7% have earnings of more than $3,333 per month.

This begs the question, “What industries are driving the higher concentration of earnings in the upper wage category for Commerce City?”

Example 2
In Colorado 50.8% of the workforce is male and 49.2% is female.
In Commerce City 73.7% of the workforce is male and 26.3% is female.

So, why are there more men workers than women in Commerce City? What are the types of jobs that cause that difference?

Example 3
In Colorado 50.1% of the population is male and 49.9% is female.
In Commerce City 50.4% of the population is male and 49.6% is female.

OK? The mix of men and women in Commerce City is split about 50-50, but the workforce (example 2) is not. Where do Commerce City employers find the workers to fill their jobs? Where do the Commerce City women go to work?

Example 4
In Colorado the median value of an owner-occupied home is $236,600
In Commerce City, the median value of an owner-occupied home is $206,600

Earlier we learned that Commerce City has a higher percentage of workers in the upper earnings bracket. If that is the case, then why isn’t the value of the homes higher there? Or do the Commerce City workers in the upper bracket live somewhere other than Commerce City?

Example 5
In Colorado 35.9% of the workforce has a Bachelor’s degree or higher.
In Commerce City 19.8% of the workforce has a Bachelor’s degree or higher.

Again, we previously learned that Commerce City has a higher percentage of workers in the upper earnings bracket. If that is the case, then what types of jobs are they performing that pay well and don’t require a college degree? Or do the people with college degrees live elsewhere and work in Commerce City?

In the matter of minutes it is possible to create a profile about any local community in the United States. Once that sketch of a community is prepared, then another series of probing questions can be asked to address policy decisions regarding social, economic, workforce, or education issues.

What’s the story behind your community? Check out LEHD and Quickfacts to learn more.

 

©Copyright 2011 by CBER.

BLS reports 33,000 Colorado jobs added in 2011

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The Bureau of Labor Statistics recently released its benchmark revisions for 2011 that show Colorado added 33,000 jobs in 2011. The updated total is nearly double the projected job growth of the monthly data presented throughout the year.

After peaking in 2008, approximately 150,000 jobs were shed in 2009 and 2010. Employment declines were so severe that total employment dropped below the 2001 peak. Finally, in 2011, Colorado employment again surpassed the high point in 2001.

If Colorado employment increases by about 1.7% in 2012 and 1.9% – 2.2% for the 2 years after that, it will reach the 2008 peak in 2014. In other words, it will take six years to return to the 2008 peak.
By comparison, it took 4½ years for employment to return to the 2001 peak after jobs losses associated with the 2001 recession. (Some economists are saying the full recovery will return to peak just in time for the next cyclical downturn).

Here’s to quicker recoveries from future recessions.
©Copyright 2011 by CBER.

It is Time to Right the Ship – America’s Financial System

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Zbigniew Brzezinski, National Security Advisor to President Carter, recently released a book entitled Strategic Vision – America and the Crisis of Global Power.

In his book, Brzezinski lays out America’s assets and liabilities, listing six of each. On the liability side, he focuses extensively on the flawed financial system.

In a footnote on page 48, the author highlights data from Roger Lowenstein’s, The End of Wall Street (2010) explaining the social and economic consequences of the “self-induced 2008-2009 financial crisis (note the use of the phrase self-induced):
• Average deficits of G-20 nations increased from 1% to 8% (p. 294).
• By 2009, American share of the national debt was $24,000-$2,500 of which was debt to China (p. 294).
• America’s total national wealth decreased from $64 trillion to $51 trillion (p. 284).
• America’s unemployment rate reached 10.2% (p. 284).
• The United States lost 8 million jobs (p. 284.)
• Mortgage foreclosures increased from 74,000 a month in 2005 to 280,000 a month in the summer of 2008, and a high of 360,000 in July 2009 (p. 147 and p. 283.)
• Banks failed at a rate of three per week in 2009 (p. 282).
• During the spring of 2009, 15 million American families owed more on their mortgages than their homes were worth (p. 282).
• There was a total GDP contraction of 3.8% – the biggest contraction since post WWII demobilization (p. 282).
• America experienced its longest recession since the 1930s ( p. 282).
• Stocks fell 57%-the biggest drop since the Great Depression (p. 281).

These data quantify how tough the times have been for Americans. Brzezinski takes it a step further by pointing out that one of America’s greatest assets is its overall economic strength and the power associated with that position. In other words there is a lot of incentive for the U.S. to right the ship and fix the problems with its financial system – immediately.

For details, check out the book. It is a must read!

 

©Copyright 2011 by CBER.

Why are People Moving Out of Boulder County?

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Boulder County is the hub of Colorado’s high-tech industry.  It is the home of IBM, Ball Aerospace, and several federal labs and a host of other high-tech companies. At times the Boulder economy is like the city’s image – it sometimes moves to the beat of a different drummer. For instance, the unemployment in the county is typically lower than that of the state, average annual wages are much higher than the state average, and the county economy often lags the state when entering recessions.

As well, the county population increased by 0.7% during the 2000s, a little over half the rate of growth for the state. That is not particularly surprising given the high prices of housing in the City of Boulder and the image that it has developed as a “no growth” city (Boulder is the dominant city in the county). Between 2000 and 2010, the county population increased about 19,232 people. About  84% of that growth occurred in 4 years,  2001 and 2006-2008.

Looking more closely, it can be seen that during the first half of the past decade, the natural rate of increase for the county was between 2,000 and 2,400 people a year (The natural rate of increase is births minus deaths). The rate tapered off during the second half of the decade and ranged between 1,600 and 1,900. All together the natural rate changed by 20,296 people.

The shocker is that there was negative net migration during this period (Net migration is the difference between the number of people who move in and the number who move out). In other words, the hospitals and funeral homes were busy, but apparently the moving vans were busier.

So what does this mean for the county? At first glance, the implications could be significant – it could affect schools, tax receipts, and services provided. Stay tuned as the story unfolds in the months ahead.

 

©Copyright 2011 by CBER.

Where are all the Startups? – Are they Really a Job Creation Machine?

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Suppose your investment advisor called you and said, “Have I got a deal for you? I will sell you 12,027 shares of a fund at $6.10 per share. The total cost to you is only $72,918. Sound good?”

Your advisor continues, “This is a killer fund. In 17 years, the price per share will rise from $6.10 to $18.30. And, in full disclosure I am required to tell you the fund will buy back a few shares along the way.  Sound good?

You reply, “Sounds great, but could you tell me more about the number of shares that will be bought back along the way?”

The advisor nervously answers, “Well, you see…the price per share increases from $6.10 to $18.10. Sound good?” Very quickly the advisor continues, “And the fund will only buy back 9,348 shares. You will still have about 22%-23% of your original shares. Sound good? Can you sign right here?”

You say, “Let me get out my calculator. That means the value of the fund is only $48,987 after 17 years. Sound good?”

The manner in which jobs are created by startups has a similar rate of return. (For purposes of this discussion, startups will be defined as companies less than one-year old that have employees. The Bureau of Labor Statistics (BLS) has tracked the performance of these companies since 1994.)

From the BLS data it is possible to look at the number of firms, average firm size, total employment, and survival rates for the firms formed in 1994. The BLS data shows:

Number of Firms
• In 1994 there were 12,027 firms.
• In 2011 there were 2,679 firms.
Average Firm Size
• In 1994 the average firm size was 6.1 employees.
• In 2011 the average firm size was 18.3 employees.
Total Employment
• In 1994 the firms had 72,918 employees.
• In 2011 the firms had 48,987 employees.
Survival Rate
• In 1994 the survival rate was 100%.
• In 2011 the survival rate was 22.3%.

Do the numbers look familiar? If not, revisit the opening paragraphs.

Startups are critical to future of our country for a variety of reasons; however, they may not be job creation machine that we have been led to believe. They add jobs in year one, but that base declines in year 2 and erodes further over time. Sound good?

With the decline in the number of startups and survival rates, this is a particularly frightening model for economic growth in the state!

For additional information on startups and job creation go to https://cber.co/ or the report “Where Are All the Startups?”

 

©Copyright 2011 by CBER.

Occupy the Labor Market – Shields Foretells Growth in Northern Colorado

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In January, Dr. Martin Shields, CSU economics professor, produced his business and economic forecast for the Northern Colorado Business Review. In short, Shields pointed out that the U.S. will see a lackluster recovery that will be driven by national and international events (debt, war, oil prices, political crises, etc.)

At the national level, Shields emphasized three points:
• “Tepid and sustained” Real GDP growth.
• The decline in unemployment will be slow as the median number of weeks that workers are unemployed remains high, based on the slow rate at which jobs are being created.
• Core inflation has returned to pre-recession levels.

The Northern Colorado economy will continue to be a mixed bag, although it has been a leader in the recovery. It is expected to continue in that role. Nevertheless, unemployment will be high by historical standards. Locals have struggled with the decline in real household income, a challenge that is likely to continue in the months ahead.

Shields also emphasized the following:
• Northern Colorado lost 5,900 jobs over the past 3 years.
• On a positive note, the region added 1,900 jobs in the past year.
• Since 2008 the number of unemployed workers in the region has increased by 6,700.
• Larimer and Weld County have performed differently during the Great Recession.
o Larimer’s labor market has been stronger
o Median household income in Larimer has declined.
o Weld County household income has remained flat.
• FFHA data shows that housing prices are stagnant.
• While it is encouraging that there is an uptick in housing starts, it must be noted that the increase is small and it is from a very low base.

Looking ahead, Shields foretells continued growth in 2012.
• The unemployment rate might approach 5.0% in Larimer County.
• In Weld County, unemployment might fall below 8.0%.
• Between 2,700 and 3,300 workers might be added to local payrolls.
The Government, Information, and Financial Activities sectors will struggle, while the energy, food manufacturing, health care, and professional business services sectors will continue to grow.

Shields heavily emphasized the term “might” in each of his projections. In closing he stated that the real challenge will be to add jobs that pay good wages.

 

©Copyright 2011 by CBER.

Where are all the Startups? – Survival Rates on Downward Path

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The U.S. and Colorado have experienced volatile economic conditions for about 20 years. There was strong growth during the go-go 1990s, follow by two major recessions during the Lost Decade. Startups play an important role in any economy, but until recently there has been little data to understand their performance. This brief analysis uses BLS data and assumes that startups are less than one-year in age and have employees.

The following are the most frequent questions asked about survival rates for startups.
• Are the rates different based on the number of years the firms have been in existence?
• Are the rates different based on when the firm was started?
• How have the rates changed over time?
The answers are explained and can be observed below.

The first question is the easiest to answer – survival rates are lower for longer periods of time.
• The range for two-year rates was 60.9% to 68.9%.
• The range for five year rates was 43.7% to 50.7%.
• The range for eight-year rates was 33.4% to 39.7%.

A partial answer can be given to the second question. Data is available for different time frames (16 years for two-year rates, 13 years for five-year rates, and 10 years for eight-year rates). For the 10-year period that is common to all three rates, the lowest rates occurred in 2001.

The 2-year survival rate was 61.6% in 2001 and 60.9% in 2008. Based on the current trends, the lowest 5-year and 8 -year rates are likely to occur in 2008. This coincides with the low points in the business cycle.

The answer to the final question is simple – survival rates have declined over time.
• The 2-year rates began declining in 1999, posted a slight increase in 2002, declined in 2006 and rebounded in 2009.
• The 5-year rates showed a steady decline beginning in 1995. There was an uptick in 2002 and 2003, but the downward trend reappeared in 2004.
• The 8-year rates showed a downward trend beginning in 1995. There was slight upward movement in 2002 and 2003.
As mentioned above, these changes have coincided with the business cycle; however, over time they are trending downward.

Are there policy decisions that could reverse this downward path? Is this downward trend a function of the quality of teaching in colleges and universities? Are the multitude of higher education entrepreneurial centers that have been started over the past two decade having a positive impact? Is this trend a function of poor service from government programs such as the Small Business Development Centers or the Small Business Administration? Have the banks failed to properly fund the startups? Or would the survival rate have been worse if the university and federal government programs weren’t in place? Or is this downward trend simply a function of ten-years of annualized Real GDP growth of 1.6%.

Startups are an important part of the economy. When data becomes available for 2010 and beyond (several years from now), hopefully it will be possible to look back and see that the downward trend has reversed.

For additional information on startups and job creation go to https://cber.co/ or the report “Where Are All the Startups?”

 

©Copyright 2011 by CBER.

The Mismatch of Skills between Company Needs and the Unemployed

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It is an understatement to say that there is a mismatch of skills between the unemployed and the needs of the companies looking for workers.

There are 2.1 million unemployed workers in occupations with unemployment rates below the natural rate (4.5% to 5.0%). Many of these occupations require a college degree. These occupations account for 31% of total U.S. workers.

There are 4.3 million unemployed workers in occupations with unemployment rates between the natural rate (4.5% to 5.0%) and below the U.S. average. These occupations account for 38% of total U.S. workers.

There are 6.0 million unemployed workers in occupations with unemployment rates above the U.S. average. These occupations account for 31% of total U.S. workers.


The bottom line is there are 10 million workers competing for replacement jobs in their occupations. As well, they are part of the pool who are competing for the handful of jobs in industries where they are not qualified.

It is clear why the unemployment rate has taken so long to return to the “natural rate” and it is easy to prepare the chart that illustrates the challenge.

What is the remedy?

 

©Copyright 2011 by CBER.

Where are all the Startups? – Jobs Created Have Increased at a Declining Rate Since 1999

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Startups, entrepreneurs, and small businesses have been the focal point of discussions about how the U.S. and Colorado will fully recover from the 2007 recession. As part of this dialogue, there is a wealth of information and misinformation about the importance of these businesses to the economy.

So what do the numbers say?

The first step in analyzing the growth of startups is to define them. The second step is to find a data set that tracks changes based on that definition.

There are many ways to define an entrepreneurial business venture or a startup company that include:
• No formal structure.
• Type – Sole proprietorships or LLCs.
• Funding – Microenterprises.
• Size – A company with 1-4 employees.
• Age – A company less than 1 year in age with employees.

For purposes of this discussion, startups will be defined as firms less than one-year in age that have employees. By definition, sole proprietorships, microenterprises, or LLCs may be included if they meet these criteria. The Bureau of Labor Statistics produces data about startups defined in this manner. BLS reports the number of firms and employees based on a year ending on March 31. For example, 1994 data includes startups for the period April 1993 through March 1994.

A review of the data shows the number of jobs created at startups has increased at a declining rate since 1999 for both Colorado and the U.S.

In 1999, 94,100 jobs were created at Colorado startups. That number decreased every year through 2010. That year the new group of startups created only 47,100 jobs. A slight increase was posted in 2011.

A similar pattern occurred at the national level. In 1999, 4,703,000 employees worked at U.S. companies started that year. By 2010, the number of employees working at companies that began operations that year had fallen to 2,457,000. A slight increase was recorded in 2011.

Colorado has a track record for having world renowned startups. Clearly good things have come from Colorado entrepreneurs and startup companies; however, by this definition, Colorado may not be the entrepreneurial Mecca that we are led to believe.

For additional information on startups and job creation go to https://cber.co/ or the report “Where Are All the Startups?”

©Copyright 2011 by CBER.