43 posts categorized "Labor"

Made in (but not owned by) the USA

Investment is typically seen as a sign of economic strength, as people and financial entities put their money where they believe it can be most productive and profitable. Foreign direct investment (FDI) tracks the amount of money international firms invest in the United States, and a recent report on the matter by the Brookings Institution shows that it’s growing in the Ninth District, but not as fast as it is elsewhere in the country.

In 2013, for example, companies invested $1.46 trillion in locations outside their home country, and the United States is the single largest destination of that capital, receiving $193 billion, according to the report. This investment manifests itself in many forms: spreading technology, facilitating the exchange of knowledge and inducing new trade.

It also employs millions of people, which the Brookings report investigated more closely. Among Ninth District states, the trends are somewhat diverging. In five Ninth District states (cumulative), total employment at foreign-owned establishments (FOEs) grew by about 50 percent from 1991 to 2011, and the share of total private employment at FOEs increased as well (see Chart 1). The growth in this share of employment tended to be modest—about one-half of a percentage point—with the exception of North Dakota, whose share of FOE employment tripled over this period, most likely as a result of foreign firms investing resources in (and hiring workers for) the Bakken oil patch.

However, across the board, district states have a lower share of FOE employment than the national average and (with the exception of North Dakota) saw less growth in the share of FOE employment. As a result, most distrct states fell in ranking among their peers in FOE’s share of total private employment (see table embedded in Chart 1).

One caveat to FDI trends: Much of this investment is the result of acquisitions or mergers of U.S. companies by international firms. So a considerable amount of the resulting “growth” in FOE employment is a methodological quirk—namely, a shift in the nationality of the parent company. This was particularly the case in North Dakota. Among district states, only Wisconsin was close to the national average in the share of FOE employment growth coming from new openings (see Chart 2).

FDI Ch1-2

Personal income buys more in district states

Income earned in one part of the country goes further than in another based on differences in the cost of living. A job in New York City, or in the oilfield city of Williston, N.D., will have to pay more to purchase a similar value of housing, goods and services than a job in Missoula, Mont.

Last week the Bureau of Economic Analysis released data that adjust personal income across states and metropolitan areas to account for cost of living differences. Data on regional price parities (see chart) show state price levels relative to the U.S. average. South Dakota’s value of 88.2 means that the state’s price level is 11.8 percent lower than the U.S. average. Minnesota has the highest value among district states, but is still 2.5 percent lower than the national average. The data series also adjusts for U.S. inflation from 2008 to 2012.

Price parity -- 5--14

Since district states have lower price levels than the nation, once per capita income is adjusted for regional price differences, district states move up across the board in per capita income rankings (see table below). In 2012, North Dakota moved from the fifth to the second highest per capita income level after adjusting for price differences, behind the District of Columbia. Meanwhile, South Dakota jumped from 18th to sixth after a price level adjustment.

Price parity table

Then and now: Labor markets in Ninth District counties

Unemployment rates in the majority of District counties were higher in 2013 compared with 2007, the year before the Great Recession (see map). Unemployment rates in several counties in the eastern and western parts of the district were more than one percentage point higher in 2013 compared with 2007. Meanwhile, most counties in western North Dakota benefiting from the energy boom posted decreases in unemployment rates.

County unemployment map -- 3-24-14

Overall performance can also be seen in Charts 1-6, which compare 2013 unemployment rates with rates in 2007. Dots above the 45-degree line indicate the unemployment rate in 2013 was higher than prior to the recession in 2007. Dots below the 45-degree line indicate that the unemployment rate in 2013 was lower than the rate in 2007. In each figure the respective state’s counties are highlighted in red.

North Dakota has the largest share of counties with lower unemployment rates in 2013 than in 2007. Meanwhile, unemployment rates in Upper Peninsula of Michigan counties were all higher in 2013, and have been generally higher during this period than most other district counties.

County unemployment charts 1-6 -- 3-24-14 -- 3-24-14

March madness: ACA enrollments racing to sign-up goal

The March 31st deadline to sign-up for private health insurance plans as part of the Affordable Care Act is fast approaching, and enrollments in some states are sprinting toward their projected goals while others are lagging, according to data released last week by the U.S. Department of Health and Human Services.

As of March 1, enrollments in Michigan and Wisconsin are at 90 percent of enrollments projected by HHS before the new law’s launch (see chart). In contrast, fewer than 7,000 people have enrolled in South Dakota, or just 36 percent of its 19,000 projection. Minnesota is the only district state that constructed its own health plan exchange (all others are using the federal healthcare.gov exchange). Enrollment in private plans to date through the MNsure exchange was just 48 percent of the goal of 67,000.

States and the federal government are also keeping a close eye on the number and proportion of young people signing up. For health insurance markets to work efficiently, the number of younger (and healthier, actuarially speaking) enrollees has to balance out the number of older, less healthy enrollees. It was originally estimated that 18 to 34 year olds would make up 35 to 40 percent of all enrollees. So far, it’s just 25 percent, and has remained fairly consistent in monthly reports. Among district states, only about one in five Wisconsin enrollees are in this young age bracket, while South Dakota has one of the highest rates, at 29 percent.

ACA March update -- 3-17-14

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

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

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.

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

Unemployment insurance: Slowly mending in most district states

While unemployment rates continue to fall, if slowly, employers in many states are still grappling with higher tax rates for unemployment insurance (UI), which fund unemployment benefits in each state. Recent data from the U.S. Department of Labor suggest a mixed bag of improvements this year among Ninth District states.

Employers pay UI taxes for every covered worker on payroll, but every state does things a little differently. For example, the amount of income subject to UI taxes varies widely among states. In Michigan, employers pay UI taxes only on the first $9,500 of wages paid. In Wisconsin, it’s $14,000, and in North Dakota, almost $32,000 (see Chart 1). As a result, UI tax rates tend to be inversely related to how much income is subject to UI taxes, with Michigan’s rate the highest and North Dakota’s the lowest (see Chart 2). Higher UI rates tend to reflect benefit generosity as well.

But the direction of UI rates are heavily influenced by each state’s economy, and the Great Recession gave UI systems in most states a one-two punch: It put many out of work, thus greatly increasing unemployment benefit spending; it also lowered overall employment, which lowered the amount of UI taxes coming into UI trust funds (which pay unemployment benefits). As a result, UI tax rates on covered employees had to go up for most UI systems to maintain adequate cash flow during the recession and subsequent recovery.

The greatest increases in UI tax rates came between 2009 and 2011, once the full effects of the recession had settled in and states had exhausted their UI trust funds. Since then, average UI tax rates have moderated; half of district states saw a slight decline in 2013 as a percentage of taxable wages, and the other half increased, with Michigan seeing a significant rise (see Chart 2).

In the Dakotas, strong economies and high job growth, coupled with low unemployment and modest jobless benefits, have pushed UI tax rates to exceedingly low levels (see Chart 2). Wisconsin’s rate has also started to bend lower. But rates for Minnesota, Montana and especially Michigan have continued to increase. (Technically, only the northwestern portion of Wisconsin and the Upper Peninsula of Michigan are in the Ninth District, but the whole of both states are included in this analysis.)

UI rate charts 1-2

In some ways, the ultimate cost of UI taxes to state businesses is easier to see as a percentage of total wages. Here, the rank among district states still generally holds, but the Dakotas set themselves off even further for the low cost of their UI programs, while other district states bunch more tightly together (see Chart 3).

There are other good-news stories outside of the Dakotas. While Minnesota’s UI rates have continued to increase in 2013, the state has managed to wipe out a $770 million loan from the U.S. Treasury that it needed to keep paying unemployment benefits a few years ago. Wisconsin has done that one better: UI rates inched down this year, and though the state UI trust fund still has a $300 million loan with the federal government, that’s down from $1.4 billion just two years ago.

(Update: On Tuesday, November 19, the Minnesota Department of Employment and Economic Development announced that UI rates will drop in 2014, thanks to growth of the state UI trust fund to $1.2 billion. It's  estimated the move will save state businesses almost $350 million in UI taxes.)

UI rate charts 3

 

West-central Minnesota is manufacturing strong job growth

While pundits and policymakers loudly mourn the general loss of manufacturing jobs, the west-central region of Minnesota has quietly enjoyed robust job growth in this sector.

From 1990 to 2012, the nation saw a continuation of the downward trend in manufacturing jobs. That trend was exacerbated by the Great Recession, which hit manufacturing states like Minnesota and Wisconsin hard. Minnesota has experienced a small uptick in manufacturing jobs in recent years, but not nearly enough to offset the losses just from the Great Recession.

But a nine-county region in west-central Minnesota—a federally designated economic development planning district bureaucratically referred to as Minnesota EDR4—has seen job growth above and beyond the recession’s downturn. These nine counties (Becker, Clay, Douglas, Grant, Otter Tail, Pope, Stevens, Traverse and Wilkin) have seen their manufacturing job base increase by 53 percent from 1990 to 2012. That contrasts with a national decline of 33 percent over the same period (see Chart 1).

Much of that growth occurred during the 1990s; in Minnesota, manufacturing jobs grew by almost 60,000 during the decade, and the “R4” region similarly grew by about 2,500 jobs, hitting close to 10,000. But over the next decade-plus, Minnesota manufacturing saw a steady decline, shedding about 95,000 jobs—about one in four—by 2012. But the R4 region grew another 15 percent over the same period.

Wages have also grown in the region, though their performance is less compelling. Since 1990, average weekly (inflation-adjusted) manufacturing wages have grown by about 36 percent both nationwide and for the R4 region (see Chart 2). However, there remains a considerable gap in actual weekly pay in the region compared with the national average for manufacturing workers.

West-central MN manufacturing jobs CH 1-2 -- 9-3-13

What makes for this island of good manufacturing activity? There are likely many reasons, including industry composition, available labor, transportation access and prevailing wage scales, which are lower in the region compared to the national average.

West Central Initiative (WCI), a nonprofit organization that provides financial support for worker training in the region, credits part of the success to intensive workforce development and training by employers. Regular surveys on business outcomes from employee training are conducted in the region by an independent firm and facilitated by Enterprise Minnesota, a manufacturing consulting organization and one of 59 federal Manufacturing Extension Partnership affiliates. These surveys suggest that training efforts often paid off for companies. Another recent study of labor turnover from 2006 to 2011, commissioned by WCI, also found that average labor turnover among regional firms participating in training programs was lower and statistically significant in 22 of 23 quarters studied. Sources in the region credit organic growth as well as growth from acquisition.

WCI identified about 30 companies with 100 or more employees in the region, and that size has allowed some to grow by acquisition.

“Growth accelerates with growth,” according to Bill Martinson, a business development adviser with Enterprise Minnesota. “As companies get bigger, they accumulate more human and capital resources with which to do things. A big boost is the ability to do acquisitions. We didn’t see acquisitions until the last few years.” Martinson added that many of the companies are now supplying multinational corporations, “which makes them less susceptible to a weakened U.S. economy.”

 

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