4 posts from July 2011

Minnesota employment has recovered—or maybe not

Given all the hand-wringing over jobs, it might be surprising to know that there is considerable gray area over their actual number and how they are measured.

For example, by one measure, Minnesota’s employment remains about 4.4 percent lower than it was at the start of the recession. But by another measure, Minnesota’s employment has recently returned to its prerecession level (see Chart 1). More double talk from economists? Well, yes and no.

Employment Ch 1 -- 7-19-11                               Source: Bureau of Labor Statistics

The Bureau of Labor Statistics (BLS) collects employment statistics from two perspectives—households and businesses. To measure unemployment and labor force statistics, the BLS surveys 76,000 households across the nation and asks whether household members are employed, actively looking for work and so forth. The number of households surveyed in Minnesota is too small to get a clear picture of employment and unemployment, so the BLS combines the household survey with other information to produce state estimates.

Even with the additional information, there is a lot of uncertainty. For example, while the Minnesota unemployment rate stood at 6.6 percent in May 2011, the BLS reported that it is “90 percent confident” that the true unemployment rate is between 6 percent and 7.2 percent.

Measuring the number of jobs at businesses is somewhat easier. Here, the BLS surveys the payroll records of almost half a million nonfarm establishments across the country. While payroll employment has its own technical shortcomings, the much larger sample size is widely thought to produce more accurate estimates of state employment.

There are a number of differences between these two measures of employment, including how each treats self-employed workers, farm workers and people holding multiple jobs. But none of these differences appears to account for the large disparity since the start of the recession.

It turns out that household and payroll measures of employment have behaved differently in all states since the start of the recession—adding yet another complicating layer to employment analysis. The highlighted Minnesota bar (see Chart 2) shows that payroll employment has fallen 4.5 percent more than household employment. The difference is even larger in Arizona, where payroll employment is down 10.3 percent, whereas the household survey shows a mild 1.2 percent decline.

Employment Ch 2 -- 7-19-11 
Source: Bureau of Labor Statistics

North Dakota finds itself in the opposite position from Minnesota: Payroll employment growth has been substantially stronger than household employment. For Montana, South Dakota and Wisconsin, the two employment estimates have changed by roughly the same amount since the start of the recession.

Unfortunately, economists have yet to uncover why the two measures vary so widely. And until that matter gets resolved, Minnesota’s employment disparity will remain a tale of two surveys.

Primary care doctors thin on the ground

Alarmed by a “critical public policy problem”—a scarcity of primary care physicians—the Obama administration recently announced a plan to deploy “mystery shoppers” to phone doctors’ offices to see how difficult it is to get an appointment. Health system officials reasoned that increased medical coverage under health care legislation enacted last year will worsen a shortage of primary care doctors in many parts of the country.

The covert survey plan was nixed after complaints from doctors, but the initiative raises a question about how Ninth District states compare with the nation as a whole in per capita numbers of primary care physicians—medical doctors such as family practitioners, internists and pediatricians who initially see people in need of medical care.

It turns out that primary care physicians are thinner on the ground in every district state compared with the national average, according to 2010 occupational data compiled by the Bureau of Labor Statistics (see chart). Nationwide, there are about 12 primary care physicians for every 10,000 people. Minnesota, a state with a reputation for excellent medical care, has close to 10 primary care doctors for the same population, tops in the district. North Dakota has the lowest concentration, with fewer than four.

Physician ratio chart -- 7-19-11 

Why do people in district states on average have relatively fewer primary care physicians at their service than the typical U.S. resident? The distribution of Health Professional Shortage Areas (HPSAs) gives a clue. These are federally designated areas or population groups in which there are at least 3,500 people for every primary practitioner.

The correlation of HPSAs—areas considered medically underserved by the Health Resources and Services Administration—with rural areas is striking; North Dakota has a number of HPSAs, the vast majority of which lie outside metro areas. (Go here to create HPSA maps for any district state.)

The inference? Few doctors find it profitable professionally or personally to work in rural areas, which dominate the Ninth District landscape. Whether this amounts to a physician “shortage” in an economic sense is uncertain. Rural residents would certainly prefer to have greater access to physicians. But a low physician-population ratio suggests that rural communities and their residents have been unable or unwilling (depending on the household) to pay the fees necessary to attract more frontline doctors to town.

Montana business confidence: Location, location, location

In a soft economy, Montana’s businesses are betting on themselves.

The Federal Reserve Bank of Minneapolis surveyed Montana businesses on their confidence in the coming 12 months. They reported being very confident about their own prospects, and increasingly less so the farther they got from home.

Fully two-thirds of respondents said they were either very or somewhat confident regarding their firm’s prospects for the next year. That confidence plummeted when asked about their confidence in local, state and national economies (see Chart 1).

MT Biz confidence -- 6-27-11 

Though respondents were positive overall regarding their firm’s outlook, they were not exactly over the top (see Chart 2). Close to 40 percent expect sales to climb and productivity to rise; still, profit expectations were mostly a wash.

There was also little belief that public policy and other outside factors would offer much help, with the exception of labor availability, which is still believed to be good from employers’ perspective. There are some common complaints from businesses regarding taxes and regulation, but many were also quite negative on federal efforts to stimulate the economy and on federal health care reform.

The survey was conducted in mid-June in partnership with the Montana Chamber of Commerce. It received 155 responses. It also reflects some of the same optimism and caution of Ninth District businesses responding to the Minneapolis Fed’s recent semi-annual poll on business conditions. For more information, as well as the short-term outlook and forecast for employment, unemployment and housing in the district, see the July issue of the fedgazette.

The quirks of flooding, and flood insurance

With dozens of rivers, creeks and lakes overrunning their normal borders in the Dakotas and Montana, flood insurance is a common topic of conversation these days.

Most flood insurance is purchased through the National Flood Insurance Program, which is managed by the Federal Emergency Management Agency. Homeowners with mortgages from federally regulated lenders (e.g., Fannie Mae) on property that is located in high-risk areas for flooding are required to purchase flood insurance. The program also buys down the cost of premiums for flood insurance policies in hopes of encouraging more households and businesses to insure their homes and livelihoods from watery damage.

Despite these incentives and requirements, communities hit hard by flooding this year are finding that many flooded homes and businesses are uninsured. In Minot, N.D., where the Souris River went four feet higher than it’s ever been measured, only 375 of 4,000 homes inundated by flood were insured, according to FEMA officials.

How can this be? It’s a bit complicated, but for starters, it can be hard to judge the real risk of flood. Many homeowners in Minot believed they were well out of harm’s way for any flood. But the Souris exceeded flood stage by a historic amount, gushing into some streets and neighborhoods where homeowners probably never gave flood insurance a second thought. Many also weren’t required to buy insurance; FEMA uses a 100-year flood to draw the boundaries of high-risk areas, and this surge swamped even that flood plain.

Flood insurance is filled with such quirks. An intriguing fact for North Dakotans is that they appear to be getting one of the best deals out there for flood insurance. Data from FEMA show that the policyholders in the Peace Garden state enjoy some of the lowest premiums in the country, yet they receive some of the highest coverage in terms of insured value per dollar of premium (see chart below). Why that’s the case is not exactly clear, and FEMA officials did not respond immediately to queries on the matter.

FEMA flood insurance -- 7-2-11 

Regardless, more North Dakotans might want to consider insuring their homes and livelihoods from disasters, because they are not exactly unique occurrences. According to the state Department of Emergency Services, there have been 28 presidential declarations in the state since 1993—most of them for floods—including one every year, save for 2008. Last year there were four separate declarations, and this year there are sure to be several additions. Two counties (Benson and Walsh) have been designated as disaster zones 19 times over this period, and virtually all counties in the eastern two-thirds of the state have had double-digit disasters.