How are Things Going? Thoughts to Barry County Jim Robey February 25, 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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Forecasts are too optimistic for 2016? 5 Gross Domestic Product and Employment Change 1,000 GDP Change (%) 4 3 2 1 0-1 Forecast 800 600 400 200 0-200 Employment Change (000s) -2 2010 2011 2012 2013 2014 2015 2016-400 GDP Change (L) Employment Change (R) Source: Bureau of Labor Statistics Current Employment Survey, Bureau of Economic Analysis, Philadelphia Federal Reserve Consensus Forecast 4
The employment forecast suggests more modest employment growth in the next two years Annual Employment Change (000,000s) 3.5 3.0 2.5 2.0 1.5 1.0 0.5 258,000/ mth Consensus Forecast 221,000/mth 197,000/mth* 133,000/mth** 0.0 2014 2015 2016 2017 Source: Bureau of Labor Statistics, *Philadelphia Federal Reserve Consensus Forecast, and **University of Michigan Research Seminar in Quantitative Economics 5
Consumers are confident as borrowing indicates Billions ($) Consumer Confidence and Change in Consumer Debt 35 30 25 20 15 10 5 0-5 -10-15 2010 2011 2012 2013 2014 2015 120 100 80 60 40 20 0 Index: 1995 = 100 Consumer debt (L) Consumer confidence (R) Source: New York Federal Reserve and Conference Board 6
Real wages for production workers are flat, but may be on the rise 22 Average Hourly Wage for Production Workers (2015$) Hourly Wages ($) 20 18 16 14 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Bureau of Labor Statistics Current Employment Survey and Consumer Price Index 5
The calendar isn t calling yet for a recession if you trust history Employment Index From Business Cycle Peak 135 130 125 120 115 110 105 100 95 90 1960 1969 1981 1990 1991 2000 2001 2007 2007 present M1 M6 M11 M16 M21 M26 M31 M36 M41 M46 M51 M56 M61 M66 M71 M76 M81 M86 M91 M96 M101 M106 M111 M116 M121 M126 Source: Bureau of Labor Statistics Current Employment Survey 8
National nondurables: growth or no growth? Employment Change (%) 8 6 4 2 0-2 -4-6 -8-10 2015 2020 Projection 0 5 10 15 20 25 30 Gross Product Change (%) Food Beverage and Tobacco Product Textile Mills Textile Product Mills Apparel Leather and Allied Product Wood Product Paper Printing and Related Support Activities Petroleum and Coal Products Chemical Plastics and Rubber Products Source: Moody s Analytics and Upjohn Institute 9
National durables: more of the same? 15 2015 2020 Projection Nonmetallic Mineral Product Primary Metal Employment Change (%) 10 5 0-5 Fabricated Metal Product Machinery Computer and Electronic Product Electrical Equipment, Appliance, and Component Transportation Equipment -10 0 10 20 30 40 50 Gross Product Change (%) Furniture and Related Product Miscellaneous 10 Source: Moody s Analytics and Upjohn Institute
Mixed national business conditions for 2016 Interest rates remain low following the bump by the Fed in December Fuel prices are expected to remain low Sluggish international markets High value of the dollar Labor and skills shortages Commodity prices are low 11
Moving on to Michigan 12
Employment growth in Michigan was solid and spread across many sectors 30,000 Employment Change, 2014 to 2015 25,000 20,000 Employment Change 15,000 10,000 5,000 0-5,000-10,000-15,000 Wholesale Info. Manuf. Transport., Util. Construct. Retail Finance Prof. and Tech. Admin. Education Hospitality Health Govt. Other Srv. 13 Source: Bureau of Labor Statistics Current Employment Survey
Real wages are down since 2007, but may be rising 26 Average Hourly Wage for Production Workers (2015$) 24 Hourly Wages ($) 22 20 18 16 2007 2008 2009 2010 2011 2012 2013 2014 2015 Michigan United States 14 Source: Bureau of Labor Statistics, Current Employment Survey and Consumer Price Index
Latest University of Michigan employment forecast shows continued growth Employment Forecast 4 th Quarter to 4 th Quarter 2014 67,233 jobs (1.6%) 2015 80,000 jobs (1.9%) 2016* 61,100 jobs (1.4%) 2017* 64,800 jobs (1.5%) Source: University of Michigan Research Seminar on Quantitative Economics 15
Michigan is following the nation Employment Forecast 2.5 2.1 2.2 Annual Change (%) 2.0 1.5 1.0 0.5 1.7 1.4 1.6 1.5 0.0 2015 2016 2017 United States Michigan Source: Philadelphia Federal Reserve Consensus Forecast and University of Michigan Research Seminar on Quantitative Economics 16
Next Up, Barry County 17
Employment growth in the region has been comparable to the state since the end of the Great Recession 110 Total Employment Index (2006 = 100) 105 100 95 90 85 80 *2015 data through second quarter only 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* Barry County Michigan United States Source: Bureau of Labor Statistics Quarterly Census of Employment and Wages 18
The local labor market is tighter than the state and the nation 16 Unemployment Rate % of Labor Force 14 12 10 8 6 4 2 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Barry County Michigan United States Source: Bureau of Labor Statistics Local Area Unemployment Statistics 19
Labor markets are tight: Barry County is just over 4% with the U.S. at 4.9% Source: Bureau of Labor Statistics Local Area Unemployment Statistics 20
The national LFPR was 62.6 in 2015; Barry County was at 66.1 Source: Bureau of Labor Statistics Local Area Unemployment Statistics and Upjohn Institute 21
Real wages declined until 2015 Average Weekly Wage ($) 1050 1000 950 900 850 800 750 700 650 600 Average Weekly Wage, All Workers (2015$) *2015 data through second quarter only 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* Barry County Michigan United States Source: Bureau of Labor Statistics Quarterly Census of Employment and Wages 22
Wages in the region are right in the middle Source: Bureau of Labor Statistics Quarterly Census of Employment and Wages and Upjohn Institute 23
Local Conditions Auto sales are expected to remain solid through 2016 and 2017 Other manufacturing sectors, including furniture and aerospace are flat Labor and skills shortages Commodity prices are low Low unemployment rate Availability of commercial/industrial real estate Lack of investment in residential capital 24
News of the week: a mixed bag February Consumer Confidence was down to the lowest point since July: 92 Conference Board Leading Indicators -.2% January CPI came in at 0% January Industrial Production up.9% December revised down.3% to -.7% Jobless Claims at 262k (7k less than consensus) Nationally, home prices are up about 5.4% 25
Questions and Comments? Upjohn Institute: 269-343-5541 Jim Robey Director of Regional Economic Planning Services jim.robey@upjohn.org Brian Pittelko Regional Analyst pittelko@upjohn.org 26