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Columbus MSA employment continues to outperform in August

We now have preliminary August sector employment totals, labor force, and unemployment estimates for the Columbus MSA, which I have seasonally adjusted.  The news is better than that for either the U.S. or the state.  The number of jobs in the region fell by 100 – literally a rounding error – compared to losses of 0.2 percent for the U.S. and 0.6 percent for Ohio.  There was little change in individual sectors – except education and healthcare, which increased 1,200.  As was the case for the Ohio unemployment rate, the seasonally adjusted Columbus MSA rate fell.  The local rate is now 8.7 percent – a full point below the U.S. rate – versus 9.2 percent in July.  This decline was partially driven by a decline in the labor force, as was the Ohio decline, but also by an increase in the number of employed Columbus MSA residents.  Overall, once again, we don’t have really good news but things could be worse.

Unemployment in Ohio

Last week the Ohio Labor Market Information Bureau announced that the Ohio unemployment rate fell in August from 11.2 percent to 10.8 percent – its first decline since February 2006.  This seems as if it would be good news, especially because the U.S. rate rose from 9.4 percent to 9.7 percent after treading water for two months.  But this is an illustration of the complexities in interpreting the unemployment rate that I discussed here earlier.  Changes in the unemployment rate are affected both by changes in employment and by changes in the number of people actively seeking work.  At the national level, the number of people employed fell in June, July, and August.  The U.S. unemployment rate changed only marginally in June and July because a decline in the number of active job-seekers offset the decline in the number employed.  In August, U.S. employment declined but the number of those looking for work did not decline, so the unemployment rate rose.  Here in Ohio, employment fell somewhat last month but the number of job-seekers fell a lot, producing a decline in the unemployment rate despite the decline in the number of people working.

Press Release: Columbus Chamber Reports Relatively Stable Second Quarter Employment - Columbus MSA Continues to Outpace National Average

COLUMBUS, OH, August 17, 2009 /24-7PressRelease/ -- The Columbus Chamber of Commerce is proud to announce second quarter statistics show the Columbus employment rate is stabilizing and continues to outpace the national average. The unemployment rate in Columbus is at 8.9 percent: far less than Ohio's 11.1 percent average, and still below as the national unemployment average, at 9.5 percent.

In fact, private education and healthcare have continued to experience a sharp rise, and government also reversed some of its earlier losses. Plus, education and healthcare are expected to continue enjoying large increases.

"Education and health services employment is more than 80 percent healthcare," Vice President of Economic Analysis Bill LaFayette, Ph.D. said. "This is the one sector whose growth has continued unabated during the recession - despite legitimate concerns over the ability of patients to pay for their care. Growth is expected to continue in the second half of the year."

The Columbus Chamber reports transportation and utilities also experienced growth of 44 percent between early 2001 and the beginning of the recession. The sector's decline early in the recession was worse than the national average, but the trend turned slightly positive at the beginning of the year. Assuming that growth does not deteriorate significantly, the comparison to 2008 for the full year should be much better than that for the first six months.

Professional and business services also experienced employment growth far stronger than the national average over the past seven years, and declines in the recession have been less than one-fifth the national average. Each of the three subsectors has performed much better than average since the beginning of the recession.

"This sector should be one of the first to benefit from economic recovery given its labor intensiveness and the likelihood of employers to increase their hiring of temporary employees as a response to early increases in demand," LaFayette said.

Leisure and hospitality employment declines in the Columbus Metropolitan Statistical Area (MSA), including Delaware, Fairfield, Franklin, Licking, Madison, Morrow, Pickaway, and Union Counties, have been less than average since the beginning of the recession. Statewide employment growth has been slightly positive, despite some weakening in recent months. Along with retail, local restaurants have benefited from the stronger-than-average Columbus MSA economy, while hotels in Columbus and elsewhere in Ohio, have benefited from the tendency of travelers to stay closer to home.

Other services - including various personal services, religious organizations, and professional and social associations - along with education and health services are experiencing higher employment now than at the beginning of the recession. Although the budgets of nonprofits have come under pressure, the services sector was growing much more weakly than average for several years before the recession hit.

The news is not all positive. Despite the marked economic growth reported by the Columbus Chamber, the implied Gross Domestic Product (GDP) decline would rank this recession as one of the two worst of the postwar period; its length is far greater than any of the 10 previous postwar recessions. U.S. employment is expected to decline through the year and into 2010, though at a much smaller rate. It is predicted that the national unemployment rate will reach 10 percent by December 2009 and will still be at 9.5 percent in December 2010.

More than two-thirds of the 51 economists in The Wall Street Journal's monthly survey expect the recession to end no later than the third quarter, with modest output growth in the second half of 2009.

For more information about the Columbus Chamber's economic update, visit www.columbus.org.

About the Columbus Chamber of Commerce
The Columbus Chamber of Commerce leads and supports economic growth and development in the Greater Columbus community. It supports a membership of 2,700 businesses. Learn more about Columbus at www.columbus.org.

Chamber Economist, Bill LaFayette Featured on Columbus Underground

Check out Walker's interview with Bill on the Columbus Underground:

An excerpt from the interview is included below:

We recently sat down with Dr. Bill LaFayette, Ph.D., the Vice President of Economic Analysis at the Columbus Chamber of Commerce, to discuss a variety of topics related to the Columbus economy. Bill shares with us his professional insight and research on some of the most important job sectors in the region, the growing importance of the creative class and urban renewal, and his thoughts on how Columbus is weathering the current economic recession. The full interview on the Columbus economy can be found here.


For more insights on the Columbus MSA economy, read Bill's series of posts here.

Foreclosures and house prices

The Columbus Dispatch reported Thursday that Ohio foreclosures have declined for three consecutive months while they continue to rise nationally.  The experts are not sure whether this is a real turn in the trend or just a temporary break in a downward trend.  While foreclosures are likely to continue to be a serious problem for Ohio communities and neighborhoods, there are reasons to think that the situation in other states will be worse.

The foreclosure crisis in Ohio has been driven by different factors than is true elsewhere.  Nationwide there was a large run-up in house prices followed by a crash.  Between the first quarter of 2002 and the second quarter of 2007 (when the market peaked), national house prices rose 47 percent, compared to  14 percent in Ohio and 15.5 percent in the Columbus MSA, according to the federal government’s FHFA House Price Index.  Since then, national prices have fallen 3.8 percent, while Ohio prices are off 0.1 percent and those in the Columbus MSA have recovered and are up 0.7 percent.  (Only 10 of the 50 largest metros have done better.)  California, Florida, Arizona and Nevada account for 56 percent of foreclosure filings.  The 2002-2007 house price gain in these four states was more than 90 percent, and their subsequent loss has been between 18 and 27 percent.  Many of those buying in these states near the top of the market now owe far more than the house is worth.  If the payment on the mortgage increases to an unaffordable level, they cannot refinance and have no alternative but to default.

Homeowners in these four states share the chief problem facing Ohio’s homeowners: payment problems due to job loss.  Ohio employment has declined 5.9 percent since the beginning of the recession – equal to California’s loss, but less than the 7.2 percent in Florida, the 7.8 percent in Nevada, and the 9 percent in Arizona.  The rate of job declines is expected to decrease in coming months, but the recovery in the housing market in boom states is likely to be much longer in coming.

Another small gain in Columbus regional employment

The Bureau of Labor Statistics released preliminary June employment statistics for the Columbus MSA this morning. On a seasonally-adjusted basis, total employment increased in the Columbus Region for the second consecutive month. This is especially surprising because the June decline in U.S. employment was worse than that in May. Our net gain was 1,700 jobs (0.2 percent), close to the 2,000-job gain in May. (May employment was adjusted downward by 300 jobs.) The nation lost 459,000 jobs (0.35 percent), compared to 330,000 jobs (0.25 percent) in May. State employment fell 33,000 (0.6 percent). Since the recession began in December 2007, the region has lost 17,600 jobs, or 2.0 percent, compared to losses of 4.7 percent nationally and 5.9 percent in Ohio. The largest employment gains in June were 2,500 in private education and healthcare and 1,200 in the beleaguered government sector. Construction lost 1,400 and leisure and hospitality lost 1,200. Changes in everything else were close to zero.

For more information on the Columbus economy, visit www.columbusregion.com.

The Pickaway County economy

I was honored to be guest speaker Wednesday at a Pickaway County Chamber event.  Part of my talk included some analysis of the Pickaway County economy.  I always enjoy these deeper dives into local economies because of the significant economic differences among the eight counties of our region.  Pickaway County’s economy is driven by manufacturing.  The 2,450 manufacturing jobs in 2007 represented almost 17 percent of the county’s total employment – a concentration 63 percent greater than the U.S. and twice that of the Columbus region as a whole.  As is true of other manufacturing-oriented areas, efficiency increases and consolidation among producers caused employment declines for Pickaway County earlier in the decade.  Manufacturing lost more than 2,000 jobs (46.5 percent) between 2001 and 2006, which led to a total loss of nearly 1,900 jobs (11.6 percent) over that period.  Unlike most other manufacturing-based economies, though, Pickaway County has enjoyed strong growth more recently.  The county gained 100 manufacturing jobs (4.2 percent) between 2006 and 2007, and about 40 more in the first three quarters of 2008.  As a result, Pickaway County’s total employment increased 2.7 percent in 2007 – twice the rate of the Columbus region and the U.S. – and declined only marginally in the first three quarters of 2008 relative to the same period of 2007.  The earlier employment declines and current recession, however, have led to a May 2009 seasonally-adjusted unemployment rate of 11.3 percent.

State government is also important, contributing more than 10 percent of employment.  There are two sectors that, while still below average in terms of employment share, are growing nicely and becoming far more important: professional and business services and private education and healthcare.  Transportation and logistics has declined since 2001, but has a bright future thanks to the recent opening of the Norfolk Southern Intermodal on the county’s northern border, and the completion of the Heartland Corridor rail project next year.

Some happy employment news

We now have preliminary Columbus MSA employment numbers for May and they are surprisingly good.  On a seasonally-adjusted basis, jobs in the region increased 2,300 (0.25 percent) from April.  The national job total decreased by exactly the same 0.25 percent, but this was the smallest national job decline since last September.   The largest local gains were registered by professional and business services, which has been a little soft lately but gained 2,300 jobs in May, and private education and healthcare (up 1,600).  Government and manufacturing lost 800 jobs each and retail lost 700.  Other sectors showed modest changes up or down of 100 to 300 jobs each.  Since the recession began, the local area has lost 19,000 jobs (2.0 percent), much less than the national loss of 4.3 percent and Ohio’s 5.3 percent.

The May regional unemployment rate was a seasonally-adjusted 8.5 percent, nearly a percentage point lower than the U.S. rate of 9.4 percent.  These two rates were essentially equal in January.  The Ohio rate, meanwhile, was 10.8 percent.

Before we get too excited, it is important to remember that these employment totals are preliminary and will be revised next month.  But it is clear that the Columbus region continues to fare far better than elsewhere in this recession.

The Doctor Is In: The Unemployment Rate and Reality

Today the Bureau of Labor Statistics released initial estimates of U.S. employment and unemployment for May (actually the second week in May).  As usual, the headlines are focusing on a single number, the unemployment rate, which rose to 9.4 percent from 8.9 percent in April.  This is a very easy number to communicate and fits well into a headline.  But for a couple of reasons, the unemployment rate is not the best gauge of the status of the economy, either nationally or locally.

For one thing, changes in the unemployment rate are driven both by changes in employment and changes in the labor force – equivalently, the number of people working and the number of people looking for work.  This latter number is defined in a very specific way: you are looking for work – and in the labor force – if you have actively sought employment within the last 30 days.  If you have not, you are not counted at all.  (These totals are estimated from a monthly survey of households called the Current Population Survey.)  In reality, being available for work is not a yes-no question; it is a more-or-less question.  For this reason, the labor force fluctuates from month to month as people who do not work steadily step up or step down their job search.  This can cause some odd results.  In April, the number of people looking for work jumped, leading to the largest monthly percentage increase in the labor force since November 2007.  This caused a fairly big increase in the unemployment rate (8.5 percent to 8.9 percent) even though the estimated number of people working actually increased slightly.  In May, the number of people fell back somewhat while the labor force increased again, producing the unemployment rate increase to 9.4 percent.

Just the opposite can happen as well.  The initial estimates for the Columbus region during mid-2003, as the labor market was bottoming out after the last recession, showed employment and labor force both declining.  But because the labor force was falling faster than employment, the unemployment rate was declining.  People were asking me, “The unemployment rate is falling at last.  Isn’t this great?”  My reply was, “Well, no.”  Actually, this is the worst of all possible worlds: jobs were declining and workers were expecting not to find work, so they were not even looking.  Conversely, the increases in labor force we have seen during the past three months are a sign that workers may be expecting jobs to be easier to come by during the summer.  Thus, the unemployment rate increases aren’t quite as bad as they seem.

That leads to the second problem with the unemployment rate: it understates the pain as the economy worsens.  As jobs disappear, people stop looking for them, which puts downward pressure on labor force and the unemployment rate.  Thus, the unemployment rate increases less in a recession than it would if the number of discouraged workers weren’t increasing.  If people hadn’t dropped out of the labor force over the course of the current recession, the May unemployment rate would have been an even 10 percent.

A much better labor market indicator is the total number of jobs (nonfarm payroll employment).  This declined in May by “only” 345,000 – half the 700,000-job pace between December and March and the smallest decline since last September.  It is hard to imagine the disappearance of 345,000 jobs being good news, but that is a sign of the current times.

We will get local payroll employment estimates for May in two weeks, but thus far we are weathering the recession fairly well.  From the beginning of the recession through April, U.S. employment fell 4.2 percent, while Columbus region employment fell 2.1 percent – again, good news only in context.

First Quarter Economic Update - Things Could Be Worse

The Columbus MSA continued its better-than-average employment performance during the first quarter.  Although preliminary March statistics show that the region lost 4,600 jobs during the first three months of 2009, the 0.5 percent loss was less than one-third the 1.6 percent U.S. decline.  Employment growth in most individual sectors was also stronger than average.  The worrisome decline in transportation – a crucial sector for us – paused, with a net gain of 500 jobs (1.0 percent) .  Most other individual sectors turned in better-than-average performance, including retail, financial activities, and professional and business services, each of which registered small net gains locally while continuing to decline nationally.  Since the beginning of the recession in December 2007, the Columbus MSA’s job loss has been 1.9 percent – little more than half the 3.7 percent national average. Read the full quarterly economic update here.