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2014–2015 Forecast for Ottawa County

2014–2015 Forecast for Ottawa County. 2013 was another great year! George A. Erickcek Brian Pittelko W.E. Upjohn Institute for Employment Research January 14, 2014. Outline. Most think that the economy is stronger than it looks. Only 74,000 new jobs in December

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2014–2015 Forecast for Ottawa County

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  1. 2014–2015 Forecast for Ottawa County 2013 was another great year! George A. Erickcek Brian Pittelko W.E. Upjohn Institute for Employment Research January 14, 2014

  2. Outline • Most think that the economy is stronger than it looks. Only 74,000 new jobs in December • The state economy continues to be driven by the car industry • Ottawa County simply had a great year • Forecast: more employment growth

  3. 2 GDP grew by 4.1 percent in the third quarter, and the forecast is positive The last quarter of the year is expected to be slow as businesses work off unwanted inventories.

  4. Capacity utilization has not yet fully recovered but business confidence is up

  5. 4 Employment conditions have improved; however, the number of job seekers per opening is still double what it was in 2008

  6. Employment has been slow to recover

  7. Yes, we are coming off a bad one 54 months since the trough and we are still off more than a million jobs in the nation.

  8. 7 Unemployment is falling, but there are still too many long-term unemployed workers In December, the unemployment rate dropped because 347,000 individuals left the workforce

  9. 8 Consumers appear to be holding more debt and not feeling that good about it Source: Conference Board and the Federal Reserve.

  10. 9 Interest rates and inflation are moving upward but are still at historically low levels

  11. There isn’t a lot of demand for loans

  12. So let’s sum up • The economy is expected to grow faster in 2014 than last year, but will still be below what we want • The major problem is the lack of demand as seen in our capacity utilization rates and loan demand • This means the number of job seekers per job will remain too high • Don’t expect anything from Congress and the Fed will slowly—and I mean slowly—tighten the money supply But there is something else as well

  13. 12 Starting in 1981 and continuing until today, most of the nation’s income growth has been earned by the top 5 percent Source: Census Historic Income.

  14. 13 Why does it matter? • Inequality limits consumer expending and, hence, slows the economy • Research suggests that historical trends in upward mobility are declining • Consumer confidence surveys indicate that households’ future expectations are at record lows

  15. 14 What should be done? That is the question • Very little political will to make the tax code more progressive • Increasing educational opportunities is a standard response but it is a long-term solution • Current efforts are to increase the minimum wage

  16. 15 The state’s minimum wage of $7.40 has not changed since 2008

  17. 16 In real terms, the minimum wage has not kept its value

  18. 17 So should we increase the minimum wage? • Worries: • Negatively impact employment – Recent research indicates that this may not be the case • Many individuals who earn the minimum wage do not live in low-income households. This is true. • My preferred solution is to increase the Earned Income Tax Credit • Bottom line: this issue will not go away

  19. 18 Turning to Michigan • 2013 Employment Growth Estimates: 59.480 total jobs created, up 1.4% 17,570 manufacturing jobs, up 3.3% • U of M’s Forecast is positive 66,730 additional jobs in 2014 65,050 additional jobs in 2015 Source: University of Michigan.

  20. During the past four quarters, the state’s employment has increased by 64,400 Implied manufacturing multiplier is 3.9 which is a bit too high. Source: Michigan Labor Market Information, CES.

  21. 20 Auto sales continue to pick up and are forecast to drive past 16 million units in 2014 Source: BEA.

  22. 21 The auto outlook is promising • The current fleet on the road is old, very old–11.4 years • Incentives are back • New selections – there will be 40 new launches in 2014 • Financing is available

  23. 22 Construction activity has a long way to go *2013 is an estimate Source: U.S. Census.

  24. Ottawa County • Strong employment growth and falling unemployment • Wage pressures have started to build • Returns to education remain strong • Job posting data aretroubling • Forecast calls for more employment growth in 2014 and 2015 • This might be the last forecast for the county

  25. Strong increase in employment across the board—a robust 2.4 percent jump during the four quarters Source: BLS LAUS and Upjohn Institute.

  26. Manufacturing is still the largest economic sector in the county Source: BLS CES.

  27. 26 The county’s unemployment has not yet reached pre-recession lows Source: BLS LAUS and Upjohn Institute.

  28. November-to-November Change The county unemployment has been falling and it has been falling for the right reasons Source: MI Labor Market Indicators, Local Area Unemployment Statistics.

  29. 28 Ottawa County’s recovery almost looks “V”-shaped although employment has not yet fully recovered Source: BLS LAUS and Upjohn Institute.

  30. 29 The county’s service sector has recovered and is 10 percent higher than in 2000 Source: BLS LAUS and Upjohn Institute.

  31. 30 Manufacturing, not so much Source: BLS LAUS and Upjohn Institute.

  32. Still, employment gains in manufacturing are broad based Source: BLS QCEW.

  33. The county’s manufacturing sector is diversified Source: BLS CES.

  34. Evidence now shows that manufacturing wages for lower skill levels are being pushed up Source: IPUMS USA.

  35. This is not the case for the state Source: IPUMS USA.

  36. Inching up very slowly Source: BLS LAUS and Upjohn Institute.

  37. The age dip is worrisome; however, the area’s talent is strong Source: Census ACS.

  38. This is important as it leads to higher income . . . Source: IPUMS USA.

  39. . . . and lower unemployment Source: IPUMS USA.

  40. Job postings do not match skill levels of employed workers Source: IPUMS USA & BurningGlass.

  41. Total job postings increase by 27 percent during the period. Posting in Leisure grew 5 times as fast. Source: Burning Glass Labor Insight

  42. Job postings for knowledge-based occupations have grown slower than average in the Holland MSA Source: Burning Glass Labor Insight.

  43. On to the 2014 and 2015 forecast Not so fast, how good was your last year’s forecast? Happy you asked!

  44. Offsetting errors resulted in a very close total forecast

  45. What did we factor in? • Current business reports • Information on the office furniture industry • Evidence on the level of public and employment assistance demanded

  46. Office furniture industry is moving forward

  47. Nearing pre-recession lows

  48. Business reports we considered include expansion reports from: • Challenge Manufacturing • GNS America • L & W Engineering • Magna Mirrors • NOVO1 • Perrigo • Stow Company • TransMatic Manufacturing And one negative report: LG Chem

  49. 2014 and 2015 Employment Forecast for the Holland–Grand Haven MSA Percent change

  50. This will likely be the last employment forecast we can give for the county, using monthly data.

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