Winning the Next Prospect With Labor Data

How do you make big decisions? If you’re involved in a site selection, you know that reliable labor data are critical to the process. Chmura has been helping communities for twenty years and we’ve seen fantastic results! For insights into why we do what we do, please view the attached brief video!

Tracking Liftoff: If the Fed Raises Rates this Week, Will it Impact Consumers?

If the Federal Open Market Committee (FOMC) raises the federal funds rate target on Thursday, September 17, at the end of their two-day meeting, it is bad news for borrowers and good news for savers.

For people who are about to borrow money for a home with a 5- or 7-year adjustable-rate mortgage or a car, it means interest rates could be about a quarter of a percentage point higher. As a result, monthly loan payments would be larger.  Rates on longer-term mortgages, such as the 30-year fixed-rate mortgage, probably won’t move much, if at all, because they are more dependent on inflation expectations than shifts in Fed policy. But they would likely tick upward if the Fed continues to raise the target for the federal funds rate over the next few months

On the positive side, savers who have money at commercial banks and in money market accounts should see an uptick in their savings rate.

The bottom line for the overall economy is that an increase in the federal funds rate target is good news.  It means the FOMC believes the economy is strong enough to continue growing in the face of higher interest rates.

The graphic below allows you to track how FOMC members are thinking about when that liftoff in rates should occur. Click on the photo of an FOMC member to see that person’s view about the timing of liftoff, how the view may have evolved since last December, and key quotes that are hyperlinked to full speeches.

The photos of voting members are shown in circles with nonvoting members in squares. Key economic indicators are presented on the right (where the data shown represent the original estimates that were available at the time of the meeting rather than more recent revisions).

Subscribe to our RSS feed to receive notifications when the graphic is updated.

The Decline in College-Aged Students

The “echo boom” of births in the United States peaked in 1990. The children of that peak became college-freshman aged around 2008. Since then, the population of 18 to 19 year olds in the nation has been trailing off. Children born at the peak of the echo boom are now about age 25, and most from that peak are out of college. As a result, the size of the prime college-aged population is on the downswing.

The prime college-attending ages are 18 to 24. This cohort makes up about 58% of the college student population.[1] The population in the United States age 18 to 24 peaked in 2013 at 31,535,000. As of 2015, this population cohort is estimated to have slipped to approximately 31,214,000, a drop of one percent.

This downturn is expected to continue till 2020 when the age 18 to 24 cohort population hits a trough of roughly 30,555,000—a drop of 2.1% from 2015 levels. 

Population projection 2014-2030

Some areas of the country will be seeing more drastic declines than this, while other areas can expect to see no drop at all. Nine states are projected to see growth in the 18 to 24 cohort over the coming five years. From 2015 to 2020, states expected to see this population cohort expand include Utah (+3.9%) and Texas (+3.4%).On the other hand, states forecast to see steeper-than-average declines include Michigan (-6.9%) and New Mexico (-6.8%). 

There is some good news, however, for those wanting to see an increase of population in the college-aged cohort. The number of births in the United States hit a trough in 1997—many children born in that year are just beginning their freshman year in college right now. Following 1997, the number of births began trending upward and peaked in 2007 at a height surpassing that of the echo boom. So while postsecondary schools are facing some unfavorable demographics in the short run, another swell is on its way. 

Research support was provided by Allison Magee and Asim Timalsina.

[1] Based on Fall 2013 enrollment data from the 2014 Digest of Education Statistics.

Defense Budgets and Actual Funding: Presidents Don’t Typically Get What They Ask For

Another budget showdown this fall seems inevitable. The President’s Budget for Fiscal Year 2016 calls for $561 billion in defense spending (excluding overseas contingency operations).  That’s $38 billion above sequestration levels.

Ultimately, however, budgeting is decided in Congress, and a look back at previous budget proposals shows that the president never gets exactly what he asks for. The chart below shows a five-year projection of Department of Defense (DoD) funding in each president’s budget proposal (the dashed line) compared with the actual funding levels passed by Congress (the solid black line).[1]

Differences between proposed and actual budgets have varied by president—especially during the last drawdown in defense spending in the late ‘80s and early ‘90s.  As in the past, we should expect changes to this year’s proposed budget.

Research support was provided by Patrick Clapp.

[1] This chart is a reproduction of Figure 21 in the Center for Strategic and Budgetary Assessments’ Analysis of the FY2015 Defense Budget, recalculated and updated with the FY2016 Budget. The numbers are shown in 2015 dollars.

As Employment Grows, When Will We See Wage Growth?

Wage growth remains relatively flat despite indicators of economic recovery. As the unemployment rate falls and employment grows, the increasingly smaller supply of workers is expected to lead to wage growth. As Loretta Mester, president of the Federal Reserve Bank of Cleveland, put it recently in the Wall Street Journal, “basic economics hasn’t gone out the window […]when employment grows, wages will start to grow.”

Over the past two years, however, most workers have not seen much wage growth. In fact, there is a somewhat weak but negative relationship between employment growth and wage growth for over 800 occupations from 2012 through 2014 (each occupation is weighted by the number of people employed in that occupation in 2014). There are some outliers, including occupations in the arts with an especially wide range of wages (such as models and makeup artists), but the majority of occupations are clumped approximately equally around low employment growth and low wage growth.

Employment and Wage Growth by Occupation

Using the Bureau of Labor Statistics’ occupation profiles and typical entry-level education requirements for each occupation, the relationship between employment growth and wage growth from 2012 through 2014 differs depending on the education typically required for an occupation.

Employment and Wage Growth by Typical Entry-Level Education for Occupation

Based on a review of the charts by education required, much of the negative relationship for all occupations is being driven by lower-skilled occupations, those that typically require a high school diploma or equivalent or less. Low-skill occupations with employment growth have seen a decline in real wages over this period, while many of the higher paying occupations have seen declining or stagnant employment. This is likely an indication that there is a surplus of available workers at the low-skill level. In fact, unemployment rates for workers without a college degree were well above the national average, as shown in the chart below from the Bureau of Labor Statistics.

Earnings and unemployment rates by educational attainment

For higher-skilled occupations such as those requiring at least a bachelor’s degree, the expected positive relationship between employment growth and wage growth is evident, indicating that labor market slack for these positions has been eliminated or nearly eliminated. Meanwhile, for middle-skill occupations (typically requiring some college or an associate’s degree) the relationship has been flat, which may suggest a tipping point in the near future as the remaining slack diminishes. Even so, the wage disparity between high and low-skilled jobs has been increasing for decades.

These charts align well with other reports indicating that employment is growing for jobs with higher wages and benefits packages, and most of these jobs are going to people with a bachelor’s degree or higher. This is good news for college graduates, but only part of the story—occupations requiring at least a bachelor’s degree made up less than a quarter of total employment in 2014, while  66% of employment in 2014 was in low-skill occupations.

Until the negative or flat relationship between wage growth and employment growth in lower- and middle-skill occupations reverses, we will likely continue to see little real wage growth in the economy at large.

Research support was provided by Patrick Clapp.