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W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
Economic Conditions:A Look at Factors Affecting the Grand Rapids
Region and a Look Forward
Jim Robey, PhDDecember 7, 2016
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
W.E. Upjohn Institute for Employment Research
• The Institute is an activity of the W.E. Upjohn Unemployment Trustee Corporation, which was established in 1932 to administer a fund set aside by Dr. W.E. Upjohn, founder of the Upjohn Company.
• MISSION:– The W.E. 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
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
Regional and Economic Planning Services
• Data Dissemination & Analysis• Economic Impact Studies• Economic & Workforce Development Strategy• Talent Assessment• Urban & Regional Planning
3
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
Is it really that good?
-2,500
-2,000
-1,500
-1,000
-500
0
500
1,000
1,500
-10
-8
-6
-4
-2
0
2
4
6
2006 2008 2010 2012 2014 2016
Empl
oym
ent C
hang
e (0
00s)
GDP
Chan
ge (%
)
Gross Domestic Product and Employment Change
GDP Change (L) Employment Change (R)
Forecast
Source: Bureau of Labor Statistics Current Employment Survey, Bureau of Economic Analysis, Philadelphia Federal Reserve Consensus Forecast
4
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
The calendar isn’t yet calling for a recession—if you trust history
1960–1969
1981–1990
1991–2000
2001–20072007–present (108
months)
90
95
100
105
110
115
120
125
130
135
Employment Index From Business Cycle Peak
Source: Bureau of Labor Statistics Current Employment Survey
Mon
th o
f Bus
ines
s Cyc
le P
eak
= 1
00
5
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
Consumer confidence has been flat for over a year
0
20
40
60
80
100
120
-20
-10
0
10
20
30
40
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Inde
x: 1
995
= 10
0
Billi
ons (
$)
Consumer Confidence and Change in Consumer Debt
Consumer Debt (L) Consumer Confidence (R)
Source: New York Federal Reserve and Conference Board6
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
Good for the consumer, but…
0
20
40
60
80
100
120
140
0
1
2
3
4
5
6
7
2011 2012 2013 2014 2015 2016
$ Pe
r Bar
rel
$ Pe
r Mill
ion
Met
ric B
TU
Energy Commodity Prices
Natural Gas (L) Crude Oil (R)
Source: International Monetary Fund
Natural Gas spot price at the Henry Hub terminal in Louisiana, US$ per million metric BTU;Crude Oil (petroleum) simple average of Dated Brent, West Texas Intermediate, and the Dubai Fateh. 7
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
Some recent upturns portend good things
0
2
4
6
8
10
12
0
5
10
15
20
25
30
2011 2012 2013 2014 2015 2016
$ Pe
r Met
ric T
on (0
000s
)
$ Pe
r Met
ric T
on (0
00s)
Industrial Inputs Commodity Prices
Nickel (L) Copper (R)
Source: International Monetary FundNickel - melting grade; Copper - grade A cathode, LME spot price, CIF European ports. 8
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
Bumper crops will not be good for agricultural capital expenditures
024681012141618
0123456789
2011 2012 2013 2014 2015 2016
$ Pe
r Bus
hel
$ Pe
r Bus
hel
Agriculture Commodity Prices
Corn (L) Soybeans (R)
Source: University of Illinois Farm Decision Outreach Central (Farmdoc)9
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
Mixed signals from credit markets?
-3-2-1012345678
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Inte
rest
Rat
e &
CPI
Cha
nge
Interest Rates and Change in Consumer Price Index
30-Year Mortgage 10-Year Treasury 3-Month Treasury 12-Month Change in CPI-U
Source: New York Federal Reserve and Bureau of Labor Statistics, Consumer Price Index10
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
National nondurables: Growth or no growth?
-10-8-6-4-202468
0 5 10 15 20 25 30
Empl
oym
ent C
hang
e (%
)
Gross Product Change (%)
2015–2020 Projection Food
Beverage and Tobacco Products
Textile Mills
Textile Product Mills
Apparel
Leather and Allied Products
Wood Products
Paper
Printing and Related Support Activities
Petroleum and Coal Products
Chemical
Plastics and Rubber Products
Source: Moody’s Analytics and Upjohn Institute11
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
National durables: More of the same?
-10
-5
0
5
10
15
0 10 20 30 40 50
Empl
oym
ent C
hang
e (%
)
Gross Product Change (%)
2015–2020 ProjectionNonmetallic Mineral Products
Primary Metals
Fabricated Metal Products
Machinery
Computer and Electronic Products
Electrical Equipment, Appliance, andComponentsTransportation Equipment
Furniture & Related Products
Miscellaneous
Source: Moody’s Analytics and Upjohn Institute12
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
-10%
0%
10%
20%
30%
40%
-20% -10% 0% 10% 20% 30% 40% 50%
Empl
oym
ent C
hang
e %
Gross Product Change %
2015–2020 Projection
The technology and business services
Accounting, tax preparation, bookkeeping, & payroll services
Architectural, engineering, & related servicesComputer systems design & related servicesData processing, hosting, & related services
Insurance carriers
Legal services
Management of companies & enterprisesManagement, scientific, & technical consulting servicesOffice administrative services
Other professional, scientific, & technical services
Scientific research & development servicesSoftware publishers
Specialized design services
Source: Moody’s Analytics and Upjohn Institute 13
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
Moving on to Michigan
14
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
Michigan is doing well, year to date
Construct.
Manufacturing
Wholesale
Retail
Transport. and util.
Info.
Finance
Prof. and business
Education and health
Leisure and hospitality
Other services
Government
-10
-5
0
5
10
15
20
25
30
35
Empl
oym
ent C
hang
e (0
00s)
Employment Change, Q3 2015 to Q3 2016
15
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
Auto sales have reached a peak?
02468
1012141618202224
2000 2002 2004 2006 2008 2010 2012 2014 2016
Annu
al R
ate
of S
ales
(in
000,
000s
)
Annualized Rate of U.S. Light Vehicle Sales (in millions)
18.1 (2000 to 2007 Peak)
16.8 (2000 to 2007 Average)
Source: Bureau of Economic Analysis16
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
Michigan Forecast
Job Growth Per Year(All Sectors)
2016 – 69,000 jobs2017 – 41,600 jobs2018 – 50,000 jobs
Source: University of Michigan Research Seminar on Quantitative Economics17
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
Michigan Forecast
Job Growth Per Year(Manufacturing)
2016 – 11,900 jobs2017 – -7,040 jobs2018 – -2,990 jobs
Source: University of Michigan Research Seminar on Quantitative Economics18
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
Moving on to Grand Rapids
19
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
Tight labor markets should push wages up
0
2
4
6
8
10
12
14
16
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Perc
ent o
f Lab
or F
orce
Unemployment Rate
Grand Rapids MSA Michigan United States
Source: Bureau of Labor Statistics Local Area Unemployment Statistics & Upjohn Institute20
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH Source: US Census American Community Survey
Labor Force Participation,
62.7 in the United States
21
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
Full recovery by 2013, and then some
85
90
95
100
105
110
115
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Inde
x (2
006
= 10
0)
Nonfarm Employment Index (2006 = 100)
Grand Rapids MSA Michigan United States
Source: Bureau of Labor Statistics Current Employment Statistics & Upjohn Institute22
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
Pre-recession by mid-2015
6065707580859095
100105110
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Inde
x (2
006
= 10
0)
Manufacturing Employment Index (2006 = 100)
Grand Rapids MSA Michigan United States
Source: Bureau of Labor Statistics Current Employment Statistics & Upjohn Institute23
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
Strong performance in the services sector
85
90
95
100
105
110
115
120
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Inde
x (2
006
= 10
0)
Private Service-Providing Employment Index (2006 = 100)
Grand Rapids MSA Michigan United States
Source: Bureau of Labor Statistics Current Employment Statistics & Upjohn Institute24
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
Most sectors in Grand Rapids are doing well
Construct.
Manufacturing
Wholesale
Retail
Transport. and util. Info.
Finance
Prof. and business
Education and health
Leisure and hospitality
Other servicesGovernment
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Empl
oym
ent C
hang
e (0
00s)
Employment Change, Q3 2015 to Q3 2016
Source: Bureau of Labor Statistics Current Employment Statistics & Upjohn Institute25
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
• Birmingham-Hoover, AL• Charlotte-Concord-
Gastonia, NC-SC • Dallas-Fort Worth-
Arlington, TX• Greenville-Anderson-
Mauldin, SC• Knoxville, TN
• Louisville/Jefferson County, KY-IN Metro Area
• Portland-Vancouver-Hillsboro, OR-WA Metro Area
• Rochester, NY• Tulsa, Ok
Comparison cities (in partnership with The Right Place)
Comparison areas:
26
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
Comparison city criteria
• Population 20% above or 20% below theGrand Rapids-Wyoming MSA
• Not located on an oceanic coast• Not a state capital city• Must have at least 10% of its overall GRP
generated from the manufacturing sector
27
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
The tightest labor market
5.65.0
4.94.8
4.74.7
4.44.3
3.84.7
3.3
0 1 2 3 4 5 6
Birmingham, ALTulsa, OK
Charlotte, NCPortland, OR
Greenville, SCRochester, NY
Louisville, KYKnoxville, TN
Dallas, TXComparison average
Grand Rapids
Percent of Labor Force
Average Unemployment Rate, Jan-Oct 2016
Source: Bureau of Labor Statistics Local Area Unemployment Statistics28
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
Above average growth
-0.3-0.2
1.02.0
2.52.52.5
3.03.6
1.82.6
-0.5 0 0.5 1 1.5 2 2.5 3 3.5 4
Tulsa, OKRochester, NY
Birmingham, ALGreenville, SCKnoxville, TNCharlotte, NCLouisville, KYPortland, OR
Dallas, TXComparison average
Grand Rapids
Employment Percent Change
Total Employment Change Jan-Oct 2015 to Jan-Oct 2016
29Source: Bureau of Labor Statistics Current Employment Statistics
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
Strong manufacturing performance YTD
-9.9-1.0-0.8-0.7
0.20.3
0.93.6
4.2-0.3
3.6
-12 -10 -8 -6 -4 -2 0 2 4 6
Tulsa, OKRochester, NY
Dallas, TXBirmingham, AL
Portland, ORCharlotte, NCGreenville, SCLouisville, KYKnoxville, TN
Comparison averageGrand Rapids
Employment Percent Change
Manufacturing Employment Change Jan-Oct 2015 to Jan-Oct 2016
30Source: Bureau of Labor Statistics Current Employment Statistics
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
Middle of the pack in services
-0.20.8
1.22.0
2.12.52.5
3.34.1
2.02.3
-0.5 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5
Rochester, NYTulsa, OK
Birmingham, ALGreenville, SCKnoxville, TNLouisville, KY
Charlotte, NCPortland, OR
Dallas, TXComparison average
Grand Rapids
Employment Percent Change
Services Employment Change Jan-Oct 2015 to Jan-Oct 2016
Source: Bureau of Labor Statistics Current Employment Statistics31
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
Entrepreneurial activity in a growing sector
19.219.9
22.823.3
24.825.4
30.032.1
34.825.8
28.2
0 5 10 15 20 25 30 35 40
Rochester, NYKnoxville, TN
Birmingham, ALCharlotte, NC
Dallas, TXLouisville, KYPortland, OR
Tulsa, OKGreenville, SC
Comparison averageGrand Rapids
Percent of Industry
Percent Self-Employed in Professional, Scientific, and Technical Services
Source: US Census American Community Survey32
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
More than one third have at least a four-year degree
28.128.7
29.934.234.334.7
37.238.0
40.834.0
35.9
0 5 10 15 20 25 30 35 40 45
Tulsa, OKGreenville, SCKnoxville, TN
Birmingham, ALLouisville, KY
Dallas, TXRochester, NYCharlotte, NCPortland, OR
Comparison averageGrand Rapids
Percent of Age Group
Bachelor's Degree or Higher, Age 25-34
Source: US Census American Community Survey33
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
Low growth in housing prices
100120140160180200220240260280
Inde
x (1
995
= 10
0)
Housing Price Index (1995=100)
Grand Rapids Birmingham, AL Charlotte, NC Dallas, TX Greenville, SCKnoxville, TN Louisville, KY Portland, OR Rochester, NY Tulsa, OK
Source: Federal Housing Finance Agency34
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
Local Forecast
• Thank you to the Right Place and to our focus group contributors
• The next section includes “factors” affecting our forecast
35
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
Permits issued at pre-recession levels
0500
1,0001,5002,0002,5003,0003,5004,0004,5005,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*
Uni
ts p
er Y
ear
Construction Permits Issued, Grand Rapids MSA
Total, All Structure Types Single Family Houses
* Projection based on year to date Oct 2016
Source: US Census Building Permit Survey 36
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
Increased activity in 2016
050
100150200250300350400450
2011 2012 2013 2014 2015 2016
Uni
ts p
er M
onth
Number of Dwelling Units Placed Under Contract for Construction
New Dwelling Units 12-Month Moving Average
Source: F.W. Dodge Division, McGraw Hill37
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
Positive long-run trend to Purchasing Managers Index
40
45
50
55
60
65
70
75
2011 2012 2013 2014 2015 2016
Inde
x
West Michigan Purchasing Managers Index
Purchasing Managers Index 12-Month Moving Average
Source: National Association of Purchasing Management38
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
Last year’s forecast – not too far off
2.6
3.6
2.6
0.4
2.42.2
2.7
0.10.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Total Goods Producing Service Providing Government
Perc
ent C
hang
e in
Em
ploy
men
t
Annual Percent Change in Employment
Current Estimate Forecasted
Source: Bureau of Labor Statistics Current Employment Statistics & Upjohn Institute39
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
Our View of 2017 and 2018
40
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
Grand Rapids MSA 2017–2018 Employment Forecast
2.6
3.6
2.6
0.4
1.1
0.5
1.3
0.5
1.0
0.1
1.3
0.7
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Total Goods Producing Service Providing Government
Perc
ent C
hang
e in
Em
ploy
men
t
Annual Percent Change in Employment
2016 Estimate 2017 Forecast 2018 Forecast
Source: Bureau of Labor Statistics Current Employment Statistics & Upjohn Institute41
W.E.
UPJOHN INSTITUTEFOR EMPLOYMENT RESEARCH
Grand Rapids MSA 2017–2018 Output Forecast
1.1
0.5
1.3
2.52.2
2.8
1.0
0.1
1.3
2.4
1.8
2.9
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Total Goods Producing Service Providing
Perc
ent C
hang
e in
Em
ploy
men
t
Annual Percent Change in Output
2017 Employment 2017 Output 2018 Employment 2018 Output
42Source: Bureau of Labor Statistics Current Employment Statistics & Upjohn Institute