9 posts from January 2014

Labor force participation: The young and the not restless

A recent report by the Minnesota State Demography Center projects fairly stark and opposing trends in future labor force participation rates of young and old workers. While it might spark a great debate at family reunions over the work ethic of young folks, the underlying source of these trends is likely more benign.

For workers ages 16 to 21 years old, labor force participation rates have been trundling down for some time and are projected to continue dropping in the coming decades (see left chart). For workers ages 22 and older, participation rates remain largely high and flat until you get to age 60, where comparatively lower rates are expected to climb considerably for workers through age 74 (see right chart).

But before you go trashing young workers for their lack of work ethic, the matter is mostly baked into the demographic cake; demographers believe this is not a matter of older workers out-competing younger ones for a limited stock of jobs. It’s also not a function of financial readiness of older workers for retirement. Instead, it has to do with the value of education and the rising longevity of workers.

Susan Brower, Minnesota state demographer, said the projections made by her office use models created by the Bureau of Labor Statistics, which predicts a falling participation rate for young workers because of increasing demands for education. The state office also expects some convergence over time between Minnesota’s high participation rates for young workers and the nation’s lower rate.

Older workers, for their part, are staying on the job longer because of increased life span and improved health during later years, Brower said. While the Great Recession has increased attention toward the financial readiness of older workers for retirement, this matter doesn’t play a major role in long-term projections, at least in an immediate sense, according to Brower. Various economic and demographic factors that affect participation are built into BLS models, and the state office then applies them “in a pretty straightforward manner” to state population estimates, producing what Brower called “a pretty slow-moving curve.”

Labor force participation -- 1-29-14

Ninth District states grew faster than nation last year

When the Census Bureau released its 2013 population estimates this week, they showed that southern and western regions of the country grew at the fastest pace. But Ninth District states held their own.

North Dakota ranked first in the nation in state population growth. South Dakota (6th), Montana (15th) and Minnesota (22nd) also grew faster than the national average, and only Wisconsin (37th) grew slower than the nation (see table).

Some of the population growth occurred from natural increases—the number of births outweighed the number of deaths. Natural population increase was relatively consistent; all district states saw an increase of between 0.3 and 0.6 percent in its population by natural means. For Minnesota and Wisconsin, it was by far the largest growth factor.

The other factor in population change is migration; 37 percent of U.S. population growth occurred from international migration. International migration was a significant factor in the population increases for Minnesota and Wisconsin.

States can also gain (or lose) population by migration between states (see chart). Montana and the Dakotas gained considerable population from people moving into the state from other parts of the country. Almost 17,000 people migrated to North Dakota from other states, most of them headed for the many job opportunities in the Bakken oil fields. Net state migration was negative in Minnesota and especially Wisconsin. 

District population 2013 -- 1-24-14

Boundary Waters: Roughing it, for the day

The dead of winter can be a good time to start dreaming of a summer vacation. In Minnesota, many might be thinking about a trip to the Boundary Waters Canoe Area Wilderness. But fewer of those dreams appear to include overnight stays.

The 1.3-million-acre BWCAW, located in the northern third of the Superior National Forest in northeastern Minnesota (see map), is renowned for its vast nonmotorized lakes and other recreation areas. Since 2003, the park has seen a steady drop in permits (required for overnight stays and other special uses between May 1 and Sept. 30), but an increase in total visitors, according to information from the Superior National Forest office (see chart).

The office believes the annual variation and general decline in permits is likely the result of a combination of factors, including camp fire restrictions, bugs, weather, gas prices and the general health of the economy.

At the same time, based on permits and other monitoring, the office estimates that there has been a slow, steady increase in total park visitation from an estimated 200,000 people in 2000 to an estimated 250,000 people in recent years. This increase, according to the office, likely reflected shifts in travel patterns and length of stay, with fewer overnight stays and more day use spread more broadly across the seasons.

BWCAW chart & map -- 1-23-14

District crop production suffered in 2013

It’s no secret that last year was a tough one for district farmers. As discussed in the Minneapolis Fed’s most recent Survey of Agricultural Credit Conditions, the weather last year was difficult, beginning with heavy rains that delayed or prevented planting in some areas and giving way to drought later in the summer.

Earlier reports from the USDA gave indications that the weather had taken a substantial toll. The agency recently released its annual crop production summary, and final numbers show that while the weather did have an impact, it wasn’t the same across Ninth District states.

Take corn, for example. While overall production fell slightly from a year earlier as expected in Minnesota and North Dakota, it increased in Wisconsin and especially in South Dakota, though the increase is due more to a drought-ravaged 2012 than stellar production in 2013 (see Chart 1).

Crop production CH 1-2 -- 1-17-14

That wasn’t the case for soybeans or wheat, however, both of which saw lower overall production in the district, although South Dakota also had a strong year in soybeans compared with 2012 (see Charts 2). While crop acreage shifted somewhat, output changes among district states (both higher and lower) were due mostly to changes in yields. For example, corn acres harvested increased slightly last year in North Dakota, but production declined because yields fell about 10 percent. Conversely, higher corn production in South Dakota and Wisconsin was due to higher yields. For soybeans, both acreage and yields were down.

Wheat is a different story altogether (see Chart 3). The drop in wheat output was due almost entirely to lower acreage, thanks in part to the lingering effects of the 2012 drought, which led to a dramatic decrease in winter wheat plantings (which occur in the fall of the year prior to harvest).

It was also a tougher year for crop prices. For example, the price farmers received for corn at the end of 2013 was 37 percent lower than a year earlier, according to the USDA. Lower prices and poorer yields have meant lower income for many farmers. USDA data on state farm income will not be released until next month, but 48 percent of respondents to the ag credit survey expected lower farm income in the fourth quarter of 2013, compared with 16 percent expecting an increase.

Crop production CH 3 -- 1-17-14

Businesses expect hiring to continue in 2014

There are renewed signs that the Ninth District economy continues to grow based on a recent poll of more than 100 business contacts from around the district (see methodology).

Businesses are expecting to expand; 41 percent plan to increase employment at their firms, and 58 percent of these firms cited expected high sales growth as the most important factor. Only 9 percent plan to decrease employment. In the same survey a year ago, 40 percent planned to increase employment and 7 percent planned to cut jobs (see chart).

Other important factors cited for new hiring were overworked staff, the need for additional skills, and improved financial condition of firms. The vast majority of respondents plan to use current employee referrals, word of mouth and advertising to get new employees. Twenty-two percent plan to use a recruiting firm, and only 8 percent plan to raise starting pay.

For those respondents not planning to hire additional people this year, most reported that finding skilled candidates is hampering hiring, or they wanted to keep operating costs low or expected sales growth to be low.

Ad hod survey chart -- 1-14-14

Methodology: On Jan. 13, the Minneapolis Fed invited, via email, about 500 Beige Book contacts from around the Ninth District to answer the special question in a web-based survey. By Jan. 14, 104 contacts had filled out the survey. The respondents come from a variety of industries (see table).

Ad hod survey table -- 1-14-14

Report: Minneapolis area real estate on the upswing

As many know, real estate runs in cycles. The market provides signals to build, and two years or more might pass before permits are approved, construction is done and people move in. If many people act at the same time, it can create a supply glut when expansion is followed quickly by contraction.

Integra Realty Resources (IRR), a commercial real estate services firm with an office in Minneapolis, has modeled and described four phases of this cycle. IRR identifies the first phase as recovery, a period in which vacancy rates decrease and there is little new construction, followed by an expansion phase with decreasing vacancy rates and moderately high new construction. The third phase is hypersupply, with high new construction and increasing vacancy rates. The last phase is recession, with increasing vacancy rates and low construction. Each phase also has three stages, or positions, within a phase.

IRR sees the current Minneapolis office market in the recovery phase (see Chart 1) with a 14 percent to 15 percent vacancy rate (depending on property class) and low construction and rent growth. There may be some movement in that market as plans for an office park near the new Minnesota Vikings stadium are under way and a medical company plans a multimillion-dollar, two-story 180,000-square-foot office, manufacturing and warehouse facility.

Integra CRE report MPLS -- CH1 -- 1-8-14

The Minneapolis apartment market is in the expansion phase, according to IRR (see Chart 2), with a 3 percent to 4 percent vacancy rate and high rent growth. But it’s in the third stage of expansion, nearing hypersupply—maybe not a surprise given the multitude of apartment buildings planned or under construction around the Minneapolis-St. Paul area. According to the city of Minneapolis, last year four of the top five construction projects by building permit valuation were apartments, with a combined value of $244 million.

Integra CRE report MPLS -- CH2 -- 1-8-14

Charts reprinted with permission from Intregra Realty Resources.

 

Help wanted: Limited hours and benefits

It’s widely perceived that the post-2009 employment recovery has been dominated by temporary and part-time jobs that typically have fewer health and retirement benefits. The data show there is some truth to this perception, but only by a matter of degree.

During the recession, for example, part-time jobs rose in the U.S., but have been mostly flat in Minnesota. However, the number that were part-time for economic reasons (in other words, they wanted full-time work but accepted part-time) has risen considerably both nationwide and in Minnesota, while part-time jobs held for noneconomic reasons fell (see Chart 1). Though the trend has leveled off, a quick return to pre-recession levels doesn’t appear likely.

Part-time jobs CH1-2

Still, despite the increase, the share of part-time workers has risen only marginally in the Ninth District and the nation (see Chart 2). The part-time share of employment in the Ninth District historically has been higher than the national average, in part, because district states have generally higher workforce participation rates, especially among young workers age 16 to 19 (almost 50 percent in Minnesota, versus the U.S. rate of 35 percent), as well as higher rates of workers with more than one job. Both factors are correlated with a higher incidence of part-time employment.

Temporary jobs also have grown considerably since the end of the recession. But they still make up about 2 percent (and often much less) of total nonfarm employment in Ninth District states (see earlier blog post for more on temp jobs).

A greater share of jobs today do not have health or retirement benefits. In Minnesota, for example, the number of available jobs offering health benefits has slowly eroded over the last decade, bottoming out below 50 percent before rising this year in quarterly job vacancy surveys by the Minnesota Department of Employment and Economic Development (see Chart 3). Federal data also show that the percentage of jobs with pension plans in district states has fallen slightly from 58 percent in 2006 to 56 percent in 2012, but 2012 actually saw a notable gain of almost 1.5 percentage points.

Part-time jobs Ch3

DEED’s job vacancy surveys also show that the share of part-time and temporary or seasonal vacancies has been volatile since the recession, but the trend line for both has gradually ticked higher (see Chart 4). That’s not likely to change quickly. Online job ads tracked by the Conference Board through October 2013 show that ads for part-time jobs continue to rise in Ninth District states (see Chart 5).

Part-time jobs Ch4-5

Dulguun Batbold, research assistant, contributed data for this post.

District manufacturing exits 2013 in expansion mode

Last year proved to be a strong one for manufacturing in Ninth District states, and 2014 appears likely to start on good footing, according to the Mid-America Business Conditions Index, tallied monthly by the business school at Creighton University.

December readings, released Jan. 2, show Minnesota and the Dakotas in optimistic territory overall, enjoying the entire year in expansion mode (see Chart 1; an index reading over 50 denotes expansion, and under 50 contraction). However, unlike the first half of the year, when district states were more optimistic than their national counterparts, it appears that manufacturers elsewhere are gaining somewhat more momentum, while district states have seen more volatility, particularly in the Dakotas.

Employment sentiment was mixed for district states. Manufacturers were in expansion mode for jobs throughout 2013, but index scores trended lower in the last few months (see Chart 2). North Dakota has seen wild swings in employment sentiment, but the data suggest considerable seasonality, with regular spikes in the spring and fall, followed by slowing.

Mid-America biz conditions -- 1-6-13

Temp jobs on the rise in Ninth District

It’s been a roller coaster ride for the temporary help services sector over the past decade, but the industry is on the rise after a harrowing plunge.

The sector includes those employed by staffing agencies to work temporarily at client firms, as well as the permanent employees at staffing firms placing individuals in temp jobs. In 2006, after several years of steady growth, total employment in the temporary help sector was at almost 110,000 in Ninth District states (including all of Wisconsin, only the northwestern one-third of which is technically in the Ninth District. The Upper Peninsula of Michigan is not included in these figures).

By 2009, at the height of the Great Recession, temporary employment had bottomed out at about 80,000, according to data provided to the fedgazette by Economic Modeling Specialists Intl. EMSI estimates use composite employment data from more than 90 sources, including an enhanced, unsuppressed version of quarterly BLS surveys, which allows it to estimate temporary employment in smaller states like the Dakotas.

Since 2009, the industry has witnessed strong growth, with every state save for Montana regaining the number of temp jobs it lost during the recession, and then some. With slow overall job growth in most states, temp employment is slowly increasing its total share of employment (see chart, at bottom). Minnesota is tops in the district, at 2.2 percent of total nonfarm employment, higher than the national average. But every district state has seen this share increase since bottoming out in 2009.

However, the Dakotas and Montana have historically had a much smaller share of total employment in temp jobs compared with Minnesota and Wisconsin—a trend that held both during the recession and after it (see chart). It’s difficult to say why exactly this is the case. One possible explanation is the lower proportion of manufacturing jobs in these smaller district states compared with Minnesota and Wisconsin, because manufacturing is a major employer of temp workers. However, this doesn’t fully explain the lower proportion of temp jobs in the South Dakota economy, where manufacturing makes up 10 percent of jobs, which is close to Minnesota’s 11 percent.

For its part, North Dakota has seen remarkable growth in total temp jobs, more than doubling since 2009 to 4,500 jobs in 2013, according to EMSI; however, the proportion of temp jobs to overall employment has not gone up significantly because of strong job growth throughout the state’s economy over this period.

Watch for the forthcoming January issue of the fedgazette, which takes an in-depth look at temporary jobs and the staffing services industry.

Temp penetration rates -- 1-2-14