Economic Summit XI

Economic Summit XITHE VIRGINIA AND ROANOKE VALLEY LABOR MARKETS

ALICE LOUISE KASSENS, PHD

JOHN S. SHANNON PROFESSOR OF ECONOMICS

ROANOKE COLLEGE

Outline

A look at the Commonwealth’s economyA look at the local economyFuture labor market in Roanoke

The Commonwealth’s Economy

Data sources: Virginia Employment Commission, Bureau of Labor Statistics ; Author’s calculations

January-99

July-99

January-00

July-00

January-01

July-01

January-02

July-02

January-03

July-03

January-04

July-04

January-05

July-05

January-06

July-06

January-07

July-07

January-08

July-08

January-09

July-09

January-10

July-10

January-11

July-11

January-12

July-12

January-13

July-13

January-14

0.58

0.6

0.62

0.64

0.66

0.68

0.7

0.72

0.015

0.025

0.035

0.045

0.055

0.065

0.075

Labor Market Movements in Virginia 1999-2014

lfpr epop urate

Pre-Great Recessionaverage EPOP: 65.9%

Great Recession +average EPOP: 63.8%

Pre-Great Recessionaverage u-rate: 3.3%

Great Recession +average u-rate: 5.9%

Pre-Great Recessionaverage LFPR: 68.2%

Great Recession +average LFPR: 67.8%



LFPR-0.4 ppts.

URATE+2.6 ppts.

EPOP fell by 2.1 percentage points

over the Great Recession and recovery

Prolonged job search

Dropped out of the labor force


Source: Virginia Employment Commission

March 2014

Supply and demandof labor

Shortage of labor in VA

Surplus in the US

0.87 March 2014

269,379 March 2014

233,871 March 2014


2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013400

500

600

700

800

900

1000

1100

Weekly Wages Over Time, Virginia

Nominal wages Real wages

Wag

es, $

/wee

k

Source: BLS and author’s calculationsNote: Real wages adjusted using CPI for Southeast Region (1996=100); wage values assume work 40 hours per week and every week per year; Q1 wages

Despite labor shortage in VA, realwages are the same in 2013as they were in 2007 (~$675/wk.)


Data source: U.S. Census Bureau, Center for Economic Studies ; Author’s calculationsNote: No distinction between full-, part-time, or temporary hires; no distinction between voluntary and involuntary separations

Q407Q108

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Q212Q312

Q412Q113

Q213400000

450000

500000

550000

600000

650000

700000

750000

800000

850000

Separations and Hires, Virginia

Separations Hires

# se

para

tions

, hir

es (`

000)

RecoveryRecessionLabor flows

Cyclical

Match quality

Productivity


Q407Q108

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Q213400000

450000

500000

550000

600000

650000

700000

750000

800000

850000

Separations and Hires, Virginia

Separations Hires

# se

para

tions

, hir

es (`

000)

RecoveryRecessionLabor flows

Employment grows &unemployment ratefalls when hires exceedseparations


The Commonwealth’s EconomyMovements along theBeveridge Curve

Changes in Aggregate Demand


0.020 0.030 0.040 0.050 0.060 0.070 0.0800.030

0.035

0.040

0.045

0.050

0.055

0.060

0.065

0.070

f(x) = − 0.605599179719158 x + 0.0801604833567952R² = 0.874486656042074

Beveridge Curve during the Great Recession

Unemployment rate

Job

vace

ncy

rate

(JO

/LF)


“Recovery”

“GreatRecession”

Shifts of theBeveridge Curve

Changes in the matching process


0.020 0.030 0.040 0.050 0.060 0.070 0.080 0.0900.030

0.035

0.040

0.045

0.050

0.055

0.060

0.065

0.070

0.075

0.080

f(x) = − 0.689140972179885 x + 0.0988036521269595R² = 0.438054835303045

f(x) = NaN x + NaNR² = 0 Beveridge Curve during the Recovery

Unemployment rate

Job

vace

ncy

rate

(JO

/LF)


“Recovery”



0.020 0.030 0.040 0.050 0.060 0.070 0.080 0.0900.030

0.035

0.040

0.045

0.050

0.055

0.060

0.065

0.070

0.075

0.080

f(x) = − 0.689140972179885 x + 0.0988036521269595R² = 0.438054835303045


Unemployment rate

Job

vace

ncy

rate

(JO

/LF)

Shifts of theBeveridge Curve

WHY?

Skills mismatch (structuralunemployment)

Federal EUI


“Recovery”



0.020 0.030 0.040 0.050 0.060 0.070 0.080 0.0900.030

0.035

0.040

0.045

0.050

0.055

0.060

0.065

0.070

0.075

0.080

f(x) = − 0.689140972179885 x + 0.0988036521269595R² = 0.438054835303045


Unemployment rate

Job

vace

ncy

rate

(JO

/LF)

Long run unemployment rate average for Roanoke MSA = 4.4%(1999-2014)

Job opening rate at 4.4% unemployment rate during recession = 5.4%

Job opening rate at 4.4% unemployment rate during recovery = 6.8%


Q199Q499

Q300Q201

Q102Q402

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Q312Q213

Q1140

2000

4000

6000

8000

10000

12000

14000

Initial Unemployment Insurance Claims, Virginia Q1 1999 – Q1 2014

Quarter/Year

# cl

aim

s

Data sources: US Department of Labor ; Author’s calculations


Data sources: US Department of Labor ; Author’s calculations

Q199Q499

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0

10000

20000

30000

40000

50000

60000

70000

80000

90000

100000

Continued Unemployment Insurance Claims, Virginia Q1 1999 – Q1 2014

#cla

ims


Elementary(0.7%) Some High School

(7%)

High School Grad/GED

(38.5%)

Some College(10.4%)

Associate's Degree(16.8%)

Bachelor's Degree(15.8%)

Post Graduate Degree(6.3%)

Unknown(4.6%)

Education status of March 2013 job ap-plicantsN=10,949

Male = 53.4%Under 22 = 9.3%Over 34 = 53.2%Veterans = 7.6%


The Local EconomyUnemployment by CountyMarch 2014

Roanoke County 4.9%Roanoke City 6.2%Salem City 5.3%Botetourt County 5.3%Craig County 6.2%Franklin County 5.2%


The Local Economy

Data sources: Virginia Employment Commission, Bureau of Labor Statistics

January-07

May-0

7

September-0

7

January-08

May-0

8

September-0

8

January-09

May-0

9

September-0

9

January-10

May-1

0

September-1

0

January-11

May-1

1

September-1

1

January-12

May-1

2

September-1

2

January-13

May-1

3

September-1

3

January-14

0.02

0.03

0.04

0.05

0.06

0.07

0.08

0.09

Unemployment rate - VA & ROA

urate VA urate ROA

Une

mpl

oym

ent r

ate

The Local Economy

Source: Virginia Employment CommissionNote: candidates are those with active resumes in the workforce system

$20,000-$34,999

$5,000-$19,999

Not specified

$35,000-$49,999

$50,000-64,999

$65,000-$79,999

$80,000-$94,999

$95,000 or more

Minimum desired wage of available candidates

N=33,360

The Local Economy


March 2014

Job openingsRoanoke City 6,772Salem 1,935Roanoke County 556Franklin County 372Botetourt County 291Craig County 18

The Local Economy

Leisure, hospitality

Private eduction, health services

Misc. services

Local government

State government

Federal government

Mining, lodging

Professional business services

Wholesale trade

Finance, insurance, real estate

Transportation, warehousing, utilities

Retail trade

Manufacturing

-600 -400 -200 0 200 400 600

Roanoke Employment, Q412-Q413YOY changes+600 jobs+0.4 pp

WagesLeisure, hospitality

Private educ, health services

Source: Virginia Employment Commission. (2014). Virginia Economic Indicators, Vol. 45, Num. 4.

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Q2135000

7000

9000

11000

13000

15000

17000

19000

21000

23000

25000Separations and Hires, Roanoke City

Separations Hires

# se

para

tions

, hir

es (`

000)

Recovery

The Local Economy

Recession


Upward trend in each since Q1 2010

Hires currently outpacing separations

The Local Economy

May-0

7

September-0

7

January-08

May-0

8

September-0

8

January-09

May-0

9

September-0

9

January-10

May-1

0

September-1

0

January-11

May-1

1

September-1

1

January-12

May-1

2

September-1

2

January-13

May-1

3

September-1

3

January-14

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Unemployed per Job Opening

Roanoke VA

#Une

mpl

oyed

/#Jo

b op

enin

gsunemployed = job openings

Labor surplus

Labor shortage

Labor shortages untilearly 2009

Labor surpluses untilearly 2013

More pronouncedsurpluses in ROA

Currently shortages inROA and VA; upwardpressure on wages

The Local Economy


2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013450

500

550

600

650

700

Real wages VA and Roanoke City, 2001-2013

Roanoke Linear (Roanoke) VA Linear (VA)

Real

wag

es, $

/wee

k

Roanoke average real wage$512/weekFalling by $0.67/year

Virginia average real wage$654/weekRising by $3.44/year

Wage gap = $142/week

Gap grew by ~$4.10 per year between 2001-2013

The Local Economy


2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013450

500

550

600

650

700

Real wages VA and Roanoke City, 2001-2013

Roanoke Linear (Roanoke) VA Linear (VA)

Real

wag

es, $

/wee

k

Roanoke average real wage$512/weekFalling by $0.67/year

Virginia average real wage$654/weekRising by $3.44/year

Wage gap = $142/week

Gap grew by ~$4.10 per year between 2001-2013

Upwardmovement?

The Local EconomyRichmond$34,964

Lynchburg$43,951

Virginia Beach$32,217

Roanoke $42,120

Sources: http://www.findthebest.com/ with 2013 data; Author’s calculations

0.020 0.030 0.040 0.050 0.060 0.070 0.080 0.0900.020

0.030

0.040

0.050

0.060

0.070

f(x) = − 1.02794984949486 x + 0.115957394264859R² = 0.631433799231031

f(x) = NaN x + NaNR² = 0 Beveridge Curve, Roanoke MSA

Unemployment rate

Job

open

ing

rate

(JO

/LF)

Recovery

The Local Economy


Recession

Long run unemployment rate average for Roanoke MSA = 4.3%(1999-2014)

Job opening rate at 4.3% unemployment rate during recession = 4.4%

Job opening rate at 4.3% unemployment rate during recovery = 7.2%

Future Labor Market

Offi ce a nd Administ ra ti ve Support Occupa ti ons

Sa les a nd R ela t ed Occupa ti ons

Food Prepa ra ti on a nd Serving R ela t ed Occupa ti ons

B usiness a nd Fina nc ia l Oper a ti ons Occupa ti ons

Educa ti on, T ra ining , a nd L ibra ry Occupa ti ons

Ma na g ement Occupa ti ons

Comput er a nd Ma t hema ti ca l Occupa ti ons

Tr a nsport a ti on a nd Ma t er ia l Moving Occupa ti ons

Const r ucti on a nd Ext ra cti on Occupa ti ons

H ea lt hca r e Pr a cti ti oners a nd Technica l Occupa ti ons

541,884

414,390

294,938

257,351

234,584

254,349

199,506

226,602

197,026

191,430

613,286

472,738

340,905

317,155

290,152

275,909

267,482

257,639

243,212

240,333

Employment projecti ons (2020), Roanoke2010 Estimate 2020 Projection

$37,130

$20,310

$60,190

$49,010

$90,110

$67,570

$31,580

$34,500

$73,960

$32,220

Data sources: Virginia Employment Commission, Bureau of Labor StatisticsNote: salaries are mean annual wage, May 2013, Roanoke

Future Labor Market

Labor demand Output

Real wage

L and K substitutabil

ity

Future Labor Market

Labor demand Output

Real wage


ity

Future Labor Market

Labor demand Output

Real wage

L and K substitutab

ility

Future Labor Market

Labor demand Output

Real wage


ity

Computers strongly complement non-routine cognitive tasks (high wage)Abstract reasoning tasks (problem solving, coordination, or other high management jobs)

Future Labor Market

Labor demand Output

Real wage


ity

Computers directly substitute for routine tasks (middle-class)Bookkeeping, clerical work, repetitive production tasksAutomation of routine work

Future Labor Market

Labor demand Output

Real wage


ity

Computers have little direct impact onnon-routine manual tasks (low income)Janitors, security guards, truck drivers, waiters

Thank you

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Economy & Finance

Economic Summit XI