The Jobs Are Coming Back, Just Not Always Where They Were Lost

The latest U.S. jobs report from early July indicates the national economy continues to add jobs at a slow but steady pace. The latest data indicates the economy has added approximately 195,000 jobs each month for the past three months. If we go back to January 2011, the nation added on average close to 185,000 jobs per month. The U.S. economy is gradually recovering and now the labor market may even be gaining some momentum.

In February 2010, the U.S. job market had hit rock bottom. From the pre-recession high of 138 million people employed, the economy had shed some 8.7 million jobs—more than 6% of total nonfarm employment had vanished. Since then, total nonfarm employment has grown to almost 136 million, which is only 1.5% below the former peak. It is likely—assuming the current pace of about 180,000 new jobs created per month continues—that the U.S economy will reach its previous peak of employment in mid-2014. At that point, the U.S. economy will be deemed to have fully “recovered” from the previous recession’s job losses.

How Long Will the Recovery Take?

However, while the jobs are coming back, they are not where we left them. As of the first quarter of 2013, in fact, a small number of states have already fully recovered the number of jobs lost during the last recession and have begun to set new records of employment. These states are Texas, North Dakota, Alaska, South Dakota, West Virginia, and Utah as well as the District of Columbia. Close behind these areas are another 14 states that have recovered between 98% and 99% of the jobs they lost during the previous recession—states like Massachusetts, New York, and Nebraska. These states, along with the U.S. economy as a whole, will likely regain their previous employment peak within the next 12 months.

For the remainder of the country, however, the recovery of lost jobs has been much less robust and many states remain well below their pre-recession employment levels. For instance, California’s economy was hit much harder in the previous recession than the nation; at its nadir, California had lost nearly 9% of nonfarm employment. California’s labor market is rebounding, but it still remains as of roughly 4% below its previous employment peak. It is likely that it will take California well into 2015 to recover its previous peak employment, whereas by then many other states will be setting new employment records. States like Arizona and Florida are more than 7% below their previous employment peaks, while Nevada and Michigan are more 10% below their peak nonfarm employment.

In many previous recessions, employment bounced back quickly in the nation, typically within two years of the recession starting and many times in the very same places that lost employment in first place. This recession has seen the slowest employment recovery since the Great Depression, and the jobs that are being created today are in different sectors of the economy and in different localities. The map below depicts by county how employment levels have recovered from the previous pre-recession peaks across the nation. While some areas of the country enjoy new employment records, many others are still years away from recovering all the jobs that were lost, and in some locations it is likely that the job market may never recover back to previous peak. The jobs are coming back, just not where we left them.

Peak Employment Map

Source: JobsEQ®

Economic Impact: Job market is improving

Originally published in the Richmond Times-Dispatch on May 13, 2013.

The unemployment rate in the Richmond metro area drifted down to 5.6 percent in March.

While that rate is better than the national average of 7.6 percent, the local economy has a way to go before it is fully recovered from the recession.

Employment in the Richmond metro area stood at 628,800 in March — still about 6,600 jobs below the peak of 635,400 jobs in August 2007.

Based on the pace of employment growth in the region during the past year, we should exceed that peak before the end of the year. That job recovery is better than the for nation, which isn’t expected to reach the previous employment peak until July 2014 based on recent growth.

The prolonged recovery from the recession means new college graduates will again face a tight labor market.

Their ability to find a job, however, will vary greatly based on the knowledge and skills they acquired in high school or college.

New graduates hoping to work for professional business services firms might have a hard time finding jobs because those industries are still contracting in the Richmond metro area. For instance, two of the region’s largest law firms reduced employment over the past year, according to the Top 50 list of the area’s largest private employers.

Prospects are much better for new graduates with skills needed in the health care sector.

A little more than 1,600 new health care jobs were added to the metro area during the year ending in March, according to estimates from Chmura Economics & Analytics. Eight of the employers on the Top 50 list are health care related.

Looking ahead, Chmura Economics & Analytics is forecasting a need for an average 2,600 health care workers a year during the next decade in the Richmond metro area.

Of that amount, about 1,000 health care workers are needed annually to fill positions from which people have retired or moved to new occupations.

Even construction is looking promising again. This sector added 1,645 jobs in the Richmond region in the 12 months ending in March, according to the Virginia Employment Commission.

Along with a moderate amount of on-the-job training, cabinetmakers or drywall installers can make an average of about $30,000 in the region, according to the Bureau of Labor Statistics. The average wage of electricians in the Richmond area, which typically requires an apprenticeship, is about $46,000.

Based on our forecasts, next year’s college graduates will see further improvements in the jobs market.

And those students who choose a career path linked to jobs that are in demand by regional businesses will clearly have better prospects upon graduation.

Where the Jobs Are

The golden ticket for most economic development programs is job creation, and the more the better. For folks involved in workforce development, the perfect job would provide a sustaining wage for individuals and families. This ticket has been hard to come by for many communities as the nation’s economy limps forward, offering little in terms of opportunity for a large portion of job seekers in the middle. Chmura’s economists took a look at more than 800 occupations, analyzed employment growth and wage gains that occurred between 2001 and 2011, and identified a few trends that help us understand where the jobs are (and where they aren’t).

We broke occupations into ten groups based on employment and wages earned and analyzed each decile based on job and wage growth. The results demonstrate two troubling facts. First, wages have been mostly stagnant during the ten-year study period, with gains exceeding inflation for only occupations on the high end of the scale. Second, job growth has been mostly isolated to those jobs paying the least and those that pay the most.

Occupation Delines Chart

Over the past ten years, employment growth has been negative for occupations in the middle and it’s a substantial middle, representing more than 60% of the total jobs and wages. The data suggest it’s one part of the explanation for the skills gap – those who lost jobs in the middle may be unwilling to accept a position that pays less than their previous job and unable (because of skills and experience shortfalls) to successfully compete for jobs at the higher end of the scale.

Ohio’s Target Industries Post Strong Job Gains in 2012

Click for full-size map: Job Gains in Ohio's Target Industries

Each of Ohio’s nine target industries added employment1 in 2012 and five of the nine sectors posted job growth far stronger than Ohio’s overall job growth of 1.8% during the year. Target industry job gains were led by Ohio’s BioHealth sector, which mostly comprises pharmaceutical and medical equipment manufacturing, posting 14.1% year-over-year growth in the fourth quarter of 2012. The Energy sector also saw strong gains, due in large part to the development of Ohio’s shale gas reserves. What is especially impressive about the job gains in the BioHealth and Energy sectors is that these are two target industries where Ohio is only beginning to develop a competitive cluster—as gauged by the state’s location quotient.

Sector

Employment

Employment Change

Q4-2011 -
Q4-2012

Average
Annual Wages

Location Quotient

Ohio - BioHealth

17,306

14.1%

$56,381

0.65

Ohio - Energy

44,403

7.8%

$76,895

0.64

Ohio - Food Processing

62,455

5.2%

$47,921

0.99

Ohio - Information Technology and services

84,306

4.5%

$71,307

0.95

Ohio - Automotive

90,616

4.3%

$62,138

2.72

Ohio - Financial Services

174,692

1.6%

$66,487

0.98

Ohio - Advanced Manufacturing

121,232

0.8%

$62,938

2.43

Ohio - Polymers and Chemicals

90,437

0.7%

$58,874

2.04

Ohio - Aviation & Aerospace

38,802

0.3%

$79,650

0.72

Ohio - Total All Target Industries

724,249

2.8%

$64,460

1.53

Ohio - Total All Industries

5,036,462

1.8%

$44,059

1.00

Source: JobsEQ®

The location quotient is measure of how big these industries are given the overall size of Ohio’s economy. In this case, a location quotient less than one indicates an industry that is underweight in terms of what one might expect given the overall size of Ohio’s economy. In this context, given Ohio’s assets and labor market strengths, there can be optimism that these two industries will continue to expand employment over the next three to five years and Ohio will see the location quotient in these two sectors move from below to above one. If the location quotient of these two sectors approached the average for location quotient all of Ohio’s target industries (1.53), this would translate into the creation of more than 80,000 new jobs.

In addition to the strong growth in Ohio’s target industries in 2012 was the fact that these job gains were spread out across the state. Seventy two of Ohio’s 88 counties experienced at least some job growth in these nine target industries. In fact, some of the strongest year-over-year job gains were in rural communities which saw Ohio’s target industries collectively growing in excess of 5%. Only about 11% of Ohio’s counties saw job declines in aggregate employment in these target industries. Similarly, in the BioHealth, Energy, Financial Services, Food Processing, and Information Technology sectors, more than 75% of all Ohio counties with these industries experienced job growth in 2012. The BioHealth sector expanded last year in 95% of the counties where it was present. In the more traditional manufacturing groups—Advance Manufacturing, Automotive, Aviation and Aerospace, and Chemicals and Polymers—the employment gains were slightly more concentrated with only about two-thirds of Ohio’s counties registering employment gains in these sectors. Employment changes were the most mixed in the advanced manufacturing sector which registered job gains in 52 counties, but job losses in 34 counties.

Top 10 Counties in Job Gains for Ohio’s Target Industries

Average
Employment
Q4 2011 Target Industries

Average
Employment
Q4 2012 Target Industries

Year-over-
Year % Change

Wyandot County, Ohio

2,441

2,687

10%

Lawrence County, Ohio

602

657

9%

Scioto County, Ohio

1,560

1,692

8%

Huron County, Ohio

3,363

3,624

8%

Erie County, Ohio

5,749

6,154

7%

Brown County, Ohio

1,011

1,082

7%

Van Wert County, Ohio

2,493

2,649

6%

Fayette County, Ohio

1,727

1,832

6%

Wayne County, Ohio

8,892

9,395

6%

Tuscarawas County, Ohio

4,264

4,497

5%

Source: JobsEQ

Ohio Target Industries

Counties with Expanding
Employment in 2012

Counties with
Contracting Employment 2012

Number of
Counties w/
Industry Presence

Ohio - Advanced Manufacturing

60%

40%

86

Ohio - Automotive

68%

33%

80

Ohio - Aviation & Aerospace

68%

32%

57

Ohio - BioHealth

96%

4%

54

Ohio - Energy

85%

15%

88

Ohio - Financial Services

75%

25%

88

Ohio - Food Processing

83%

17%

84

Ohio - Information Technology and services

97%

3%

88

Ohio - Polymers and Chemicals

67%

33%

81

Source: JobsEQ

  1. Employment figures in this article reflect average Quarterly Census of Employment and Wages (QCEW) employment in Q4 2011 compared to Chmura’s preliminary estimate for average employment in Q4 2012, which is subject to revision. QCEW employment data at the county level was not available beyond Q2 2012 at the time of this publication.