2015 and 2016 Economic Outlook

for Calhoun County

George A. Erickcek
Brian Pittelko
W.E. Upjohn Institute for Employment Research
January 15, 2015

Thanks to Our Sponsors

Outline
The national economy is speeding forward on
$2.00 per gallon gasoline and low interest
rates
Robust car and truck sales are fueling
Michigans economy
Calhoun County had a good year in 2014
Forecast: continued employment growth

GDP Grew by a Robust 5.0 Percent in the Third Quarter,

and Forecasters Are Promising Continued Growth
Gross Domestic Product and Nonfarm Employment
1,500
1,000

500
2

-500

-2

Forecast

-1,500

Employment gains have been outstanding,

more than 800,000 jobs in the fourth quarter.

-4

-1,000

Employment change (000s)

Percentage change in GDP

-2,000

-6

-2,500
09 Q1

10 Q1

11 Q1

12 Q1
GDP

13 Q1

14 Q1

15 Q1

16 Q1

Nonfarm employment

Source: BLS, BEA, University of Michigan RSQE.

Employment Conditions Have Improved; the Number

of Job Seekers Per Opening Has Dropped Below 2
U.S. Job Openings and New Hires
6,000

8
Job openings at end of month

Thousands (000s)

6
4,000

3,000

4
3

2,000

2
1,000

Unemployed / job openings

5,000

Job seekers per opening

0

0
2006

2007

2008

Source: BLS.

2009

2010

2011

2012

2013

2014
5

Prices and Interest Rates Remain Low:

Prices may be too low but who is complaining about
$2.00 per gallon gas?
Interest Rates and Inflation
6.0

Annual percentage rate

5.0
4.0

30-year mortgages

10-year Treasury bill

3.0

2.0
1.0

3-month Treasury bill

0.0
-1.0
12-month change in CPI-U

-2.0
-3.0
2009

2010

2011

Source: Federal Reserve, BLS.

2012

2013

2014
6

Consumer Confidence Is Rising Despite Stagnant

Wages; However, Other Polls Have Not Been as Positive
50
45
40
35
30
25
20
15
10
5
0

100
90
80
70
60
50
40
30
20
10
0
2009

2010

2011

2012

Real hourly earnings

Source: Conference Board and BLS.

2013

Consumer Confidence Index

$ Per hour2014 dollars

Real Hourly Earnings and Consumer Confidence

2014

Consumer confidence
7

So Lets Sum Up
The national economy was surprisingly strong in the
third quarter and continued growth is forecasted
Inflation and interest rates are low and expected to
stay low. Gas prices may stay low for the year.
National employment is on the rise but wages
remain flat
The Fed has stopped its purchasing of bonds but will
likely keep interest rates low
On the negative side, the nation is standing alone in
the global economy
8

Michigan Forecast
Strong auto sales are pushing the state forward
and most are forecasting that auto sales will
remain high until at least 2017
The states unemployment is down to prerecession levels but still higher than the nations
Employment growth is expected in 2015 and
2016

In 2014, State Employers Added

Nearly 30,000 Workers
Employment Change, 2013 to 2014 (in thousands)
14

If you are will to accept a 2.8 manufacturing

employment multiplier, manufacturers are driving the
entire state economy.

Manufacturing

12

Transport. and
util.

10
8
6
4

Mining, logging,
const.

Retail
Information

2
0

-2

Prof. and
business

Leisure and
hospitality

Other services

Wholesale
Education and
health
Financial
activities

-4
-6
Source: BLS CES.

Government
10

Auto Sales Continue to Pick Up and Are Forecast

to Drive Past 16 Million Units in 2015 and 2016
24

Strong sales years are expected

in 2015 and 2016; and what
about $2.00 per gal gas?

22
20
18
16
14
12
10

8
6
4
2
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Source: BEA.

11

The States Unemployment Rate Is Back to Prerecession Levels and Now Stands at 7.1 Percent
Unemployment Rate
16

Percent of labor force

14
12

10
8

6
4
2
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: BLS LAUS.

12

Latest University of Michigan Employment

Forecast for the State Is Very Bullish
Employment forecast:
2015
2016

50,250 jobs
52,140 jobs

Source: University of Michigan RSQE Nov, 2014.

13

Calhoun County
2014 was a strong year for manufacturing
employment growth
The countys unemployment rate is down to
5.3 percent (seasonally unadjusted)
The countys overall economic performance
was similar to its peers
Why isnt the countys service sector doing
better?
Forecast for 2015 and 2016 -- Good news
14

Manufacturers Are Clearly Driving the

County Economy by Itself
Employment Change, 2013 to Estimated 2014
Total
Construction
Manufacturing
Retail
Financial
Business and professional

Education and health

Leisure and hospitality
Other services
Government
-400
Source: BLS CES.

-200

200

400

600

800
15

Again, the Employment Gains in Manufacturing

More than Offset Losses in Government
Employment Change, 2013 to Estimated 2014
800
600
400

Manufacturing

200

Financial

Education and
health

Other services

0
Mining, logging,
-200
and const.
-400

Trade,
transport., and
util.

Prof. and
business

Leisure and
hospitality

Government

-600
Source: BLS CES.

16

Auto Suppliers Are Supplying

the Growth
Manufacturing Employment Change, Q1 2013 to Q1 2014
800

Transportation

600
400
200

Printing

Plastics
and rubber

0
Chemical

-200

Fabricated metal
Elec. equip

Misc.

Nonmetallic
mineral
Machinery
Primary metal

-400
-600

Food

-800
-1,000
Source: BLS QCEW.

17

The Countys Unemployment Rate is

Down to the 2002 level and.
Unemployment Rate for Calhoun County
14
12
10
8
6
4
2
0
2000

2002

2004

2006

Source: BLS LAUS and Upjohn Institute.

2008

2010

2012

2014
18

It Is for the Right Reasons The Unemployed and

Those Who Had Previously Given up Are Finding Jobs
November-to-November Change, Calhoun County
Year

Labor Force Change

Employment
Change

Unemployment
Change

2011

-1,281

243

-1,735

2012

139

728

-680

2013

674

759

91

2014

1,018

2,082

-1,243

Source: MI Labor Market Indicators, Local Area Unemployment Statistics.

19

Calhoun County Has Bounced Back from the

Recession in Terms of Job Growth
Total Employment Index
(2000=100)
110
105
100

95
90
85

The county lost 3,800 jobs

during the recession and
gained 4,300 jobs, so far in the
recovery.

80
2000

2002

2004
United States

2006

2008

Michigan

Source: BLS LAUS and Upjohn Institute.

2010

2012

2014

Calhoun County
20

The Countys Service Sector Has Also Regained Its Losses;

However at a Much Slower Pace than the Nation
Private Services Employment Index
(2000=100)
120
115
110
105
100

95
90
85
80
2000

2002

2004
United States

2006

2008

Michigan

Source: BLS LAUS and Upjohn Institute.

2010

2012

2014

Calhoun County
21

Outstanding Manufacturing Growth

Manufacturing Employment Index
(2000=100)
105
95
85

75
65
55
45
2000

2002

2004
United States

2006

2008

Michigan

Source: BLS LAUS and Upjohn Institute.

2010

2012

2014

Calhoun County
22

Not Surprising, Manufacturers Had the

Largest Increase in Job Postings for the Year
Job Posting Change, 2013 to 2014, All Industries
Manufacturing
Retail trade
Hospitality
Educational services
Transport. and warehouse
Public administration
Arts, ent., and rec.
Real estate
Other services
Construction
Information
Management
Wholesale trade
Agriculture
Mining
Finance
Prof., sci., and tech.
Admin. and support
Health care
-100

Source: BurningGlass Labor Insight.

100

200

300

400

500
23

However for Individual Occupations, the

Increase in Job Postings Is More Diversified
Job Posting Change, 2013 to 2014, All Occupations
Sales and related
Food prep. and serving
Transportation
Installation, maintenance, and repair
Production
Office and admin.
Education
Arts, design, ent., etc.
Personal care and service
Cleaning and maintenance
Construction
Architecture and eng.
Health care support
Computer and mathematical
Community and social services
Life, physical, and social science
Protective service
Management
Business and financial
Health care
-200
Source: BurningGlass Labor Insight.

-100

100

200

300

400
24

Comparison Analysis
Comparison Areas:

Altoona, PA
Jackson, MI
Johnstown, PA
Lebanon, PA
Mansfield, OH

Monroe, MI
Muncie, IN
Springfield, OH
Wausau, WI
Williamsport, PA

25

Comparison Criteria

All one-county metropolitan areas

Within Midwest region
Not college town or state capitol
All within 15% population of Calhoun County
(plus Jackson)

26

Par for the Course

Percent Change in Total Employment,
JanNov 2013 through JanNov 2014
Battle Creek, MI
Comparison Average
Muncie, IN
Springfield, OH
Williamsport, PA
Monroe, MI
Lebanon, PA
Altoona, PA
Mansfield, OH
Wausau, WI
Johnstown, PA
Jackson, MI

1.3%
1.1%
3.3%

2.4%
2.1%
1.8%
1.3%
0.6%
0.3%
0.1%
-0.2%
-0.5%

-1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5%
Source: BLS.

27

Again, Right in the Pack

Average Unemployment Rate, JanNov 2014
Battle Creek, MI
Comparison Average
Jackson, MI
Muncie, IN
Monroe, MI
Johnstown, PA
Mansfield, OH
Williamsport, PA
Wausau, WI
Altoona, PA
Springfield, OH
Lebanon, PA

6.2
6.0
7.2
6.9
6.7
6.6

6.2
5.9
5.5
5.2
5.2
4.6
0

Source: BLS.

Clearly, the Countys Manufacturing

Growth Is Uniquely Strong
Percent Change in Manufacturing Employment,
JanNov 2013 through JanNov 2014
Battle Creek, MI
Comparison Average
Jackson, MI
Monroe, MI
Springfield, OH
Wausau, WI
Williamsport, PA
Altoona, PA
Lebanon, PA
Mansfield, OH
Muncie, IN
Johnstown, PA -5.3%
-6%
Source: BLS.

5.6%

-0.8%
3.3%
2.7%
0.8%
-0.5%
-0.8%
-1.5%
-1.8%
-2.2%
-2.7%
-4%

-2%

0%

2%

4%

6%

8%
29

This Is the Challenge and Clearly

Jackson Is Not the Problem
Percent Change in Service-Providing Employment,
JanNov 2013 through JanNov 2014
Battle Creek, MI
Comparison Average
Muncie, IN
Springfield, OH
Lebanon, PA
Williamsport, PA
Altoona, PA
Mansfield, OH
Wausau, WI
Johnstown, PA
Monroe, MI
Jackson, MI

-0.2%

0.9%
4.1%
2.3%
1.6%
1.3%

0.8%
0.5%
0.3%
-0.1%
-0.2%

-1.4%

-2.0%
Source: BLS.

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%
30

To Me, This Is a Welcome Surprise and

Warrants Further Research
Self-Employed Professional, Scientific Technical Employed
Battle Creek, MI
Comparison Average
Jackson, MI
Altoona, PA
Mansfield, OH
Monroe, MI
Lebanon, PA
Muncie, IN
Springfield, OH
Williamsport, PA
Wausau, WI
Johnstown, PA

22.1%
17.4%

21.8%
18.4%
18.3%
18.1%
17.8%
17.0%
16.7%
16.3%
15.3%
14.5%
0%

5%

10%

15%

20%

25%

Percent of industry
Source: ACS 2013.

31

Given KCC, It Is Not Surprising that Battle

Creek Is Similar to the Comparison MSAs
Associates Degree or Higher, Age 2534
Battle Creek, MI
Comparison Average
Wausau, WI
Johnstown, PA
Williamsport, PA
Monroe, MI
Springfield, OH
Mansfield, OH
Lebanon, PA
Altoona, PA
Jackson, MI
Muncie, IN

8.9%
9.4%
16.0%

11.7%
10.7%
10.4%
9.1%
8.8%
8.3%
7.3%
7.1%
5.1%
0%

Source: ACS 2013.

5%

10%
15%
20%
Percent of age group

25%

30%
32

However, for Bachelor Degrees the County

Still Lags BehindNationwide, It Is 33 Percent
Bachelors Degree or Higher, Age 2534
Battle Creek, MI
Comparison Average
Muncie, IN
Altoona, PA
Johnstown, PA
Wausau, WI
Williamsport, PA
Lebanon, PA
Monroe, MI
Springfield, OH
Jackson, MI
Mansfield, OH

18.7%
22.5%
27.8%
27.5%
25.7%
25.4%
23.7%
21.9%
21.3%
18.5%
18.0%
15.5%
0%

Source: ACS 2013.

5%

10%
15%
20%
Percent of age group

25%

30%
33

Exploring Reasons Why Employment

Trends in Services Are So Lackluster
Services depend upon the population growth
and current building permit data suggests
little to no growth
Housing prices show no new demand for
home purchases
More than 50 percent of people working in
the Battle Creek area commute from outside
the region
34

A Serious Factor in Explaining the Lack

of Service Employment Growth
Construction Permits Issued, Calhoun County
450

400
350
300
250
200
150
100
50
0

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Total, all structure types
Source: U.S. Census.

Single-family houses
Year to date, November 2014

35

Price Trends Strongly Suggest There Is

Simply a Lack of Demand For New Housing
FHFA Housing Price Index (1995=100)
200
180
160
140
120
100
80
60
40
20

Source: FHFA Housing Index.

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

36

About 57 Percent of Workers in the Battle

Creek Area Commute from Outside

Area includes Battle Creek, Springfield, Bedford, Pennfield, and Emmett Townships
Source: Census On the Map 2011.

37

The Percent of Workers Commuting into the

Area Is Approximately the Same Regardless of
Age or Income

Percent of workers

Commuters Pct. of Income

Commuters Pct. of Age

70

70

60

60

50

50

40

40

30

30

20

20

10

10

0
Less than $1,250 to
$1,250
$3,333

$3,333
and
higher

Source: Census On the Map 2011.

29 and
younger

30 to 54 55 and over

38

Before Turning to the Forecast I Want

to Give Special Thanks to the
Participants of the Annual Forecasting
Advisory Group for Accepting the
Errors of Last Years Forecast

39

Review of Last Years Forecast: Not Bad

Because of Offsetting Errors
2014 Employment Growth
Percent change in employment

6.0%
4.8%

5.0%
4.0%
3.0%
2.0%

2.4%

1.1%

1.6%

1.5%

1.0%

0.5%

0.0%
-0.3%

-1.0%
-2.0%
-3.0%

-2.6%

Total

Goods producing

Current estimate

Service providing

Government

Forecasted

40

Battle Creek MSA Employment

Forecast for 2015 and 2016
Annual Percent Change in Employment
6.0%
4.8%

5.0%

4.4%

4.0%
2.7%

3.0%
2.0%
1.0%

2.1%

1.1%

1.8% 1.7%

1.6%
0.5%

0.0%
-0.3%-0.1%

-1.0%
-2.0%
-3.0%

-2.6%

Total

Goods producing

2014

2015

Service providing

Government

2016

41

So What Keeps Me up at Night?

The global economy The U.S. is the only
game on the planet. Can we do it alone?
Lack of improvement in income equality
Polls suggest that households are more pessimistic
not only about their economic future, but for their
kids as well

The continued mystery of why employment

gains in manufacturing have a very small
impact on service employment in Battle Creek
42

2015 and 2016 Economic Outlook

for Calhoun County

George A. Erickcek
Brian Pittelko
W.E. Upjohn Institute for Employment Research
January 15, 2015