Friday, December 19, 2014

Santa's Helpers

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The holiday season is upon us and while many people are focused on holiday shopping, economists are analyzing how that shopping affects the economy. The money flies out of consumers’ wallets straight into cash registers, and retailers hire workers to support that temporary increase in customers. The magnitude of the holiday retail activity can be a powerful indicator of how confident consumers feel about the overall economy.

Since 2000, retailers in Utah have expanded their workforce an average of 5.1 percent over the holiday seasons (October to December). The weakest year was 2008 at the height of the recession when only 3,584 retail jobs were added. In 2006, the strongest year for seasonal hiring, 8,997 jobs were added. In that year, overall job growth was at 4.8 percent and the unemployment rate was 2.9 percent. It had been a good year economically speaking and consumers had the disposable income to spend. 

Forecasts for this year put the seasonal retail employment growth just slightly below last year. Currently the state is experiencing stronger job growth and a lower unemployment rate than that of 2013, and early employment estimates put the seasonal retail hiring at roughly four-tenths of a percentage point below last year. Wage growth has been somewhat weak this year, which put some drag on the holiday economy.

Or perhaps the naughty list is just a little longer this year.

Thursday, December 11, 2014

Utah Has Enough Skilled Workers?

Mark Knold, Supervising Economist

Utah has more skilled workers than the Utah economy demands. That is the conclusion of a lengthy report by the Paris-based Organization for Economic Co-operation and Development (OECD) [1] referenced in the LA Times. (Follow the link to OECD in the LA Times article; go to page 354 in the OECD report).

The OECD report is titled “Job Creation and Local Economic Development.” It involves four major sections: 1) how labor market policies and training can contribute to local job creation, 2) entrepreneurship and enterprise creation, 3) local economic strategies and systems, and 4) profiles of 35 country’s economies, including the United States.

In the United States section is a map classifying each state, with each evaluated by what OECD calls skills supply and demand. Skill supply is based on the amount of the labor force with post-secondary education. Demand is represented by the distribution of occupations in the state economy and those occupations’ education requirements. The idea is that knowledge of occupations and what skill or education quantity they employ are the proxy for labor skill (education) demand.

There are four outcome possibilities in the state analysis. “High skills equilibrium” means a state has a high amount of post-secondary educated workers, and a high amount of skilled occupations to absorb that high skill supply. A “skills deficit” would be a state with a high amount of occupations asking for advanced skills, but a labor force with not enough post-secondary education to fill that need. A “skills surplus” is a labor force with high post-secondary education, but an economic structure with not enough occupational types that demand and correspondingly absorb this supply of education. Lastly, “low skills equilibrium” is a state with a low supply of post-secondary educated workers, but an economy that isn’t asking for a lot of post-secondary education. In other words, the economy is asking for a lot of low-skilled workers, and the labor force has plenty to offer to it.

Utah is labeled as a “skills surplus” state, one of only four with that classification. In other words, our labor force holds a higher skill package overall than what the Utah economy’s occupational structure is asking of that labor force. The report did note that Utah had increased its skill demand between 2006 and 2012, meaning the occupations that do ask for higher education levels increased in Utah across that interval. Yet, the gains were not significant enough, therefore Utah was given a “skill surplus” classification.
[1] Wikipedia lists OECD as an international economic organization of 34 countries founded in 1961 to stimulate economic progress and world trade. It is a forum of countries committed to democracy and the market economy, providing a platform to compare policy experiences, seeking answers to common problems, identify good practices and coordinate domestic and international policies of its members.

Thursday, December 4, 2014

The Need for Middle Skills in the Labor Force

Mark Knold, Supervising Economist

How many of you who are parents aspire for your children to grow up and attain a middle skill? More than likely that isn’t on your aspiration radar. A four-year college degree or higher is probably more along the lines you envision for Junior. There’s nothing wrong with that. Yet there is a large and growing opportunity for good jobs and sustainable careers in what we call middle skills—more than a high school degree, but less than a four-year degree. We have gone multiple decades where our aspirations were to send our kids around and past these jobs—jobs that require mechanical, technical, or other specialized trainings.

The decline in labor needs by America’s manufacturing base for roughly the past 40 years may be the focal point of why America shied away from middle skill training. But as usually happens, too much of a bad thing can come back to haunt you.

Bridge the Gap: Rebuilding America's Middle Skills
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Now the cry is that America doesn’t have enough middle skill workers, and the business community says their need for middle skill workers will only increase over the next 20 years. The arguments are out that this middle skill gap needs to close or the American economy will be pinched. Since Utah functions within the American economy, America’s needs are also Utah’s needs. Are these fears founded?

This study sheds light on the subject and looks at the middle skill landscape in America. It is a joint effort between Harvard Business School and several business partners. I suppose the name Harvard on the label makes it worth the read.

Friday, November 21, 2014

Is Utah at Full Employment?

Carrie Mayne, Chief Economist

This is the million-dollar question. With an unemployment rate below four percent, it is a logical question to pose, but not an easy one to answer. Full employment isn’t a specific number but rather an economic concept. When an economy has reached full employment, the only type of unemployment that remains is that which occurs as people move from one job to the next, i.e. frictional unemployment. Under those conditions, no excess supply of labor exists. There are essentially no job seekers experiencing ongoing unemployment due to unsuccessful job searches.
Given the evidence available to us, I would conclude that we are very close to being at full employment, and here are my reasons why:
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  1. A large and growing share of unemployment is likely frictional. Two years ago, only 33 percent of the unemployed found a job within 6 weeks. Today, more than 45 percent find jobs within that window of time.
  2. Long-term unemployment is declining. The share of long-term unemployment to the total unemployed has decreased over the last two years from 31 percent to 21.The decreasing presence of long-term unemployment signifies a decline in the excess supply of labor.
  3. Labor force participation is leveling off or declining. After a precipitous, recession-driven decline from a pre-recession average of 72.1 percent to a low of 67.5 percent in November 2011, participation began to finally show signs of recovery. The upward trend continued until March of this year when we again started to see a decline that has continued through summer to now.  Unless this decline is annulled by data revisions in early 2015, we can interpret this downward trend as yet another sign that the labor market may be approaching a saturation point. 
  4. Job growth has leveled off.  Job counts from the employment census (which takes us through the second quarter of 2014) show that job growth has slowed down slightly in 2014. While growth in 2013 was 3.3 percent, current and projected numbers imply 2014 will register close to 3.0 percent. Employers can only add new jobs if there are new workers available to fill those jobs, so the slow down may be due to a lack of labor supply. 
Essentially, Utah’s economy is showing all the signs of full employment. Except for one. An important one. Wages.