Many local entrepreneurs and firms fly under the labor market radar

The largest number of business in the Tri-Cities don’t have storefronts and most have a low public profile. In fact, much of the public are not even aware they exist. They’re what the Bureau of Labor Statistics (BLS) calls nonemployer businesses. The most recent count shows there’s 30,445 of them in the Tri-Cities’ two metropolitan statistical areas (MSA). That dwarfs the 9,786 firms many people recognize as local businesses.

These local nonemployer firms had $1.2 billion in receipts at the last Census Bureau count. They also account for a little more than 13% of the total employment in the seven-county region and about 14% of the region’s real GDP (total economic output). So, they are as much a part of the economy and labor market as Ballad or Eastman.

To peel the cover back and get a peek at this part of the labor market you must get into the weeds of what BLS and Census reports do and do not count and when they come up with their reports.

Clicking on chart renders a larger version

Comparison of the number of nonemployer firms in the Tri-Cities and how many were lost to the Great Recession to traditional firms and their recession loss.

Nonemployer firms – in many ways – are the heartbeat of the entrepreneur spirit.  A nonemployer business obviously has no paid employees other than the owner. The firm must have business receipts of $1,000 or more and is subject to federal income taxes. Think self-employed people or independent contractors.  It may be the owner’s primary source of income or a side gig. And much of their economic impact is off the radar of the monthly labor market reports.

Nonemployer firms cover a wide swath of trades and professions. The actual work varies from lawn maintenance, independent building trade people, cosmetologists, graphic artists, food truck operators, financial advisers, medical technicians, tech-support, computer coders, medical technicians, and even doctors.

These firms get little, or no note in monthly employment or nonfarm job reports and there’s a bigger time lag in the reporting their numbers since they are part of Census’ Business Patterns report. But even though they’re off the radar much of the time, they are an increasingly important part of the economy and labor market. They’ve always existed by they’re gaining new prominence in today’s evolving economy. That importance is rooted in the reality that the nature of work is changing and increasingly focused on individuals and their productivity rather than multi-employee firms. Simply put, nonemployee firms are at the epicenter of the entrepreneurial ecosystem. Many analysts believe they will play a bigger role in an emerging economy increasingly reliant on contract work and labor outsourcing rather than full-time employees. Business and industry like this because it reduces labor and human resources costs and the need for a larger physical building and sometimes tech infrastructure footprint.

The monthly BLS payroll report where you get nonfarm totals is a survey of convention firms and employers, so nonemployer firms are mostly excluded. That means the annual nonfarm job count you see is understated since a nonemployer firm is also one job. In 2016 – the latest year for the nonemployee firm count – the total was understated by as much as 15%. That year’s BLS report showed an annual nonfarm job total of 200,900 for the seven-county Tri-Cities area. But if you add the nonemployer firms’ one employee, the total was a little more than 231,000. That’s closer to the employment number in the household survey used to estimate the unemployment rate. It’s also an exception to the accuracy standard for the two labor market reports. The payroll report is viewed as more accurate because it’s a larger sample. But since the household survey includes those who are self-employed its total is a somewhat better labor picture for regional employment.

The largest local number of nonemployer businesses is in the Other Services labor sector. They typically outnumber the number of conventional Other Services firms due to the nature of jobs in that sector. And unlike their conventional cousins, they increased their total after the recession.

The next largest number is in construction – 4,540.  Like conventional construction firms, the nonemployer group took a big hit from the recession, down 1,311. The recession wiped out 182 of the Tri-Cities’ conventional construction firms.

Not being able to find workers with the right skills is a constant complaint from employers. There are two solutions to that issue. The first is what’s already happened here in the Tri-Cities – a concentrated effort to educate and enable a ready-to-work and skilled tech and trade workforce. But there’s another part of the nonemployer firm sector – one that may be growing faster than the trades sector. It’s made up of highly skilled professionals in the medical, technical, and professional fields. Employers are increasingly looking at these type workers and independent contractors in their effort to increase productivity and profitability. There’s also the reality that the internet makes it easier to outsource some highly technical or analytical work. For example, information analysts and computer coders who live outside the Tri-Cities can just as easily get the job done as someone who lives here.  Some cities are trying to cash in on this trend by attracting telecommuters. Tulsa is one example. Telecommuters who relocate there can get $10,000 for moving. And Tulsa isn’t the only place testing these waters. Nonemployer firms won’t replace the traditional workforce, but its role is expected to continue increasing.

The most current Business Pattern and Nonemployer Firm data is for 2016 with an update in a couple of months.

Renting gains dominance in Tri-Cities county housing markets

April’s Rent vs. Buy Report shows some shifts in the rent position, which now dominates Tri-Cities county markets with one exception.

Hawkins County was neutral for the month, down from a 1% cheaper to rent position in January.

The report calculates median buying costs based on Realtor.com county-level residential price data and median rental prices sourced from the U.S. Department of Housing and Development data for rental estimates in the 50th percentiles. Household income data is from Nielsen Pop Facts Demographics 019.

According to the report, it was cheaper to rent in 10 of the 11-county Tri-Cities region. The strongest rent position was in Johnson County, where it was 16% cheaper to rent than buying. The weakest rental position was in Unicoi County, where it was 2% cheaper to rent than buy. February’s rent position was 4% in January.

The report compares the median monthly costs of renting and buying relative to the median income in 3,143 US counties. By February 2019, renting costs have gone up in 66% of the counties, and buying is cheaper in 40% of counties nationwide.

 

 

 

Led by Sullivan Co. area high-end home permits increase in Q1; existing market listings, sales down

Although Sullivan Co. led the region in new permits for high-end homes in Q1 the Johnson City region led the region for existing high-end home listings and resales.

New permits for Tri-Cities high-end homes during the first three months of this year increased while permit pulls in the Chattanooga, Knoxville, and Asheville metro markets declined from Q1 2018 totals.

That’s a reversal of the trend pattern for the annual permits for homes 4,000 square feet or more and with a permit value of $400,000 or more. Last year’s high-end construction was higher in all of the metro areas except the Tri-Cities.

Sullivan Co. led the seven-county Tri-Cities region monitored by The Market Edge with six permits in Q1. Washington Co. TN and Washington Co. VA had four new permits each, and there was one new permit in Greene Co.

Although the Tri-Cities had a higher year-over-year quarterly growth rate, its’ new permits total was at the bottom of the regional permit totals. Here are those totals looked like compared to the same quarter last year:

Asheville – 129, down from 141.

Knoxville – 86, down from 89.

Chattanooga – 22, down from 40.

Tri-Cities – 15, up from 11.

The annual high-end home permit trend in the Tri-Cities declined last year while it increased in area metro areas.

Asheville led the region in new high-end permits last year (578) followed by Knoxville (403) then Chattanooga (128) and Tri-Cities (71)

The local high-end existing home market had 399 regional Multiple Listing Service (MLS) listings in mid-May. That represents 14.9% of the region’s total listings. This time last year there were 402 listings.

A drill-down of May listings shows:

–  239 in the $400,000 to $599,000 price range.

  • 88 in the $600,000 to $799,999 price range.
  • 72 in the $800,000 and above price range.

The Johnson City region had was home to most of the high-end (185) followed by the Bristol TN-VA market with 79. The Kingsport region had 78 high-end listings. The Johnson City region had the most listing for $800,000 and above (34).

There were 262 sales of high-end homes in the 12 months ending in mid-May compared to 269 during the 12 months ending in May last year. A drill-down on the most recent 12 months of high-end sales shows:

– 206 in the $400,000 to $599,999 price range. That’s five fewer than the 12 months ending in May 2018.

– 45 in the $600,000 to $799,999 price range. That two fewer than the 12 months ending in May 2018.

– 18 in the $800,000 and above price range. Unchanged from the 12 months ending in May 2018.

The Johnson City region had the highest number of sales in the $800,000 over price rage – 10, down from 12 during the previous period. It also had the highest number of sales of listings in the $400,000 to $599,999 price range – 113 up from 107 in the previous period. In the $600,000 to $799,999 price range, it had 28 sales in the 12 months ending in May this year compared to 33 in the previous period.

 

 

Non-farm jobs flirt with Tri-Cities pre-recession benchmark – recovery status

A hiring surge in the Kingsport-Bristol’s Leisure and Hospitality sector and an upward revision in March’s jobs pushed total Tri-Cities nonfarm employment above the pre-recession benchmark for the third straight month in April. Preliminary, nonadjusted numbers from the Bureau of Labor Statistics (BLS) put April’s total at 205,900 jobs, 700 more than April 2008. At the same time, the seven-county region’s unemployment rate dropped to 3%. That’s the lowest it has been since 1990. That’s when the online version of the jobless rate cuts off.

April’s strong report mirrors the national report that saw the seasonally adjusted new jobs increase by 263,000 and the jobless rate falling to 3.6%.

Although Kingsport-Bristol hiring made April’s track against the prerecession Tri-Cities benchmark look good the four-county area’s jobs total still lags what it was before the recession. At the same time, the three-county Johnson City Metropolitan Statistical Area’s (MSA) jobs total has exceeded the benchmark for 10 straight months. In April there were 300 fewer nonfarm jobs in Kingsport-Bristol’s than April 2008.

The annual net jobs gains for the region last year was 500 – 400 in the Johnson City MSA and 100 in Kingsport-Bristol.

And there’s a reality bite to the record low jobless rate. While employment has been increasing, one reason the jobless rate is so low is there are fewer people in the labor force. April’s employment was 10,038 below the pre-recession benchmark, and there were 15,856 fewer people in the labor force. That’s a demographic structural issue driven by the region’s rapidly adding population.

But for those in the labor market and those who are thinking about getting back in it, the region continues to be at full employment. Basically, everyone who wants to work can find a job.

Kingsport-Bristol labor sectors adding jobs in April include: Trade and Transportation; Professional and Business Services; Other Services; and Leisure and Hospitality. The only sector reporting a month-over-month job loss is Government.

Johnson City MSA sectors adding jobs include: Construction; Manufacturing; Financial Activities; and Leisure and Hospitality. The Education and Health Care sector lost jobs.

According to the State Department of Labor and Workforce Development, unemployment rates for 94 counties dropped in April and unchanged in the last county.

Ninety-four counties had rates lower than 5%, and only one county’s rate was higher than 5%.

 

 

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