WELCOME October 6, 2017 Presented by: Bree Dority, PhD. Daniel Chaffin, PhD. Supported by:
Tri-City Area Economy Overview State Indicators Tri-City Area Tri-City Area Employment Tri-City Area Entrepreneurship University of Nebraska Kearney 2
$ Billions $ Billions State Economy Real GDP: Nebraska vs. U.S. 17,000 105.0 16,500 16,000 100.0 15,500 95.0 15,000 14,500 90.0 14,000 85.0 13,500 13,000 80.0 US NE Source: Bureau of Economic Analysis University of Nebraska Kearney 3
Service Goods State Economy Contribution to Nebraska Real GDP Growth by Industry NE Industry Contribution to Real GDP Growth Industry Composition 2010-2017 2013-2017 Manufacturing 11.2% -0.09% -1.49% Agriculture, forestry, fishing, and hunting 5.1% -0.20% -1.17% Construction 3.4% -0.38% 0.11% Mining 0.1% -0.05% -0.11% Real estate and rental and leasing 10.2% 1.87% 0.87% Finance and insurance 9.5% 2.77% 2.16% Health care and social assistance 7.7% 1.44% 0.74% Transportation and warehousing 7.1% 0.11% -0.02% Wholesale trade 7.1% 1.72% 1.37% Retail trade 5.8% 0.78% 0.26% Professional, scientific, and technical services 4.3% 0.22% 0.12% Information 3.2% 0.81% 0.61% Administrative and waste management services 3.0% 1.05% 0.58% Management of companies and enterprises 2.8% 0.96% 0.36% Utilities 2.1% 0.37% 0.07% Accommodation and food services 2.0% 0.22% 0.14% Other services, except government 2.0% 0.05% 0.03% Educational services 0.6% -0.14% -0.05% Arts, entertainment, and recreation 0.5% 0.10% 0.02% Government 12.3% -0.02% 0.47% Total, All Industries 100.0% 11.6% 5.1% Note: Contribution to Nebraska real GDP calculation 100 Real GDP i,t 1 Source: Bureau of Economic Analysis σ i Real GDP i,t 1 Real GDP i,t Real GDP i,t 1 1. Percentage of total real GDP by industry is in parentheses. University of Nebraska Kearney 4
Billion ($2017) Billions ($2017) State Economy Real Net Farm Income, 2010-2017F 140.0 9.0 120.0 8.0 7.0 100.0 6.0 80.0 5.0 60.0 4.0 40.0 20.0 3.0 2.0 1.0 0.0 2010 2011 2012 2013 2014 2015 2016 2017F 0.0 US NE Source: USDA, Economic Research Service, Farm Income and Wealth Statistics University of Nebraska Kearney 5
Tri-City Area Economy Overview State Indicators Tri-City Area Tri-City Area Employment Tri-City Area Entrepreneurship University of Nebraska Kearney 6
Tri-City Area Economy Tri-City Area Population Growth 60% of Nebraskans live in Lincoln-Omaha Area Note: Figure was created by Paul Burger, Geography Department, University of Nebraska at Kearney Source: U.S. Census Bureau 10% of Nebraskans live in Tri-City Area University of Nebraska Kearney 7
Tri-City Area Economy Overview State Indicators Tri-City Area Tri-City Area Employment Tri-City Area Entrepreneurship University of Nebraska Kearney 8
Tri-City Area Employment Employment: Tri-City Area vs. Nebraska 110 108 106 104 102 100 98 96 94 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 NE Tri-City Area Note: Index of Growth since 2005 (2005 = 100) Source: Nebraska Department of Labor University of Nebraska Kearney 9
Tri-City Area Employment Contribution to Employment Growth: Top 4 Industries Industry Tri-City Area Industry Composition Tri-City Area 2010-2016 2014-2016 2010-2016 Nebraska 2014-2016 Manufacturing 16% 1.3% -0.2% 0.6% -0.1% Health Care and Social Assistance 15% 1.2% -0.1% 1.7% 0.4% Retail Trade 13% 0.3% -0.2% 0.7% 0.2% Accommodation and Food Services 9% 0.8% 0.3% 0.9% 0.3% Total, All Industries 5.9% -0.1% 8.0% 2.4% Source: Nebraska Department of Labor University of Nebraska Kearney 10
Tri-City Area Employment Composition of Employment by Education, All Industries 2016 Change since 2010 Workers aged 24 or younger Less than high school High school or equivalent, no college Some college or Associate degree Bachelor's degree or advanced degree 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% -1.5% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% NE Tri-City Area NE Tri-City Area Source: Longitudinal Employer-Household Dynamics (LEHD) Program Quarterly Workforce Indicators (QWI) University of Nebraska Kearney 11
Tri-City Area Employment 150 Employment by Educational Attainment, All Industries 140 130 120 110 100 90 80 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Less than high school High school or equivalent, no college Some college or Associate degree Bachelor's degree or advanced degree Workers aged 24 or younger Note: Index of Growth since 2005 (2005 = 100) Source: Nebraska Department of Labor University of Nebraska Kearney 12
Tri-City Area Employment 120 Employment by Educational Attainment, Manufacturing 110 100 90 80 70 60 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Note: Index of Growth since 2005 (2005 = 100) Source: Nebraska Department of Labor Less than high school High school or equivalent, no college Some college or Associate degree Bachelor's degree or advanced degree Workers aged 24 or younger University of Nebraska Kearney 13
Tri-City Area Employment 200 Employment by Educational Attainment, Health Care 180 160 140 120 100 80 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Note: Index of Growth since 2005 (2005 = 100) Source: Nebraska Department of Labor Less than high school High school or equivalent, no college Some college or Associate degree Bachelor's degree or advanced degree Workers aged 24 or younger University of Nebraska Kearney 14
Tri-City Area Employment 130 125 120 115 110 105 100 95 90 85 Employment by Educational Attainment, Retail Trade 80 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Less than high school High school or equivalent, no college Some college or Associate degree Bachelor's degree or advanced degree Workers aged 24 or younger Note: Index of Growth since 2005 (2005 = 100) Source: Nebraska Department of Labor University of Nebraska Kearney 15
Tri-City Area Employment 160 Employment by Educational Attainment, Accommodations & Food Services 150 140 130 120 110 100 90 80 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Note: Index of Growth since 2005 (2005 = 100) Source: Nebraska Department of Labor Less than high school High school or equivalent, no college Some college or Associate degree Bachelor's degree or advanced degree Workers aged 24 or younger University of Nebraska Kearney 16
Openings Rate Tri-City Area Employment Hires & Job Openings by Education, 2016 High Openings, Low Hires High Openings, High Hires Less than high school High school or equivalent, no college All Education Categories of 25+ Bachelor's degree or advanced degree Some college or Associate degree Low Openings, Low Hires Low Openings, High Hires Hire Rate Source: Nebraska Department of Labor; Longitudinal Employer-Household Dynamics (LEHD) Program Quarterly Workforce Indicators (QWI) University of Nebraska Kearney 17
Tri-City Area Employment $3,500 Average Monthly Earnings of New Hires, 2016 $3,000 $2,924 $2,500 $2,164 $2,255 $2,345 $2,000 $1,500 $1,302 $1,000 $500 $0 Workers aged 24 or younger Less than high school High school or equivalent, no college Some college or Associate degree Bachelor's degree or advanced degree Source: Longitudinal Employer-Household Dynamics (LEHD) Program Quarterly Workforce Indicators (QWI) University of Nebraska Kearney 18
Tri-City Area Employment 125 Real Average Monthly Earnings of New Hires 120 115 110 105 100 95 90 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Less than high school High school or equivalent, no college Some college or Associate degree Bachelor's degree or advanced degree Workers aged 24 or younger Note: Index of Growth since 2005 (2005 = 100) Source: Longitudinal Employer-Household Dynamics (LEHD) Program Quarterly Workforce Indicators (QWI) University of Nebraska Kearney 19
Tri-City Area Employment Labor Force Participation Rates, 2010-2017 72.0 70.0 68.0 66.0 64.0 62.0 60.0 2010 2011 2012 2013 2014 2015 2016 2017 NE Tri-City Area Source: Nebraska Department of Labor; U.S. Census University of Nebraska Kearney 20
Tri-City Area Employment Challenges Sluggish employment growth in Top 3 industries Composition of workers by education level has shifted Employment growth driven by workers with less than a high school degree, particularly in Health Care and Social Assistance Declining participation has downside implications for the long-run size of the economy University of Nebraska Kearney 21
Tri-City Area Economy Overview State Indicators Tri-City Area Tri-City Area Employment Tri-City Area Entrepreneurship University of Nebraska Kearney 22
Making the case for entrepreneurship University of Nebraska Kearney 23
2015 Entrepreneurship Class: Focus on effectuation, resources at hand and innovation. University of Nebraska Kearney 24
I have no idea how to actually start a business -2015 Entrepreneurship student evaluation comment University of Nebraska Kearney 25
Question University of Nebraska Kearney 26
Entrepreneurship Entrepreneurship Project at UNK University of Nebraska Kearney 27
Entrepreneurship Entrepreneurship The Upside It is new businesses (and not small businesses) that fuel U.S. job creation (Haltiwanger, Jarmin & Miranda 2013) Companies less than one year old with 1-4 employees have created more than 1 million jobs per year over the past 3 decades Those with 5-9 employees have added 500,000 jobs per year Young firms exhibit up or out dynamic (http://www.nber.org/papers/w16300. pdf) University of Nebraska Kearney 28
Entrepreneurship Entrepreneurship The Downside New establishment entry rates are highly correlated with exit rates, Resources must be freed up to be utilized in new ventures, Process of creative destruction Source: Business Dynamics Survey at https://www.census.gov/ces/dataproducts/bds/data_firm.html University of Nebraska Kearney 29
Where we stand University of Nebraska Kearney 30
Entrepreneurship Kauffman Start-Up Activity Index 6 4 2 NV OK WY MT 0 ID AK ND UT VT SD MS NM OR HI KS NE AR -2 CT KY DE ME IA WV NH RI -4-6 -8 Start-up Activity Index Change in Rank The Kauffman startup activity index is a broad index measure of business startup activity in the United States. It is an equally weighted index of three normalized measures of startup activity including: The Rate of New Entrepreneurs in the economy, calculated as the percentage of adults becoming entrepreneurs in a given month. The Opportunity Share of New Entrepreneurs, calculated as the percentage of new entrepreneurs driven primarily by "opportunity" vs. "necessity. The Startup Density of a region, measured as the number of new employer businesses normalized by total business population. The index is ranked across the 50 most and least populated states. Kauffman Index http://www.kauffman.org/kauffmanindex/reporting/startup-activity University of Nebraska Kearney 31
Entrepreneurship Rate of New Entrepreneurs Starting a Business Per Month Per 100,000 Adults 450 400 350 300 310 317 250 250 200 150 100 50 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Nebraska 7 State Surrounding US Source: The Kauffman Index at http://www.kauffman.org/kauffman-index/reporting/startup-activity. Gray bars indicate recessions. University of Nebraska Kearney 32
Entrepreneurship Opportunity Share of New Entrepreneurs Percent Coming from Employment 10 9.5 9 8.5 8.63 9.14 8.70 8 7.5 7 6.5 6 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Nebraska 7 State Surrounding US Source: The Kauffman Index at http://www.kauffman.org/kauffman-index/reporting/startup-activity. Gray bars indicate recessions. University of Nebraska Kearney 33
Entrepreneurship Number of Startups per 1,000 Employer Businesses 120 100 80 85 74 60 62 40 20 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Nebraska 7 State Surrounding US Source: The Kauffman Index at http://www.kauffman.org/kauffman-index/reporting/startup-activity. Gray bars indicate recessions. University of Nebraska Kearney 34
Entry Rates Entrepreneurship Entry Rates and Exit Rates (Non) Metro Nebraska 0.016 0.014 1982 0.012 1991 1987 1985 1979 1980 1988 1981 0.01 0.008 0.006 2003 2004 2005 2007 2012 2008 2011 2013 2009 2014 2010 1992 1994 1990 1995 1993 1996 1997 1998 2002 2006 2001 1999 2000 0.004 0.004 0.006 0.008 0.01 0.012 0.014 0.016 1989 Exit Rates 1983 1986 Non-Metro Series2 Metro Linear (Series2) Source: Business Dynamics Survey at https://www.census.gov/ces/dataproducts/bds/data_firm.html University of Nebraska Kearney 35
Fragmenting Concentrating Entrepreneurship Sector Fragmentation/Concentration Fragmented Concentrated Manuf Arts & Enter Admin Trans & Ware Whole Trade Const Prof & Tech Serv Real Estate Fin & Ins Ag Mgmt Comp Inform Utilities Accom & Food Retail Public Admin Health Care Educ Source: Bureau of Labor Statistics comparing employer based businesses from 2011-2016. An index was created based on the share of number of firms compared to the share of employees within the Tri-City Area. Share of employees was divided by share of firms. When share of employees is larger than the share of firms (index is >1) the sector is classified as concentrated (converse for when the share of employees is smaller than share of firms (index is <1) the sector is classified as fragmented. University of Nebraska Kearney 36
What might be holding us back University of Nebraska Kearney 37
Entrepreneurship Reallocation Pivots Creative Destruction University of Nebraska Kearney 38
Entrepreneurship 0.4 Nebraska Reallocation rate for Metro Non-Metro 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 US Metro 7-State Metro Neb Metro 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 US Non-Metro 7-State Non-Metro Neb Non-Metro Source: Business Dynamics Survey at https://www.census.gov/ces/dataproducts/bds/data_firm.html University of Nebraska Kearney 39
Entrepreneurship Networks and Reallocation University of Nebraska Kearney 40
Entrepreneurship Comparing Nebraska and Nevada Labor Flows Nebraska Nevada Labor flows represent the ease with which employees can move between sectors of the economy. Tight, well connected networks ensure efficient reallocation of labor across sectors. Source: Census job-to-job flows at https://j2jexplorer.ces.census.gov/ for Nevada and Nebraska for 2016-Q1 2017. The natural logorithm was taken of all data to reduce the impact of population differences between states. Graphs were built using Stata version 14 nwplot function with multidimensional scaling for the placement of nodes for shortest distance. The edge width represents the volume of employee flows between sectors. Measures were dropped for Utilities and Mining due to very few data points. University of Nebraska Kearney 41
Entrepreneurship Case Study: St Louis St Louis was not without entrepreneurial activity in the past It existed in disconnected pockets These pockets inhibited entrepreneurial genealogy when successful entrepreneurs mentor and fund the next generation It s faddish in economic development circles today to talk about collisions. If you create lots of bars and coffee shops and parks, serendipitous unexpected connections will occur: The strategy is premised on people running into each other. St Louis intentionally and deliberately built connections and networks. RoverTown example: Arch Grant 2013 Moves to nonprofit co-working space Accelerator program Mock Angel program Secures $1,000,000 in venture capital funding Named fastest-growing tech startup in St Louis 90.00% 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% 77.39% 70.83% 96.7 66.51% 86.3 73.4 0.16% 0.22% 0.23% 2014 2015 2016 120 100 80 60 40 20 0 Rate of Entrepreneurs Opportunity Share Startup Density St Louis Post Dispatch June 10, 2016 How did St. Louis become an Entrepreneurial Boomtown? by Dane Stangler and Colin Tomkins-Bergh http://www.stltoday.com/business/local/how-did-st-louisbecome-an-entrepreneurial-boomtown/article_c40240aa-9f49-5fd9-83bf-db7228bcbfd2.html Data from Kauffman Index University of Nebraska Kearney 42
Entrepreneurship Possible Barriers to ENT Source: The Platte Institute at http://www.platteinstitute.org/research/detail/strong-jobs-nebraska-the-2017-occupational-licensing-review University of Nebraska Kearney 43
Entrepreneurship Massage Therapist Licensing Requirements State Fee Education CEUs Year law Enacted Nebraska $110 1000 hours 24 1958 Colorado $90 500 hours none 2008 Iowa $120 600 hours 24 1992 Kansas - - - - Missouri $200 500 hours 12 1998 South Dakota $120 500 hours 8 2005 Wyoming - - - - Source: The Platte Institute at http://www.platteinstitute.org/research/detail/strong-jobs-nebraska-the-2017-occupational-licensing-review University of Nebraska Kearney 44
Entrepreneurship Opportunities and Challenges Opportunities Creating and strengthening networks across sectors Leveraging existing approaches to revisit regulation that inhibits creative destruction Recognizing that resources must be freed to be reallocated Challenges Geographic distance Lower population Infrastructure University of Nebraska Kearney 45
Summary Summary Nebraska Economy Weak, driven by Manufacturing and Agriculture Net farm income forecast indicates signs of stability Tri-City Area Employment Sluggish employment growth in Top 3 industries Composition of workers by education level has shifted Employment growth driven by workers with less than a high school degree Entrepreneurship Declining start-up rates Increased concentration among major economic sectors indicating less competition (except Health Care) Opportunity to increase cross-sector labor flows Opportunity to reconsider regulatory basis to enhance new venturing University of Nebraska Kearney 46
Questions? University of Nebraska Kearney 47
Average Number of New Entrepreneurs per 100,000 Adults 2013-2017 Percent Change in Rate of New Entrepreneurs 2013-2017 Entrepreneurship Number of New Entrepreneurs per 100,000 Adults 400 368 30% 350 300 291 292 26% 308 318 330 20% 250 246 250 262 10% 200 150 200-6% 2% -1% 3% -2% 2% -6% 0% -10% 100 50-20% 0-24% -24% Iowa United States Nebraska Kansas 7 - State North Dakota Missouri South Dakota Wyoming Colorado -30% The Rate of New Entrepreneurs in the economy, calculated as the percentage of adults becoming entrepreneurs in a given month the change represents the percentage change in the number of entrepreneurs comparing 2013 and 2017. http://www.kauffman.org/kauffman-index/reporting/startup-activity University of Nebraska Kearney 48
Average Percent of New Entrepreneurs Coming from Employment 2013-2017 Percent Change in Opportunity Share 2013-2017 Entrepreneurship Opportunity Share: % of Entrepreneurs Coming from Employment 10.0 9.0 8.0 8.1 7% 8.3 8% 8.6 8.6 8.7 8.7 8.7 8.8 8.9 3% 3% 3% 9% 10% 5% 7.0 6.0 6.6-1% 0% 0% 0% 5.0-5% 4.0 3.0-10% 2.0 1.0-14% -15% 0.0 United States Missouri Colorado South Dakota 7 - State Kansas Wyoming Iowa Nebraska North Dakota -20% Serves as a proxy indicator of the percent of new entrepreneurs starting businesses because they saw market opportunities. Measures the percentage of new entrepreneurs who were not unemployed before starting their businesses (e.g., new entrepreneurs who were previously working for another organization or in school). Acts as a broad proxy for business growth prospects. Entrepreneurs who were previously unemployed may be acting out of necessity and, therefore, may be more likely to start businesses with lower growth potential. http://www.kauffman.org/kauffman-index/reporting/startup-activity University of Nebraska Kearney 49
Average Number of Startups per 1,000 Employer Businesses 2013-2017 Change in Startup Density 2013-2017 Entrepreneurship Startup Density New Firms per 1,000 Employer Firms 100 6% 10% 90 80 70 60 57 62 63 63 65 71 73 80 83 87 5% 0% -5% 50-9% -10% 40-15% 30 20 10-22% -18% -20% -23% -21% -17% -24% -20% -20% -25% 0 Iowa Nebraska Kansas South Dakota United States 7 - State Wyoming North Dakota Missouri Colorado 2013-2017 Change -30% Estimates the number of startup firms by total employer population. Measures the number of new employer startup businesses normalized by the employer firm population of an area. Because companies captured by this indicator have employees, they tend to be at a more advanced stage than are the companies in the rate of new entrepreneurs measure. Defines startup businesses as employer firms less than one year old that employ at least one person besides the owner. This measure includes all industries. Uses data based on the U.S. Census s Business Dynamics Statistics. http://www.kauffman.org/kauffman-index/reporting/startup-activity University of Nebraska Kearney 50
Entrepreneurship Percent Change in Establishment Count 2011-2016 Mining, Quarrying, and Oil and Gas Extraction Information Public Administration Arts, Entertainment, and Recreation Educational Services Manufacturing Utilities Professional and Technical Services Wholesale Trade Retail Trade Real Estate and Rental and Leasing Accommodation and Food Services Other Services, Ex. Public Admin Finance and Insurance Administrative and Waste Services Construction Transportation and Warehousing Total, All Industries Management of Companies and Enterprises Agriculture, Forestry, Fishing & Hunting Health Care and Social Assistance -0.40-0.20 0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 Tri-Cities Area Nebraska Source: Bureau of Labor Statistics comparing employer based businesses from 2011-2016 University of Nebraska Kearney 51