Wednesday, October 22, 2014

My Response to Carrie's Blog

Mark Knold, Supervising Economist

In a previous blog post dated September 19, our Chief Economist Carrie Mayne drew attention to Utah’s declining labor market dynamics. By saying dynamics we mean “movement within,” and movement within is people moving into and out of jobs. We also call this labor market “churn.” Carrie observed that there is not as much churning within the labor market as was seen 15 years ago. This is visualized in the first graph below. Carrie’s challenge to her fellow economist’s: why? I’ll give that challenge a shot.

Higher churn levels generally signal a strong economy. People feel confident enough about the overall economy and its long-term prospects to let go of their current job and look toward something better. Making the leap to a new job means you trade tenure at your old job for a better overall advancement in your new job. But, you are exposed to being the low man on the totem pole if the economy turns soft and business releases workers. If workers feel confident about the economy’s staying power, then more people are willing to take this risk and make this jump. It’s a psychological decision.

People are continuously looking to do this, as movement up the career ladder (and with it movement up the pay ladder) is a natural motivation among working adults. A strong economy creates jobs, and as more jobs are created, more opportunities develop for people to advance into better jobs—and thus more churning. Conversely, a slowing economy creates fewer job-movement opportunities resulting in less churning.



On the graph above, we see the natural declines in job churning during the recession periods. We also see a rebound in the strong economic period between the recessions. But the overall flow of this job churning is a series of steps downward and thus Carrie's questions—why?

The data available to create the above graph only begins in 1999. We don’t have a window prior to that to evaluate. I mention this because the high point on the graph is 1999. What we don’t know is if that was the long-term normal, or an anomaly.

If you remember the go-go 1990s, it was a long period of above-average employment growth in Utah. As I mentioned above, strong economies produce the most job churning. We don’t know if we are coming down from some historical high—but I strongly suspect we are.

The historical flow of Utah job growth is depicted in the graph below. Long-term average job growth is represented by the red line. The down arrow points to the time frame that corresponds with the 1999 period of the prior graph. We see that by 1999, Utah was just ending a 12-year period of almost continual above-average growth—and in many years noticeably above-average growth.

If an economy runs for nearly 12 years at such high rates of growth, and we operate under the assumption that high job growth produces more job churning, then I would speculate that the highest percentage of job churning we may ever see would probably be during this late 1990s period. (That is the timeframe we are comparing against in the first graph).


To paraphrase, Carrie’s challenge was, “what has changed in the current economy?” My answer is: not enough job growth for not a long enough period of time. The job-churning trends coming out of each recession are upward. The problem is they just aren’t reaching the level seen in 1999. It looks like the mid-2000s churning wanted to rise higher, but it ran out of steam. The current recovery period following the most recent recession still hasn’t played itself out and thus still has its story to unfold. The current recovery would have a long way to go to reach the churn levels of the late 1990s.

In her blog post, Carrie offered some options to explore as to why this lowering in churn is occurring. The common theme across her suggestions is that what we are seeing is a structural change. The alternative to that would be a cyclical change (i.e., it’s just the business cycle and give it enough time and it will eventually bounce back). My comments up to this point as to what I speculate is going on may lead one to think that I lean to this cyclical view. I generally do not.

I believe there is a structural change that has occurred, and the change that has occurred is psychology. Those of us who are old enough to have had grandparents who lived through the Great Depression probably observed them living out their lives in frugality. Even in the prosperous 50s, 60s, and 70s, my grandparents would stock up on products when they went on sale. They didn’t throw many things out. They drove cars into the ground. They bought with cash. They told me to save and take care of my stuff. Their economic psychology was molded by that depression and it dictated to them the rest of their lives.

I believe a bit of the same psychology is at work in relation to job churning. If you look at the second graph, you will see that prior to the dot.com recession of the early 2000s, there really weren’t any Utah recessions that seriously slowed employment expansion. Things were pretty good in Utah for multiple decades, and even the few setbacks weren’t very long. But the dot.com—and particularly the recent Great Recession—put the realities of tight job markets into the working population’s psychology. I believe this predominantly true for the Millennial Generation—those currently 10—35 years of age. The working portion of that Generation is currently the largest working segment in Utah’s labor force.

The Millennial’s were coming of working age during those recessions. The young generally have the roughest ride in recessions. They have the hardest time getting jobs and are the most vulnerable to layoffs. Therefore, they probably have the most structural, psychological “damage” to deal with from the Great Recession in terms of their confidence in the economy. And that may linger in affecting their decisions on how confident they are to move from one job to another. This may be a major factor as to why the amount of job churning now is not at the level that generations prior felt comfortable enough to generate.

Tuesday, October 14, 2014

How Utahns Get to Work

By Jim Robson, Senior Economist

Most workers in Utah must travel some distance each day to get to work. In 2013, there was an estimated 1,307,408 workers 16 years of age and older in Utah working during the average week. About 67,201 workers, or 5.1 percent, worked from home. The remaining 94.9 percent of workers (1,240,207) were commuting to work. Figure 1 gives a breakout of how workers went to work in 2013 for Utah and the U.S.

Basically, three out of four Utahns drive alone to work, as do workers on average in the nation. In Utah, 14.1 percent of workers carpool or take public transit compared to 14.6 percent nationally. Of the 27,879 (2.1 percent) of Utah workers who took “other means” to work 10,769 rode a bicycle or 0.8 percent of all workers. The other 17,110 (1.3 percent) using other means to get to work, a motorcycle, a taxicab or by some other way.

Figure 2 provides a five-year history of the means of transportation to work for Utah workers from 2009 to 2013. Looking at this statewide perspective over the last five years, there is some variation as would be expected from an approximately two percent sample of Utah households surveyed each year from the U.S. Census Bureau’s American Community Survey.  But overall, the percentages of Utah workers arriving at work seem to be quite stable in recent years.

Thursday, October 2, 2014

Entrepreneurship in the U.S. and Utah

John Krantz, Research Economist

At the most basic level, entrepreneurship refers to the process of creating a new business or firm. From the economic point of view, it is seen as an important catalyst for beneficial change in the economy. The economist Joseph Schumpeter described entrepreneurs as innovators who introduce improved methods of production or superior products to the market. It is the energy of the entrepreneur that makes a free-market economic system flourish.

America has been well-known for its entrepreneurship, which thrives in part because of the ease with which a new business can be started. The U.S. Bureau of Labor Statistics (BLS) produces data under its Business Employment Dynamics (BED) program that gives insight into entrepreneurship’s impact on the labor market. Nationally, the BED data shows that the level of establishment births has grown at roughly the same rate as private employment, but the level of establishment births in Utah has not kept up with overall statewide employment growth. An additional insight provided by the data is that the employment gains from establishment births have been declining since the late 1990s, both nationally and in Utah.

The following graphs describe the births and deaths of establishments and the gains and losses in employment that resulted from those births and deaths. Entrepreneurship is best characterized as the creation of new firms that have never previously existed. Technically speaking, the birth of an establishment may be the result of an existing firm merely expanding by opening a new worksite in a different location, which may not comport with our notion of entrepreneurship. Nevertheless, the data shows that the births and deaths of new firms and new establishments tend to follow the same patterns. And because entrepreneurship births are a subset of establishment births, the data does reflect the size and impact of entrepreneurship on the labor market (see the article by BLS economist Akbar Sadeghi for a detailed discussion of the definitions).

At the national level, the level of establishment births has remained roughly proportional to the size of the labor market over the last 15 years. From 1998 to 2013, the level of births has increased by 8.4 percent, while total private-sector employment has increased 7.7 percent. In Utah, however, establishment births have only grown by 6.8 percent, even though total private-sector employment has grown by 25.7 percent.


Click graphs to enlarge
In 2013, the level of establishment births in the U.S. reached an historical high, but in Utah the level is roughly 18 percent below the peak achieved in 2006 (see Figures 1 and 2). The steep increase in establishment births in Utah during the 2000s was largely the result of the housing bubble, which generated many new construction and real estate establishments, and they tend to be small establishments. The subsequent recession produced a large decline in new establishment formation.  Yet, even taking into account the effects of recessions, the growth rate of establishment births appears low relative to the growth of the labor market.

One feature of entrepreneurship that has been changing, both nationally and in Utah, is the impact of new establishments on job creation.  In 1996, employment gains from establishment births accounted for only 1.2 percent of total private employment in the U.S. and 1.5 percent in Utah. Since then, the contribution to total private employment has weakened further. Job gains from new establishments amounted to only 0.7 percent of U.S. total private employment and only 0.8 percent in Utah (see Figures 3 and 4).


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If establishment births can be viewed as a good proxy for entrepreneurial activity, then the data suggest that fewer entrepreneurs are presently starting new businesses in Utah relative to the size of the labor market. Furthermore, the contribution of entrepreneurship in terms of employment gains from new establishments has steadily declined for the last 20 years in the U.S. and Utah. However, this should not be viewed as meaning that the overall impact of entrepreneurship to the broader economy has lessened. The data say nothing about the overall benefits to society from the innovations in the methods of production and the introduction of new products within existing establishments that arise from entrepreneurial activity. New firms today might have a larger impact through the introduction of inventions and innovations, on average, as compared to 20 years ago. At the same time, the data does suggest that entrepreneurial activities are contributing fewer jobs as a percent of total private employment today than several decades ago.

Wednesday, October 1, 2014

How are Job Creation and Loss related to Firm Age?

By Lecia Parks Langston, Senior Economist

Tracking job loss and creation by the age of a firm using the Census Bureau’s Local Employment Dynamics program reveals many facets of Utah’s labor market generally concealed by movements in the aggregate numbers. The relatively recent addition of firm-age characteristics allows economists to determine how firms of different ages contribute to overall job losses and gains over time.


First, a few explanations about the data used. Four-quarter moving averages are provided in the charts to ameliorate seasonality. Also, keep in mind that firm age is determined nationally. For example, In-N-Out Burger is a fairly recent addition to Utah’s employer pool. However, the first U.S. In-N-Out location opened in 1948. In this database, the firm would then be considered a mature (11 years or older) firm rather than a six year-old company.

 In addition, this data covers only “stable” employment at private firms. To be considered a stable job, an individual must have received earnings from the same employer for three consecutive quarters. Focusing on stable employment eliminates temporary and/or seasonal employment fluctuations.

Finally, these figures are calculated at the establishment level. In each age category, some firms contracted and some expanded during a particular quarter. Yet aggregate numbers may show a substantial increase or decrease. Underlying the aggregate change is an economy in a constant state of churn at the individual and firm levels.

A few points about firm age and job creation and loss in Utah follow.

• During the recession, only young firms (one year old or less) showed net job gains. In other words, new jobs at start-ups somewhat mitigated the effects of the downturn on the labor market.

• More mature firms (11 years and older) typically produce the largest share of job losses as well as job gains. Job losses ranged from a high of 65 percent in 2000 to a low of 56 percent in 2008. Mature-firm’s share of job gains measured lowest in 2000 (51 percent) and highest in 2011 (59 percent).

• Medium-aged (two to 10 years) firms accounted for the next largest share of job creation and destruction. Interestingly, these firms showed their largest share of losses during the recession when mature-firm losses were lowest.

• Newly-born firms (a year old or less), generated a notably higher share of firm gains than firm losses. Of course, young firms would be more likely to add employment as they begin the start-up process.

Wednesday, September 24, 2014

Women Outperform Men in Educational Attainment

By Jim Robson, Senior Economist

One very important aspect of U.S. economic success, prosperity and growth over the decades has been increasing educational attainment of the populace over time. An educated workforce is associated with higher productivity, increasing real incomes, and better standard of living.

Levels of education have risen steadily in America over the past 73 years. In the 1940 Census, 24.5 percent of people age 25 and over had at least a high school diploma. By 2013 this had increased to 86.6 percent, with 29.6 percent having attained a bachelor’s degree or higher.


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In recent years, one trend of particular note has been the relatively large increase in educational attainment of women. This trend is most readily illustrated by examining the educational attainment among the younger generation, those 25 to 34 years of age.

The 2000 Census showed nationally that 81.9 percent of males, ages 25 to 34 had at least a high school diploma, increasing to 87.0 percent as measured by the American Community Survey (ACS) in 2013. Females, 25 to 34 years of age, registered 85.9 percent with at least a high school diploma in 2000, increasing to 90.2 percent in 2013.

When you look at college-level education at the national level, women significantly surpassed the level of attainment by men. In 2000, 25.7 percent of U.S. males 25 to 34 years of age had a bachelor’s degree or higher, increasing to 28.9 percent by 2013. For U.S. women of the same age, measured attainment of a bachelor’s degree or higher was 29.4 percent (3.7 percentage points above the men) in 2000, increasing by 7.5 percentage points to 36.9 percent in 2013.

Looking at this same data for those in the 25 to 34 age group in Utah, we see that men exceeded the educational attainment levels of men nationally for those with at least a high school education. Utah men had similar levels as men nationally with a bachelor’s degree or higher. In 2000, 25.6 percent of Utah men had a bachelor’s degree or higher, in 2013 it had increased to 29.9 percent.

For Utah women in the 25 to 34 age group, 93.3 percent—3.1 percentage points above the national level for women—have a high school diploma or above in 2013. While more Utah women in 2013 have a bachelor’s degree or higher (33.1 percent) than Utah men (29.9 percent), Utah women are 3.8 percentage points below the national level. This is an improvement for women in Utah relative to the national level recorded in 2010, when Utah women were 5.6 percent below the U.S. percentage of 35.0 percent with a bachelor’s degree or higher.

Friday, September 19, 2014

Declining Labor Market Dynamics

Carrie Mayne, Chief Economist

A recent academic article published in the IZA Journal of Labor Economics (Henry R Hyatt and James R Spletzer, 2013, 2:5, http://www.izajole.com/content/pdf/2193-8997-2-5.pdf) explores the trend of declining employment dynamics over the last two recessions. What are labor market dynamics and why are they important? Simply put, dynamics occur in the labor market as businesses and workers begin and end their relationships, i.e. hiring and separation activity. This movement is generally associated with economic improvement; workers and employers finding more productive matches. Businesses find the most productive workers and workers find higher wages and more preferred working conditions. Hyatt and Spletzer found that at the national level the last two recessions brought declines in labor force dynamics but the recoveries did not bring with them increases in hiring and separations. The resulting status is a lower overall level of labor market dynamics today than the levels prior to the recessions and along with it concern as to whether the nation is missing out on the benefits of labor market movement.

Reading these results made me wonder whether Utah was experiencing the same trend. As a state whose economy is touted as one of the top five in the nation, with job growth rates far exceeding national averages, could it be that Utah also has stronger labor market dynamics? Is Utah experiencing the same decline in hiring and separations as the nation, or is our strong economy a result of productive labor market matches?

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Surprisingly, Utah does NOT buck the national trend. Quarterly hires and separations rates in Utah mirror the nation with stepwise decreases occurring in recessionary periods. Instead of labeling our state as the exception (as we often have the luxury of doing) we are following the rule and therefore should ask the same questions Hyatt and Spletzer pose in their research. 
  • Is this a result of changing demographics, such as an aging workforce or differences in labor force participation between men and women?
  • Could the trend perhaps be driven by changes in industry structure in our state?
  • Should we rethink our theories on labor market dynamics? Maybe lower dynamics is a sign of high adjustment costs, worker uncertainty, the housing lock, or changes in the production process.
Here I challenge my fellow economists at DWS to explore these possible explanations. Is Utah also missing out on higher wages and increased productivity, or is it time to rethink how we understand labor market dynamics?

Thursday, September 18, 2014

Can you find your career future in the stars?

New projections and star ratings provide general career guidance

 By Lecia Parks Langston, Senior Economist

Here at the Utah Department of Workforce Services (DWS) we’ve taken Edgar R. Fiedler’s advice to heart. He said, “If you have to forecast, forecast often.” Every two years, DWS economists use current trends to project occupational growth and replacement needs into the future.

Once these projections are completed, star ratings are assigned based on both employment outlook and wages. Star ratings are meant to provide general guidance for those seeking high-demand/high-wage positions and are not the final word on the desirability of a particular occupation. The accompanying list outlines the best of the five-star jobs in Utah, those with the best employment outlook and the highest wages.  More detailed information on individual occupations (including regional data) can be found here.

Click table to enlarge

Not surprisingly, most of the “best of the five-star jobs” typically require at least a bachelor’s degree. Only one occupation in this group shows merely a high school diploma prerequisite. However, this job (supervisor/managers of mechanics, installation and repair workers), also necessitates notable time spent in on-the-job training and experience in a related occupation.

The recently-released projections cover the years 2012 to 2022. Don’t be deceived. These projections are not “old” just because the base year is 2012. The projections process follows federal timing requisites and use the most current data available. Projections are currently available for Utah and eight substate regions.

Most broad trends remain unchanged in the current projection set from previous sets. We’re continually monitoring and projecting patterns that encompass all employed persons. It takes countless individual changes to alter the shape of the entire labor market. In other words, the general configuration of the labor market changes quite slowly. It should be comforting to realize that the same general patterns emerge with each new set of projections. Projections do catch current trends and provide reliable information for future decision-making.  A few facts and trends of note follow:

Click graph to enlarge
  • Projections show that on average, Utah employment will expand by an annual rate of 2.4 percent between 2012 and 2022—essentially unchanged from the last projections set.
  • The state is expected to create an average of 62,730 openings each year over the projection decade.
  • Roughly 49 percent of those openings should result from the need to replace workers leaving an occupation, while the remaining 51 percent should be due to expansion in the economy.
  • Washington County is projected to show the most rapid regional growth (3.5 percent, annually) and central Utah the lowest rate of expansion (1.4 percent).
  • Healthcare support occupations, which require lower skill levels than practitioners and technical workers), should show the most rapid annual rate of expansion (3.9 percent), followed by construction/extraction occupations (3.3 percent), the higher-skilled healthcare practitioners and technical group (3.2 percent), and computer/mathematical occupations (3.2 percent).
  • Farming, fishing and forestry occupations are expected to show the lowest annual growth; a mere 0.1 percent.
  • Office/administrative support (clerical) occupations are projected to create the most employment opportunities followed by sales and food preparation/serving occupations.
  • On a detailed level, retail salespersons, customer service representatives, fast food workers and cashier occupations should provide the most job opportunities.
  • Entry-level educational requirements suggest that occupations requiring at least a bachelor’s degree will show the fastest growth rate over the next decade.
  • More than 63 percent of job growth in the next decade is expected to occur in jobs requiring a high school education or less.
For visualizations of statewide and regional projections data, click here.

Tuesday, September 16, 2014

Industry Profile: Oil and Gas Extraction in Utah

Tyson Smith, Regional Economist

Oil and natural gas production in the United States has been booming in recent years, and it looks like 2014 will be a banner year for the U.S. oil and gas industry. Domestic crude oil production reached a 27 year high in July and a September report from BP asserts that the U.S. has become the global leader in natural gas production. In 2011, the United States was the third largest producer of crude oil behind Saudi Arabia and Russia. The impact of the oil and gas boom has been felt here in Utah as well.

The oil and gas industry plays an important role in the Utah economy, especially in the eastern region of the state. According to the Department of Natural Resources, Utah ranked 11th in U.S. crude oil production and 10th in gross natural gas production in 2011. The fact that oil and gas industry employment in Utah equates to approximately five-tenths-of-one percent of total payroll employment understates its value to the economy – especially in the oil and gas communities of eastern Utah. The wages paid to workers in the industry far exceed the average state wage, and the export value of these natural resources contributes significantly to Utah’s gross domestic product.

The infographic below provides some of the most relevant data specific to Utah’s oil and gas production and extraction industry employment.

Click Images to Enlarge
Click here for Printable PDF

Wednesday, September 10, 2014

Moonlighting; Holding a Second Job in Utah

By Lecia Parks Langston, Senior Economist

Do you think more of us are working two jobs to make ends meet? Think again. Recently-released data from the U.S. Bureau of Labor Statistics (BLS) on multiple jobholding in states indicates a smaller share of Utahns hold more than one job today than they did a decade earlier. During 2013, 6 percent of Utahns moonlighted. Only 2010 showed a lower rate. In addition, given the margins of survey error for this figure, 2010 and 2013 are not statistically different.
Click to Enlarge

BLS began tracking the percentage of workers holding more than one job by state back in 1999. Between 1999 and today, Utah’s highest level of multiple jobholding occurred in 2003 when 9 percent of workers held more than one position. By 2013, that share had dropped to 6 percent.

Changing demographics may contribute to the declining rate of multiple jobholding. A BLS study of multiple jobholders in the 2000s found that teenage and older workers were least likely to hold more than one job than other workers. As the vast baby boomer cohort ages and has weaker attachment to the labor force, they are less likely to moonlight.