Economic Impact: College degrees provide resiliency amid change

Apparently a college degree does make a difference — at least when it comes to a region’s ability to recover from recession.

Northern Virginia is a driver of growth in our state. This was the case in the period between the last two recessions. From 2002 through 2007, employment in the Northern Virginia portion of the Washington metro area expanded at an annual average rate of 2.7 percent, compared with a 1.5 percent rate statewide.

Employment in Northern Virginia also recovered from the most recent recession more quickly than the state and nation. It reached the former peak in employment early in 2011, compared with 2014 in both the state and the nation.

Then came federal budget cuts and a government shutdown. During this period, the lack of growth in Northern Virginia caused the economy in Virginia to stall.

Employment growth in Northern Virginia contracted 0.7 percent on a year-over-year basis in February 2014 and drove the overall state growth down 0.3 percent during the same period. In contrast, employment growth in the nation was accelerating and stood at 1.6 percent.

One would expect such a sharp slowdown in employment that is caused by one industry sector — federal spending — to generate a prolonged slowdown in economic activity as displaced workers try to find other employment.

Similar to the 1990s, when a cut in military spending slowed growth in Northern Virginia for a short time, the latest employment report shows the region growing at the same rate as the nation. For the 12 months ending with September 2015, employment grew 2 percent in Northern Virginia compared with 2 percent in the nation and 0.9 percent in the state.

A highly educated population is a major reason for the quick rebound in Northern Virginia.

Based on census data from 2013, 54 percent of residents in the region have a bachelor’s degree or higher, compared with 30.5 percent in the nation. The unemployment rate for people in the labor force with a bachelor’s degree was 2.5 percent in September, compared with 5.2 percent for those who have only a high school diploma.

Skills that come with a bachelor’s degree are more easily transferable from one industry to another. It’s not quite as easy as changing a consultant’s letterhead from Defense Inc. to Cyber Security LLC, but the transferable skills possessed by workers in Northern Virginia clearly give the region resiliency during times of economic change.

Tracking Liftoff: Will it be October?

The Federal Open Market Committee (FOMC) is getting ready for it October 27-28 two-day meeting, where it will decide whether it is time to raise the federal funds rate target.

Based on comments by some Fed officials, it appears that a rate hike might come before year-end.  As shown in the right-hand column of the graphic below, however, monthly employment gains have slowed, as has capacity utilization.  The deceleration in growth is causing some analysts to predict that the Fed won’t raise rates until its December meeting or even delay until 2016.

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 their 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).

The number of people in college-age range is declining

Colleges and universities may want to take note: The number of people in the college age range of 18 to 24 is falling.

The nation's population is expected to grow by more than 13 million, or an annual average of 0.8 percent a year, from this year through 2020.

Virginia will see 403,585 new residents, or 0.9 percent a year, in the next five years. And the Richmond metropolitan statistical area will gain 67,346 people, or 1 percent a year.

However, not all age groups will grow over that period. While the number of echo boomers and retirees will increase, the number of college attendees over this next five-year period will decline, according to data based on the U.S. Census projections.

The “echo boom” births in the United States peaked in 1990. The children of that peak became college-freshman around 2008. Since then, the population of 18 to 19 year olds in the nation has trailed off.

Children born at the peak of the echo boom are now about age 25, and most are out of college. As a result, the size of the prime college-aged population is on the downswing.

The prime college-attending ages of 18 to 24 makes up about 58 percent of the college student population according to fall 2013 enrollment data from the 2014 Digest of Education Statistics. The U.S. population of people in that age range peaked in 2013 at 31,535,000.

As of 2015, this segment of the population has slipped 1 percent to about 31,214,000.

This downturn is expected to continue until 2020 when the number of people 18 to 24 hits a trough of about 30,555,000 - a drop of 2.1 percent from 2015 levels. 

Some areas of the country will see more drastic declines, while other areas can expect to see no drop at all.

Nine states are projected to grow in the 18 to 24 segment in the next five years, including Utah (up 3.9 percent) and Texas (up 3.4 percent).

States forecast to see steeper-than-average declines include Michigan (down 6.9 percent) and New Mexico (down 6.8 percent).

By comparison, Virginia is expected to see a 0.9 percent drop and the Richmond metro area is projected to decline by 1.0 percent.

There is some good news for those wanting to see an increase of population in the college-aged segment.

The number of U.S. births hit a trough in 1997. Many children born in that year are beginning their freshman years in college.

Following 1997, the number of births began trending upward and peaked in 2007 at a height surpassing that of the echo boom.

So while post-secondary schools are facing unfavorable demographics in the short run, another swell is on its way.

On another end of the pendulum, retirees - aged 69 and older - are growing by double digits. 

Nationwide, the population in that age group is expected to increase by 18 percent from 2015 through 2020.  The growth of this segment in Virginia (up 19 percent) and the Richmond metro area (up 21 percent) are both faster than the nation.

The fastest growing states are expected to be Alaska (27 percent) and District of Columbia (26.1 percent), while the slowest growth is expected in Connecticut (14.5 percent) and Rhode Island (14.9 percent).

This demographic group will put increased demand on the health care system for many years to come.

The Graying of America

Most people know that the percentage of older Americans is increasing dramatically. What’s less known to the average person is how that graying will impact different areas of the country.

The overall demographic shift is illustrated in the chart below that shows four age cohorts. The first three are each based on equal twenty-year spreads: people age 0 to 19, those who are age 20 to 39, and the age group 40 to 59. The fourth cohort is defined as those age 60 and older.

The age group 60 and up was roughly 40% smaller than the other cohorts in 2000. By 2010 it had begun to close the gap, but it was still about a third smaller than the other cohorts. By 2030, however, this 60+ age group will be nearly the largest cohort—surging from 57 million in 2010 to over 93 million in 2030.

U.S. Population by Age Cohorts

The reason for this increase is the aging of the baby boom generation along with the overall increase in life expectancy. The ramifications are many. The shift affects consumer spending patterns, health care needs, labor force mix, and so on.

The demographic shift will be manifest differently throughout the nation. The map below shows the age mix for every county in the nation as it transforms from 2010 through 2030. Each county is colored according to the cohort that is the largest during that given year (using the same cohorts from above).

A word about these data: the age mix data at the county level for 2010 are derived from the decennial census. The projections by age through 2030 at the national level follow forecasts from the Census Bureau. The county-level projections are produced by Chmura and can be accessed through the JobsEQ labor market system.

What do the data show? In 2010, fewer than 10% of the counties in the nation had demographic mixes where the 60+ age cohort was largest. By 2019, however, the 60+ cohort should be largest in over half of the counties. By 2027, this cohort is expected to be largest in three-quarters of the nation’s counties.

Areas of the country not expected to see the 60+ cohort become the largest during this timeframe include regions in Texas and California, various metropolitan areas, and counties with large college student populations—the latter of which stick out on the map among the light blue areas, as the age 20 to 39 cohort will remain the largest in these places.

The interaction of a shifting age mix and overall population growth also can create surprising effects. For example, the population of the Cincinnati metropolitan statistical area (MSA) is projected to grow an average annualized 0.5% from 2015 through 2030. This population growth, though, is being driven by expansion in the age 60+ cohort (+2.2% per year). The population age 0 to 59 in Cincinnati is expected to actually decline overall during this same period. And Cincinnati is not alone in this boat; other MSAs expected to see overall population growth but declines in population under age 60 are Philadelphia, Chicago, Memphis, Green Bay, Mobile, and many others.

The Social Security “full benefit retirement age” is currently 66 for people reaching that age today, and that will rise to 67 for people reaching that age in 2030. Despite this forestalling in retirement age, the number of people in the nation at full retirement age will increase substantially. From 12% at full retirement age in 2010, by 2030 in the United States approximately 18% will be at full retirement age.

This shift is shown among the largest metropolitan areas below. Despite variety in current mix and growth rates, a dramatic increase in the percentage of population at full retirement age is coming across the board. 

Top 50 MSAs by % Population at Full-Retirement Age
MSA 2010 (% age 66+) 2030 (% age 67+)
New York-Newark-Jersey City, NY-NJ-PA MSA 12% 18%
Los Angeles-Long Beach-Anaheim, CA MSA 10% 16%
Chicago-Naperville-Elgin, IL-IN-WI MSA 11% 17%
Dallas-Fort Worth-Arlington, TX MSA 8% 13%
Houston-The Woodlands-Sugar Land, TX MSA 8% 13%
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD MSA 12% 19%
Washington-Arlington-Alexandria, DC-VA-MD-WV MSA 9% 14%
Miami-Fort Lauderdale-West Palm Beach, FL MSA 15% 20%
Atlanta-Sandy Springs-Roswell, GA MSA 8% 14%
Boston-Cambridge-Newton, MA-NH MSA 12% 18%
San Francisco-Oakland-Hayward, CA MSA 12% 17%
Phoenix-Mesa-Scottsdale, AZ MSA 12% 17%
Riverside-San Bernardino-Ontario, CA MSA 10% 15%
Detroit-Warren-Dearborn, MI MSA 12% 19%
Seattle-Tacoma-Bellevue, WA MSA 10% 16%
Minneapolis-St. Paul-Bloomington, MN-WI MSA 10% 16%
San Diego-Carlsbad, CA MSA 11% 16%
Tampa-St. Petersburg-Clearwater, FL MSA 16% 22%
St. Louis, MO-IL MSA 13% 19%
Baltimore-Columbia-Towson, MD MSA 12% 18%
Denver-Aurora-Lakewood, CO MSA 9% 15%
Charlotte-Concord-Gastonia, NC-SC MSA 10% 16%
Pittsburgh, PA MSA 16% 24%
Portland-Vancouver-Hillsboro, OR-WA MSA 11% 17%
San Antonio-New Braunfels, TX MSA 10% 15%
Orlando-Kissimmee-Sanford, FL MSA 12% 17%
Sacramento--Roseville--Arden-Arcade, CA MSA 11% 17%
Cincinnati, OH-KY-IN MSA 11% 18%
Kansas City, MO-KS MSA 11% 17%
Las Vegas-Henderson-Paradise, NV MSA 11% 15%
Cleveland-Elyria, OH MSA 14% 22%
Columbus, OH MSA 10% 16%
Indianapolis-Carmel-Anderson, IN MSA 10% 16%
San Jose-Sunnyvale-Santa Clara, CA MSA 10% 15%
Austin-Round Rock, TX MSA 8% 13%
Nashville-Davidson--Murfreesboro--Franklin, TN MSA 10% 16%
Virginia Beach-Norfolk-Newport News, VA-NC MSA 11% 17%
Providence-Warwick, RI-MA MSA 13% 21%
Milwaukee-Waukesha-West Allis, WI MSA 12% 18%
Jacksonville, FL MSA 11% 18%
Memphis, TN-MS-AR MSA 10% 16%
Oklahoma City, OK MSA 11% 16%
Louisville/Jefferson County, KY-IN MSA 12% 19%
Richmond, VA MSA 11% 18%
New Orleans-Metairie, LA MSA 11% 18%
Raleigh, NC MSA 8% 14%
Hartford-West Hartford-East Hartford, CT MSA 13% 20%
Salt Lake City, UT MSA 8% 13%
Birmingham-Hoover, AL MSA 12% 19%
Buffalo-Cheektowaga-Niagara Falls, NY MSA 15% 22%
Source: Chmura Economics & Analytics, JobsEQ

Research support was provided by Allison Magee and Asim Timalsina

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!