Economic Conditions and Regional Economic Outlook Brian Pittelko September 21, 2016 1
Upjohn Institute for Employment Research The Institute is an activity of the Upjohn Unemployment Trustee Corporation, which was established in 1932 to administer a fund set aside by Dr. Upjohn, founder of the Upjohn Company. MISSION: The Upjohn Institute for Employment Research is a private, nonprofit, nonpartisan, independent research organization devoted to investigating the causes and effects of unemployment, to identifying feasible methods of insuring against unemployment, and to devising ways and means of alleviating the distress and hardship caused by unemployment. 2
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GDP Change (%) Employment Change (000s) Forecasts are flat 6 Gross Domestic Product and Employment Change 1,500 4 1,000 2 0 500 0-2 -4-6 -8 Forecast -500-1,000-1,500-2,000-10 2006 2008 2010 2012 2014 2016-2,500 GDP Change (L) Employment Change (R) Source: Bureau of Labor Statistics Current Employment Survey, Bureau of Economic Analysis, Philadelphia Federal Reserve Consensus Forecast 4
M1 M7 M13 M19 M25 M31 M37 M43 M49 M55 M61 M67 M73 M79 M85 M91 M97 M103 M109 M115 M121 M127 Month 1 of Recovery=100 The calendar isn t yet calling for a recession if you trust history 135 130 125 120 115 110 105 100 95 90 Employment Index From Business Cycle Peak 1960 1969 1981 1990 1991 2000 2001 2007 2007 present (105 months) Source: Bureau of Labor Statistics Current Employment Survey 5
Billions ($) Index: 1995 = 100 Mixed signals from consumers 40 30 Consumer Confidence and Change in Consumer Debt 120 100 20 10 0-10 -20 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 80 60 40 20 0 Consumer Debt (L) Consumer Confidence (R) Source: New York Federal Reserve and Conference Board 6
Annual Rate of Sales (in 000,000s) Are sales at a natural peak? Annualized Rate of U.S. Light Vehicle Sales (in millions) 24 22 20 18.1 (2000 to 2007 Peak) 18 16 14 16.8 (2000 to 2007 Average) 12 10 8 6 4 2 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: Bureau of Economic Analysis 7
Moving on to Michigan 8
Employment Change (000s) Employment is growing in nearly every industry 20000 Employment Change, Q2 2015 to Q2 2016 15000 Manufacturing Health 10000 Finance Prof. and business Admin. Hospitality 5000 0 Retail Construct. Wholesale Info. Transport. and util. Real estate Management Education Other srv. Govt. -5000 Source: Bureau of Labor Statistics Current Employment Survey 9
Hourly Wages ($) Statewide wages are not matching the national trend 28 Average Hourly Wage for Production Workers (2016$) 26 24 22 20 18 16 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 United States Michigan 10 Source: Bureau of Labor Statistics Current Employment Survey and Consumer Price Index
Battle Creek MSA and Kalamazoo- Portage MSA 11
Percent of labor force The unemployment rates from the nation to the region have been steadily falling 16 Unemployment Rate 14 12 10 8 6 4 2 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 U.S. Michigan Battle Creek MSA Kalamazoo MSA 12 Source: Bureau of Labor Statistics Local Area Unemployment Statistics
Unemployment rates across the region are low 13 Source: Bureau of Labor Statistics Local Area Unemployment Statistics
However, labor force participation rates are lower 14 Source: Bureau of Labor Statistics Local Area Unemployment Statistics
Index 2006 = 100 Overall employment growth is tapering 110 Total Employment Index (2006 = 100) 105 100 95 90 85 80 75 70 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 U.S. Michigan Battle Creek MSA Kalamazoo MSA 15 Source: Bureau of Labor Statistics Current Employment Statistics and Upjohn Institute
Index 2006 = 100 Services have grown similar to national and statewide patterns 120 Services Employment Index (2006 = 100) 115 110 105 100 95 90 85 80 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 U.S. Michigan Battle Creek MSA Kalamazoo MSA 16 Source: Bureau of Labor Statistics Current Employment Statistics and Upjohn Institute
Index 2006 = 100 Manufacturing employment growth has outpaced the national rate 120 Manufacturing Employment Index (2006 = 100) 110 100 90 80 70 60 50 40 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 U.S. Michigan Battle Creek MSA Kalamazoo MSA 17 Source: Bureau of Labor Statistics Current Employment Statistics and Upjohn Institute
Employment Change (000s) Employment growth in the Battle Creek MSA was mixed in the third quarter 0.35 Battle Creek Employment Change, Q2 2015 to Q2 2016 0.30 Prof. and business 0.25 0.20 Education and health services 0.15 Manufacturing 0.10 0.05 0.00-0.05-0.10-0.15 Construct. Trade, transport., and util. Finance Leisure and hospitality Other Srv. Govt. 18 Source: Bureau of Labor Statistics Current Employment Statistics and Upjohn Institute
Employment Change (000s) Nearly every industry grew in the second quarter 1 0.8 Kalamazoo Employment Change, Q2 2015 to Q2 2016 Prof. and business 0.6 0.4 0.2 Construct. Manufacturing Trade, transport., and Financial activities util. Education and health services Leisure and hospitality Govt. 0-0.2 Information Other Srv. -0.4 19 Source: Bureau of Labor Statistics Current Employment Statistics and Upjohn Institute
Average Weekly Wage ($) Overall, real wages are rising 1,100 Total Wages ($2016) 1,050 1,000 950 900 850 800 750 700 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 U.S. Michigan Battle Creek MSA Kalamazoo MSA 20
Average Weekly Wage ($) Manufacturing wages are rising in Kalamazoo, but falling in Battle Creek 1,700 Manufacturing Wages ($2016) 1,600 1,500 1,400 1,300 1,200 1,100 1,000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 U.S. Michigan Battle Creek MSA Kalamazoo MSA 21
Percent Change Battle Creek is forecast for slow growth this year and next 3.0 2.5 2.3 Battle Creek Employment Forecast 2.7 2.5 2.2 2.0 1.6 1.6 1.6 1.5 1.3 1.2 1.0 0.8 0.8 0.5 0.4 0.0 Total Goods producing Service providing Government 2015 2016 2017 22 Source: Bureau of Labor Statistics Current Employment Statistics and Upjohn Institute
Percent Change Kalamazoo s forecast shows a sharper drop-off in goods production 4.5 4.0 Kalamazoo Employment Forecast 4.1 3.5 3.0 2.5 2.0 1.5 1.0 0.5 1.9 1.4 2.0 1.4 1.3 1.5 1.4 1.5 0.5 0.6 0.9 0.0 Total Goods producing Service providing Government 2015 2016 2017 23 Source: Bureau of Labor Statistics Current Employment Statistics and Upjohn Institute
Questions and comments? Upjohn Institute: 269-343-5541 Brian Pittelko Regional Analyst pittelko@upjohn.org 24