Tri-Cities labor market post strong Sept. growth – there are more nonfarm jobs than before the recession

– Johnson City MSA labor market – avg. pay growth outperforms Kingsport-Bristol

– Kingsport-Bristol sees first monthly year-over-year avg. wage decrease since Oct. 2014

-Multiple indicators signal slower growth rate

-Labor force may be the biggest headwind to future job growth


September’s labor market report is good. So good you should step back, take a deep breath and focus on some context and the trend line.

Nonfarm jobs pushed past the pre-recession level in September. You have to go back to September 2006 for a bigger number. Tri-Cities employment is also up. It’s still not at the pre-recession level, but it’s gaining. The unemployment rate is also up because the stronger job market is bringing people back into the labor force. And, the average private sector wage in the Johnson City Metropolitan Statistical Area made another strong gain. At the same time, Kingsport-Bristol saw its first year-over-year decline since October 2014.

tri-nf-jobs

Total in thousands of jobs. Clicking on chart renders a larger version.

So, where’s the need to step back and look at context?

First, the numbers are preliminary and not seasonally adjusted. That means there will be some revision in the October and November reports. It shouldn’t be an issue with the payroll report’s job numbers. The employment data is another matter. After the monthly adjustments, there will be an annual adjustment that has – in the past – changed positive numbers to negative. It’s why the household survey’s employment numbers and the local unemployment rate are an unreliable labor market metric.

The next context point is the labor market, and several other local indicator trend lines are signaling slower growth may be just around the corner.

Nonfarm job year-over-year growth peaked in March. Since then it has declined every month. Employers are still adding jobs – just at a slower pace. The employment trend isn’t showing that softening, but when the payroll report and employment report are not saying the same thing trust the jobs report.

It could be that the biggest headwind for future long-term jobs growth is a slower-growing labor force. September’s local labor force is the highest since March 2014 but remains 15,151 below the pre-recession benchmark.

The region’s most current labor force participation rate (54.6%) came in the recently released Census data for 2015. That means almost half of the Tri-Cities 18 years-old and over population is not in the labor force. An aging population is one factor. Another is technology has replaced many jobs. Employers are also demanding workers with better skills. And then there’s the reality that many jobs require workers pass a drug test.

sept-jobs-yy

Employers are still adding jobs by the growth rate is slowing. Click on chart renders a larger version.

In addition to labor market indicators, the growth rate for existing home sales is ebbing. New home construction remains at half of its pre-recession capacity. The seasonally adjusted retail sales tax collections trend is softer. It isn’t as pronounced as the other metrics, but the year-over-year trend has softened for two straight months. Steb Hipple’s third quarter retail sales analysis should provide a better indicator when it’s released.

The final context point is the growth isn’t distributed evenly. The three-county Johnson City MSA still has some catching up to do, but it’s now showing stronger job creation, employment, and average private sector wage growth than Kingsport-Bristol.

Here’s the breakdown of September’s labor market reports.

TRI-CITIES

Non-farm jobs – up 2,600 from August and 1,600 more than September last year.

The year-over-year growth rate of 0.8% was the weakest since November last year.

There were 300 more nonfarm jobs in September than during September 2008.

Employment was 3.1% higher than September last year. That’s the biggest monthly year-over-year gain since February 2007.

Compared to the pre-recession benchmark, 13,867 fewer people were employed than September 2008.

JOHNSON CITY MSA

There were 1,800 more jobs than August and 900 more than September last year.

September’s year-over-year growth rate was 1.1%. The rate has been below 1% one time this year.

The three-county Johnson City MSA has seen its strongest jobs growth so far this year, and September’s total is 500 more than the pre-recession benchmark.

September’s employment was 4.3% better than last year. It’s the best monthly year-over-year increase since before the recession, but employment is still 7,366 shy of the pre-recession total.

September’s 5.5% unemployment rate is unchanged from August.

The average weekly wage in the three-county Johnson City MSA was $618, up 3.9% from September last year. It was the 14th straight monthly increase and was equal to the September 2008 average.

Wages have seen strong increases this year, but not enough to make up for the 36 straight months it declined. When adjusted for inflation against that pre-recession benchmark, private sector workers have $53 a month less buying power than they did in September 2008.

KINGSPORT-BRISTOL

The four-county MSA had an 800 more nonfarm jobs than August and 700 more than September last year. The 0.6% growth rate was the weakest showing this year and the sixth straight month it has declined. Kingsport-Bristol has not reached its pre-recession job level yet. September’s total was 200 shy of the benchmark.

Kingsport-Bristol employment was 2.4% better than September last year. The monthly year-over-year growth rate has been in the 1.8% to 2.4% range all year. The MSA has 6,531 fewer people employed than it did before the recession.

September’s unemployment rate was 5.3%, up 0.1%.

The average weekly private-sector wage was down 1.6% from September last year. It’s the first time since October 2014 it has not increased.

BLS reports show the average was $630 a week, down from $640 September last year. When adjusted for inflation against the pre-recession benchmark, Kingsport-Bristol MSA private sector workers had $4 a month less buying power.

BRISTOL

Employment in Bristol was 3.8% better than September last year. It was the 11th straight monthly year-over-year increase.

The unemployment rate was 6.1%, down 0.1%.

JOHNSON CITY

September was the fourth straight month employment has seen a 9% plus increase in the year-over-year rate. It’s 9.7% better than September last year.

Johnson City still has 495 fewer people employed than it did September 2008.

September’s unemployment rate 5%, down 0.1% from August.

KINGSPORT

Employment saw its best increase of the year – 3.8% better than September last year. It was also the 111th straight monthly year-over-year increase.

Kingsport in the only major city in the region with a larger number of people employed in September than during the same month in 2008. The current total is 3,841 higher. The employment report covers people who have jobs – not where the job is located. It also counts people who work as little a one-hour a week the same as full-time employees.

September’s unemployment rate was 5.8%, up 0.1%.

 

Kingsport-Bristol, Johnson City MSA manufacturing real GDP better than it was in 2001 with a lot fewer employees

“When Eastman Chemical sneezes, the Tri-Cities gets a cold.”

It’s been that way for a long time and the current community mindset hasn’t changed. And it wasn’t always just Eastman. Remember the Kingsport Press, Mead, North American Rayon, American Bembert, Raytheon and Exide to name a few?

The Tri-Cities has a long history with manufacturing and its decline leaves many wishing for the days when area cities were comfortable as company towns.

This week’s news that Eastman was doing some more belt-tightening should not have been a surprise, but for many it was – especially for those with fresh memories of Project Inspire and jobs growth.

The reasons for the decline of yesteryear’s manufacturing muscle are many and as varied as who’s telling the story, but there’s one quick reality check to keep in mind for some context before Friday’s Eastman quarterly earnings report.

If you look at the Bureau of Economic Analysis’ web site, you can find GDP data for both the Kingsport-Bristol and Johnson City MSAs. Do some quick 2001 v. 2015 comparisons complimented with the Bureau of Labor Statistics’ numbers on manufacturing jobs and you come up with this:

The real manufacturing GDP for Kingsport-Bristol is 4.4% better than it was in 2001, and manufacturers are doing that with 26.2% fewer employees. That’s primarily due to technology not foreign trade.

The same comparison for the Johnson City MSA shows the 2015 real manufacturing GDP is 22.7% greater than it was in 2001. And that’s being accomplished with 28.2% fewer workers in the manufacturing sector.

If you look at that same manufacturing real GDP on the national level, it’s a 25.9% improvement from the 2001 with 21.6% fewer employees.

It’s nothing especially new. It has happened in various forms every time a new major technological advance took hold.

The bottom line is manufacturing is actually doing fairly well, but it’s the new models not yesteryears’ norms. And yes, this is an example of an instance where the rising tide of growth and better manufacturing profits didn’t raise everyone’s boat.

 

Kingsport-Bristol, Johnson City, Knoxville pace each other’s Sept. sales tax collections gain

sales-tax-collections

CLICKING ON CHART RENDERS A LARGER VERSION

The retail sales tax collections stars aligned for three of the four MSA in NE Tennessee in September.

Year-over-year collections in Kingsport-Bristol, Johnson City and Knoxville were close to each other – very close.

According to MTSU’s Business and Economic Research Center, the seasonally adjusted year-over-year collections were:

Johnson City, up 3.8%.

Knoxville, up 3.6%.

Kingsport-Bristol, up 3.2%.

The fourth area MSA – Morristown – outpaced the other regions and the state as a whole with a 7.7% increase. The only other MSA with a higher gain was Cleveland, up 14.5%.

September was only the third time in the past 13 months when year-over-year were a close. As you can see from the chart, the overall tend patterns align in most months but with quite a bit of separation.

The Johnson City MSA also broke its three-month decline in the share of total Tri-Cities collections in September but only but 0.1%. During the month Johnson City’s share increased to 49.1%.

Johnson City has been within a point or less than claiming half of the total Tri-Cities sales tax collections for years.  It has accomplished that goal seven times since 2011, but the most recent example was April 2014.

 

 

Tri-Cities GDP shows some stirrings of growth, but recovery is a tedious thing

real-gdp

Real GDP in chained dollars from the Bureau of Economic Analysis. Clicking on chart renders a larger version.

Ask anyone you meet on the street if they think we’re on the road to recovery or still in recession, Chances are about half will say we’re still in recession.

Currently, a little more than one-in-four people say they have no confidence in government economic data. But while everyone is entitled to their opinion, no one is entitled to their own set of facts.

I’ll be the first to admit that most often used economic data is not that good. The monthly Household Survey used to calculate the unemployment report is a prime example. It’s a small sample, and while it’s reasonably accurate on the national level, the same can’t always be said for the local level. It also has some questionable ways of defining employed, but that’s another story.

Simply put, unless there’s agreement on the baseline economic data there will never be a consensus on where we are or what needs attention.

One of the best ways to keep track with the economy – local and national – is the annual gross domestic product. It’s the value of goods and services produced during a year.

On the national level, you can get almost real-time quarterly GDP. On the local level, you have to wait a year. From that perspective, it’s useful to plot a trendl.

The most current data available from the Bureau of Economic Analysis shows the Johnson City MSA posting small year-over-year gains. At the same time, Kingsport-Bristol is showing three straight years of decline and a four-year tend slide that began in 2011. The trend turned higher in 2015, but it would take more than one data-point to say things are rosy.

If you look at the 2015 GDP compared to the most current year high Johnson City’s two-year gains, haven’t gotten it back to the pre-recession level. It’s still 1.1% shy of that mark.

Kingsport-Bristol’s GDP bounced back from the recession fairly quick and peaked in 2011. But the year after it did its version of Ground Hog Day by ducking back in a hole and doing a three-year retreat. In total chained dollars, 2015 is a little better than it was in 2007, but the trend isn’t encouraging. It’s also noteworthy what the GDP trend in the Johnson City MSA followed Kingsport-Bristol’s Ground Hog Day pattern, but the decline wasn’t as deep and the recovery was better.

I suspect part of this can be traced back to the demographic effect. Our region is aging rapidly. And when your population ages your economy becomes less productive.

There’s no argument that things are looking pretty good at this point in time, but the big picture – as defined by GDP – shows a painfully slow recovery. And no one can argue that what recovery has happened left a good part of the local population behind.

Still, the economy is showing growth signs. Land for new residential and commercial development is being prepared. The 2015 Census recorded the biggest increase in household incomes since the recession.

But:

A year and a half ago existing home sales took off like a rocket. But that growth rate is slowly beginning to trend lower because it’s not sustainable.

The primary component for housing market growth is absent in all but one Tri-Cities county.

I say that because the Tri-Cities has a negative natural population growth status. The death rate is higher than the birth rate. The only population growth is newcomers, and most of that is going to Washington County. It could be argued that Carter County is poised to seep some spill-over from Washington County, but those numbers are not in, yet.

The 2015 Census shows Washington was the only local county with a population grain from 2014.

That means pent-up demand and our commuter pattern is driving existing home sales. And we’re a region with a wicked commuter pattern.  Every morning 88,000 people in the three major cities get up and drive to work someplace other than where they live.

Homeowners who are equity rich have a higher local share than the national average

And almost half of the local homes are mortgage free.

New homes are being built, but new home construction is underperforming its pre-recession level by half.

Retail sales and sales tax collections are growing thanks to some wage growth and a big consumer boost via lower gas prices.

September’s local labor market report isn’t available yet but as of August were still adding jobs, but like home sales the rate of growth is beginning to decline.

Look at it this way:

The unemployment rate is at pre-recession levels. But…

  • In August, there were here are 2,400 fewer nonfarm jobs than in August 2008.
  • There are almost 16,000 fewer people employed than during the pre-recession benchmark.
  • The labor force has declined by 18,600 people when compared to August 2008.
  • Almost 46% of our population over the age 18 is not in the labor force.

Since the recession 635 local businesses had closed by the end of 2014.

We know there have been many new businesses since then.  Others have closed. There won’t be an accurate tracking of that churn until the 2015 Census Business Patterns is available from the Census Bureau.

Weak business spending, global headwinds, and a dysfunctional national government are the top concerns. Foreign trade is a hot button.  But remember, Tennessee leads the nation in direct foreign investments.

The long view is one of a declining population and stagnation is a very real possibility unless local political and business leaders find and encourage the economic and political will to work on some solutions.

It’s all about jobs and population growth. Many experts say solutions will come on the local level. The cities and counties that get it right will flourish.

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