2015 Labor Day

Report:

Annual Report on the State of

Montana’s Economy

(Plus Information for Recruiting and Retaining

Workers)

Barbara WagnerChief Economist

September 15, 2015Great Falls, MT

Today’s Agenda

1. Overview of Montana’s Economic Performance

2. Worker Shortage Ahead

3. Tools to Help You Manage your Workforce

4. Some Ideas to Consider

Montana’s Economic Growth ContinuesU.S. and Montana Personal Income Growth

Source: Bureau of Economic Analysis 3

9th fastest growth over five years

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1

2008 2009 2010 2011 2012 2013 2014 2015

-3%

-2%

-1%

0%

1%

2%

3%

4%

USMT

Personal Income by Quarter

Source: Bureau of Economic Analysis

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1

2008 2009 2010 2011 2012 2013 2014 2015

-3%

-2%

-1%

0%

1%

2%

3%

4%

USMT

Fiscal Cliff

Fed Gov.Shutdown

Personal Income by Quarter

Source: Bureau of Economic Analysis

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1

2008 2009 2010 2011 2012 2013 2014 2015

-3%

-2%

-1%

0%

1%

2%

3%

4%

USMT

Oil Price Slide

Personal Income by Quarter

Source: Bureau of Economic Analysis

Oil Price Decline Slowed Employment Growth, but Not Wage Growth

Source: Quarterly Census of Employment and Wages, BLS and MT DLI

Employment and Labor Force Expanding

Employment and Labor Force Expanding

Job growth of over

2,000 jobs per

month in 2015

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Esti

mat

ed

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

Annual Total Employment Growth in Montana and U.S. Since 2004

U.S.MT

Source: Local Area Unemployment Statistics, BLS and MT DLI, Current Population Statistics, BLS 10

14th among states for total employment growth over 10 years

Unemployment Rate at Ideal Levels

Source: Local Area Unemployment Statistics

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

0

2

4

6

8

10

12

0

1

Une

mpl

oym

ent R

ate

U.S.MT

RECES-SION

5.3%

4.0%

13th lowest unemployment rate among states in 2014

Unemployment Rate at Ideal Levels

Source: Local Area Unemployment Statistics

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

0

2

4

6

8

10

12

0

1

Une

mpl

oym

ent R

ate

U.S.MT

RECES-SION

4.0%

Normal Unemployment Range

Strong Wage GrowthMontana Average Annual Wages

2009 2010 2011 2012 2013 2014$32,000

$33,000

$34,000

$35,000

$36,000

$37,000

$38,000

$39,000

$40,000

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

$34,596

$35,791

$37,096$37,575

$38,874

Ave

rage

Ann

ual W

age

Gro

wth

Rat

e

MT Average WageWage Growth

Source: Quarterly Census of Employment and Wages

Real Wage Growth Higher Than InflationMontana Average Annual Wages

2009 2010 2011 2012 2013 2014$32,000

$33,000

$34,000

$35,000

$36,000

$37,000

$38,000

$39,000

$40,000

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

Ave

rage

Ann

ual W

age

Gro

wth

Rat

e

Wage GrowthInflation

Source: Quarterly Census of Employment and Wages

Real Wage Growth Higher Than InflationMontana Average Annual Wages

2009 2010 2011 2012 2013 2014$32,000

$33,000

$34,000

$35,000

$36,000

$37,000

$38,000

$39,000

$40,000

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

Ave

rage

Ann

ual W

age

Gro

wth

Rat

e

REAL WAGE GROWTHWage GrowthInflation

Source: Quarterly Census of Employment and Wages

Real Montana Wage Growth by Ownership

2010 2011 2012 2013 2014

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

State GovernmentLocal Government

PrivateFederal Government

Strong Wage Growth in All Regions of State

Source: Quarterly Census of Employment and Wages, MT Dept. of Labor and Industry

Take Away Points

• Montana’s economy is doing pretty awesome.

– 5th fastest wage growth over five years• Wage growth driven by private sector

– 5th fastest GDP growth over five years

– 7th fastest personal income growth over five years

– 13th lowest unemployment rate last year

Job Growth Over Last Year By Industry

Trade

Education and Health Care

Construction

Manufacturing

Leisure Activities

Government

Agriculture

Transportation

Financial Activities

Mining and Utilities

Business Services

Other

(1,000) (500) - 500 1,000 1,500

Source: Quarterly Census of Employment and Wages, MT Dept. of Labor and Industry

Industry PerformanceGDP Growth and Employment

Other

Government

Construction

Mining and Utilities

Education and Health Care

Business Services

Financial Activities

Trade

Leisure Activities

Transportation

Agriculture

Manufacturing

-5.0% 0.0% 5.0% 10.0% 15.0% 20.0%

Five Year GDP Growth (2009-2014)

Last Year GDP Growth

Last Year Employment Growth

Unemployment Rates forRegions and Reservations

Job Growth by Region

Source: Local Area Unemployment Statistics, Montana Dept. of Labor and Industry

Reservation AreasPercent Employment Change over Prior Year

Blackfeet Crow Flathead Fort Belknap Fort Peck Northern Cheyenne

Rocky Boy

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

2011 2012 2013 2014 2015 Estimated

Source: Local Area Unemployment Statistics for Reservation Areas, Montana Dept. of Labor and Industry

South Central Region and Cascade CountyEmployment Change over Prior Year

2010 2011 2012 2013 2014

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

Cascade CountyNorth Central RegionMontana

Source: Local Area Unemployment Statistics, Montana Dept. of Labor and Industry

Industry PerformanceJobs Added in Cascade County over Last Five Years

Education and Health CareManufacturing

Leisure ActivitiesTransportation

State GovAg, Mining, and Utilities

TradeConstructionFederal Gov

OtherFinancial Activities

Local GovBusiness Services

(300) (200) (100) - 100 200 300 400

Source: Quarterly Census of Employment and Wages, MT Dept. of Labor and Industry

Upcoming Challenges

1. Strengthening dollar

2. Low oil and commodity prices

3. Worker shortage

World GDP Growth

2012 2013 2014 2015 2016 2017

-4%

-2%

0%

2%

4%

6%

8%

10%

U.S. ChinaSouth Asia

Euro AreaJapanRussia

FORECASTED

Source: World Bank Global Outlook, June 2014

U.S. Economy Doing Better Than Rest of World

• Dollar strengthens against other currencies– Harms exporting industries– Imports less expensive

• Reduced global demand for commodities

$ € £ ¥

Montana Foreign Exports in 2012 Including Nontangible Services

Source: Exports including services from the Brookings-Rockefeller Project on State and Metropolitan Innovation.

Mining, Metals, and Chemical

Manufacturing16%

Impacts of Lower Commodity Prices

• Low oil prices slowed personal income and employment growth in 2nd half of 2014.– Job losses in Eastern region have stabilized– Related job losses in temporary employment services

• Mining lost 311 jobs in 2014, but not in oil and gas mining.

• Petroleum refining expected to remain stable.– Refining comprises over half of manufacturing output.– 3.9% of GDP in 2014 (compared to 1.2% for oil and gas

extraction)

Labor Force Participation Recovering from Recession in Montana

Source: Local Area Unemployment Statistics for Montana and Current Population Survey for U.S., Bureau of Labor Statistics and MT Dept of Labor and Industry (MT DLI)

Montana and U.S. Labor Force Participation Rates Since 1976

U.S. Labor Force Participation by Age GroupFewer Working in Younger Generations

1950

1952

1954

1956

1958

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

0

10

20

30

40

50

60

70

80

90

U.S

. Lab

or F

orce

Par

ticip

ation

65 and Older

25 to 29 30 to 3435 to 44 45 to 54

55 to 64

16 to 19

20 to 24

Source: Current Population Statistics, U.S. Bureau of Labor Statistics

Montana’s Aging Population

Source: Census and Economic Information Center, MT Dept. of Commerce, April 2013

2000 2005 2010 2015 2020 2025 2030 -

100,000

200,000

300,000

400,000

500,000

600,000

700,000 Under 20 20 to 64 Over 65

Worker Shortages Expected

Assumes labor force participation will increase in response to more jobs and higher wages.

Source: Montana Dept. of Labor and Industry Employment Forecasts

Job Forecasts Expect Slightly Slower Growth Due to Worker Shortage

Expect per year:6,500 more jobs

4,100 new workers

Solutions to a Worker Shortage

1. Recruit more people into Montana.– Other states also have aging populations.– Wages are higher in other states.

2. Recruit more workers into the labor force.

Total Women American Indian

Veteran (18 and Over)

Disabled Less than High School

0%10%20%30%40%50%60%70%

Labor Force Participation Rates by Select Demographics

Source: Current Population Survey and 2011-2013 American Community Survey

Solutions to a Worker Shortage

3. More full-time employment.– 6th highest percent of part time work in the nation.– Shortest work week in the nation.

Male

Female

76%

57%

7%

14%

17%

19%

Part-time Employment by Gender

Full-time, Year-roundPart-time, year-round

Part-year, Part-time

Construction and extraction

Installation and repair

Protective service

Computer and math

Management

Building cleaning and maintenance

Arts and media

Sales and related

Legal

Food preparation and serving

Business and financial

Community services

Office and admin

Education and library

Healthcare practitioner

Personal care

Healthcare support

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

Addressing the Gender Wage Gap

39

Pay Gap Ratio

Percent Female

Source: ACS, 2013 3-Year Estimates. Some small industries removed for simplicity.

Solutions to a Worker Shortage

4. Reduce time out of labor force for retraining.– More on-the-job training like internships and apprenticeships.– More business-paid training for specific skills.

5. Improve labor productivity to produce more with fewer workers.– Technology improvements– Better job matching– More training for professionals

Take Away Points

• U.S. and Montana economies have momentum to weather international troubles.

• Tight labor markets expected.

– Workplaces may have different culture in the future as businesses work to recruit atypical workers.

– Creativity in hiring and retention practices

What does this mean for you?Finding workers

www.lmi.mt.gov

Wages by Occupation by Region

Wage Rates by Region

Cost of Living Increases

www.bls.gov/bls/escalation.htm

Cost of Living Increase versus Raise

Cost of Living Increase

• Adjustment using an inflation metric to keep wages at the SAME level after inflation.

• Based on the goods purchased by a typical U.S. consumer

Raises

• Increase in pay because of performance.

• Typically INCREASES standard of living for worker if the raise exceeds inflation.

Regional Price Changes

• U.S. and Metro prices only.

• Wage growth and price increases similar in most circumstances.– But not necessarily in E. Montana.

• New data being released soon to provide more county price information.

Is your turnover high?

Separations and Hires Rate Still Below Pre-Recession Levels

• Low separation and hire rates despite good unemployment suggests labor market frictions. (i.e. skills gap, geographical gap, wages not responding, etc.)

Source: Quarterly Workforce Indicators, U.S. Census LEHD program.

What Jobs are In Demand

Today’s Agenda

1. Overview of Montana’s Economic Performance

2. Worker Shortage Ahead

3. Tools to Help You Manage your Workforce

4. Some Ideas to Consider

Employment Status of the Montana Population

Ideas to Consider for Recruiting Workers

• Provide on-the-job training to hire from within.– Worker shortage will likely shift more worker training to employer.– Increase productivity with skill upgrading for existing professionals.

• Consider new benefit options.– Transportation in rural areas or for disabled workers.

• Different benefits for different workers?– Mentoring for young workers vs. leadership training for older

professionals.– Student loan repayment instead of retirement benefits for young workers.– Flex or family leave for older workers with ailing parents/spouses.– Maternity or paternity leave for mid-level professionals.

Ideas to Consider for Recruiting Workers

• Remember that you are recruiting among people who are already working.– Make it easy to learn about the job and apply.– Look for similar occupations that pay a little less, then train workers.– Focus on skills, not on tasks, to recruit similar workers from other

industries/occupations.

• Use tools to ensure your pay is equitable.

• Recessions cause “requirement creep.” Make sure you really need the skills/experience requested.

Ideas to Consider for Job Posting and Applications

• Post a wage range.– “Analyst” jobs can pay anywhere from $20,000 per year to

$120,000 per year. – Also reduces gender wage gap due to differences in

negotiation styles.

• Ask for references at appropriate time.

• Wage rates at prior job vs. expected salary.

Retaining Workers

• Pay for Performance?– Research suggests managerial performance review is often biased– Quantitative and Qualitative measurement

• Pay transparency vs. Pay Process Transparency– Workers most engaged when they understand WHY pay is awarded, and

what to do to get there.

• Paid parental leave increases likelihood of parents returning after FMLA.

MORE INFORMATION AVAILABLE:WWW.LMI.MT.GOV