Regional Competitive Industry Analysis

Transcription

1 Regional Competitive Industry Analysis Baker, Union, and Wallowa Counties October 2017 Union Wallowa Baker Michael Meyers, Economist (503) Jill Cuyler, Research Analyst (503) Economic Strategies & Policy Division One World Trade Center 121 SW Salmon Street, Suite 205 Portland, OR 97204

2 Table of Contents EXECUTIVE SUMMARY... 3 INTRODUCTION... 4 SECTION 1: SOURCES AND METHODOLOGY... 4 Regional Indicators... 4 Competitive Industry Indicators... 5 Employment Growth Projections... 5 Caveats and Limitations... 6 SECTION 2: OVERVIEW OF THE REGIONAL ECONOMY... 7 Employment, Total Payroll and Average Wage per Job... 7 Employment Growth... 7 Manufacturing Employment and Wages... 8 Unemployment Rate... 9 SECTION 3: REGIONAL COMPETITIVE INDUSTRIES Location Quotient Analysis Shift-Share Analysis Regional Employment Projections by Industry Page 2 of 13

3 Regional Competitive Industry Analysis Baker, Union, and Wallowa Counties Executive Summary This region in the northeast corner of the state is made up of Baker, Union, and Wallowa counties. Framed by the Elkhorn and Wallowa mountains, most of the employment in this region lies in the Grande Ronde and Baker valleys. Natural resource industries in agriculture, forestry, and wood products are the economic base of the region. Private sector employment in the region grew by 6 percent between 2005 and 2015, slower than the statewide growth rate of 8.8 percent. The region s average annual wage is 30 percent lower than the statewide average annual wage. Manufacturing was 15 percent of the region s private sector employment in 2015, higher than the statewide average of 12 percent. With a location quotient of 1.41, manufacturing is very important to the region and its competitive advantages. Wood products and transportation equipment are the largest competitive manufacturing sectors in the region. Forestry and wood products, agriculture, and transportation equipment drive the traded sector of Northeast Oregon. Agricultural industries, including other crop farming (hay, sugar beets, etc.) and vegetable and melon farming, experienced some of the highest competitive share gains amongst competitive traded sector industries in the region between 2005 and Veneer, plywood, and engineered wood products, agriculture, construction, and mining machinery manufacturing, RV parks and campgrounds, and cement and concrete product manufacturing also saw competitive advantage gains. Overall, forestry and wood products experienced the largest competitive share losses amongst competitive industries. Accommodation, insurance related activities, and cattle ranching also saw competitive advantages erode. Emerging traded sector industries in the region are found primarily in the service sector, where wholesale electronic markets and agents and brokers, management of companies, and professional, scientific, and technical services experienced competitive advantage gains between 2005 and Private sector payroll employment in the region is projected to grow 7 percent between 2014 and 2024, well below the projected statewide rate of 16 percent. Health care, manufacturing, and wholesale and retail trade are projected to add the most jobs. Page 3 of 13

4 Introduction The purpose of this report is to present a competitive industry analysis of the regional economy consisting of Baker, Union, and Wallowa counties. Regional trends in employment and wages are analyzed and compared to trends in Oregon and the U.S. This report provides data and analysis to help economic development practitioners, policy makers, and businesses identify strengths, weaknesses, opportunities, and threats that pertain to their regional economy. The information in this report can be used to help guide strategic economic development efforts in the region. This report is composed of four sections. Section one outlines the data sources and methodology behind the creation of this report. The second section provides an overview of the regional economy by analyzing employment and wage trends over time. Section three supplies a framework to identify industries in the region that may have a competitive advantage in developing or expanding regional industry specialization. Section four analyzes ten year employment projections of the region s main industries and identifies industries with above average growth potential. Section 1: Sources and Methodology This report is based on analysis of statistical data from the U.S. Bureau of Labor Statistics (BLS), Oregon Employment Department (OED), and U.S. Census Bureau. The majority of data is presented for traded sector industries only. However, non-traded sector employment data is provided as part of OED s projections (Table 9). The methodology for this report uses a series of indicators to provide a framework for evaluating the competitive strengths and growth opportunities of the regional economy. The following indicators are used for this report. Regional Indicators Section two begins with a comparative analysis of the regional economy focusing on private sector business establishments, employment, total payroll, and average wages to show the geographic distribution and characteristics of employment in each region. Recent employment and wage trends are also analyzed and compared to the state. This is followed by an analysis of manufacturing employment and wages. Employment and average annual wages of leading manufacturing subsectors are presented, along with their location quotients. A location quotient measures the employment concentration of a given industry in a region compared to that industry s employment concentration in the nation as a whole. Location quotients above 1.0 indicate that an industry s share of employment in the region is greater than its share of employment nationwide. For Page 4 of 13

5 example, an industry with a location quotient of 2.0 has twice as much employment locally as the national average for that industry. Location quotients are a simple way to help identify industries in the region that have a competitive advantage as demonstrated by a greater than average employment concentration. An analysis of manufacturing establishments by size class follows, which shows the distribution of manufacturers in the region amongst four different size classes. This analysis shows how much a region may be dependent on small, medium, or large-size manufacturers. The unemployment rate analysis reveals how well the region has done at creating and retaining jobs for its working-age population. The analysis compares the regional unemployment rate to rates from Oregon and the U.S., which shows whether the region has performed better or worse than average. This comparative analysis also provides insight into how autonomous the region s economy is from Oregon and the U.S. Competitive Industry Indicators Section three begins with two detailed analyses that attempt to identify industries that have a competitive advantage in the region. A detailed location quotient analysis by four digit NAICS codes shows industries in the region that appear to have a competitive advantage based on high location quotients. This analysis includes all traded sectors of the economy, not just manufacturing. Industries with high location quotients and higher than average wages are highlighted. Following the location quotient analysis is a shift-share analysis. Shift-share analysis, like location quotient analysis, is useful in identifying industries with a competitive advantage in the region. Unlike a location quotient analysis that is a point-in-time analysis, shiftshare analysis looks at industry performance over time to measure how employment in an industry changed in relation to national and industrial trends. If a region s industry consistently outperforms its peers nationwide over a period of time this indicates a growing competitive advantage for that industry. The shift-share analysis examines the ten-year growth rates for regional and nationwide industry employment. Employment change over the past ten years for each industry is broken out by change due to national total employment trends, change due to national industry employment trends, and change due to competitive advantage. Tables 6, 7, and 8 present competitive share percent changes and competitive share job gains and losses for industries in the region that had the largest gains and losses in competitive advantage. Employment Growth Projections Section four examines employment growth projections for the major industries in each region. Current projections cover the period from 2014 to Page 5 of 13

6 Caveats and Limitations Employment and wage data throughout the report comes from Quarterly Census of Employment and Wages (QCEW) data from the BLS and OED. Data was also used from the U.S. Census Bureau s Local Employment Dynamics (LED) program, which is also based on QCEW data. All of these sources are limited to employment and wages covered under unemployment insurance. The final table in this report (Table 9) is not limited to covered employment and includes total non-farm employment. A substantial amount of industry employment and wage data for Oregon counties is confidential and not published by BLS or OED. Estimates were created for confidential three and four digit NAICS industries by county. The primary method used to create estimates was wage share calculations from LED data. Unlike BLS and OED employment and wage data, LED data includes wages for many industries for which employment is confidential. As a result, one can produce employment estimates for industries with confidential employment by calculating the share of wages in a particular industry compared to other confidential industries under the same parent industry and applying that ratio to the amount of unpublished confidential employment amongst those industries. Estimates were done for industries with at least $3 million in annual payroll. Local knowledge and analyst judgment were used to vet the reliability of final employment data. In just in few cases, more reliable employment figures from other sources such as Hoovers (Dun & Bradstreet), newspapers, or company websites were substituted for wage share employment estimates. In these instances, the wage column reads N/A in relevant tables. The manufacturing establishments by size data in Table 3 is a combination of two data sets. The total number of manufacturing establishments comes from QCEW data from the Bureau of Labor Statistics. The percent of manufacturing establishments by employment size-class data comes from County Business Patterns (CBP) data from the U.S. Census Bureau. The two data sets are combined in this table because the QCEW data is more accurate in its total count of establishments, but it does not include size class data for counties. The CBP data does have size class data for counties, but its overall number of establishments by county is not as accurate as the QCEW. Combined, one can estimate the number of establishments by employment-size class. Tables 6, 7, and 8 include ten year employment change analyses by industry. Due to the administrative nature of QCEW data, changes in industry employment can occur that are not the result of actual economic changes within the industry. Some, but not all, of these so-called non-economic changes were identified in the ten year analyses and industry employment adjustments were made so that industry employment trends could be more accurately captured. Page 6 of 13

7 Section 2: Overview of the Regional Economy Employment, Total Payroll, and Average Wage per Job Private sector employment in this region accounted for 0.9 percent of Oregon s total private sector employment in Over half of the region s employment is in Union County. Baker County has about one-third of the region s employment. The 2015 private sector average annual wage in the region was $33,160, 31 percent lower than the statewide average annual wage. The private sector average annual wage is highest in Union County and lowest in Wallowa County. Table 1: Employment, Total Wages, and Average Wage per Job, Private Sector, 2015 Area Employment Total Payroll Average Wage % of Region Employment % of Statewide Ave. Wage Baker 4,049 $129,899,903 $32, % 67.2% Union 7,661 $266,718,024 $34, % 72.9% Wallowa 1,848 $52,964,124 $28, % 60.0% Region 13,558 $449,582,051 $33, % 69.4% Oregon 1,508,680 $72,079,481,599 $47,777 N/A 100.0% Source: US Bureau of Labor Statistics, Quarterly Census of Employment and Wages, Employment Growth The region s ten year private sector employment growth ranked 7 th in the state. Private sector employment in the region grew by 6 percent between 2005 and 2015, less than the statewide rate of 8.8 percent. Private sector growth was strongest in Wallowa County where it outpaced the state. Page 7 of 13

8 Table 2: Change in Private Sector Employment, Area 2005 Employment 2015 Employment Employment Change Employment Change Rank Baker 3,930 4, % 19 Union 7,198 7, % 16 Wallowa 1,664 1, % 11 Region 12,792 13, % 7 Oregon 1,386,917 1,508, % N/A Source: U.S. Bureau of Labor Statistics, Quarterly Census of Employment & Wages. Manufacturing Employment and Wages Manufacturing was 15 percent of the region s private sector employment in With a location quotient of 1.41, manufacturing is very important to the region s economy and competitive advantages. Leading manufacturing subsectors include woods products, transportation equipment, nonmetallic mineral products, and fabricated metals. The region has a lower percentage of very small manufacturers compared to the statewide average and a higher percentage of medium-sized manufacturers. Table 3: Manufacturing Employment and Wages, 2015 Industries with Employment Greater than 25 NAICS Industry Employment Location Quotient Average Wage Manufacturing 1, $45, Wood Product Manufacturing $49, Transportation Equipment Manufacturing $47, Nonmetallic Mineral Product Manufacturing $75, Fabricated Metal Product Manufacturing $46, Machinery Manufacturing $37, Miscellaneous Manufacturing $44, Primary Metal Manufacturing $48, Food Manufacturing $25,579 Source: Business Oregon with data from U.S. Bureau of Labor Statistics, Oregon Employment Department, and U.S. Census Bureau ( ). Page 8 of 13

9 Table 4: Manufacturing Establishments by Size, 2015 Percent of Manufacturing Establishments by Employment-Size Class Area Total Manufacturing Establishments or More Baker % 8.3% 8.3% 0.0% Union % 26.9% 15.4% 3.8% Wallowa % 15.4% 0.0% 0.0% Region % 17.5% 9.5% 1.6% Oregon 5, % 19.0% 4.4% 2.3% Source: Total establishments from U.S. Bureau of Labor Statistics, Quarterly Census of Employment & Wages; employment-size class data from U.S. Census Bureau, County Business Patterns, Unemployment Rate The region s unemployment rate was slightly higher than the state s from 2005 to 2008 but equaled Oregon s rate in 2009 and It has remained higher since The region reached its highest unemployment rate over the ten year period, 11.3 percent in 2009 and has since declined at a slower rate than Oregon and the U.S. The region s lowest unemployment rate over the ten year period, 5.7 percent, occurred in Page 9 of 13

10 Section 3: Regional Competitive Industries Location Quotient Analysis Forestry and Wood Products is the largest competitive industry group in the region. Five of the seven industries with the highest location quotients are in this group. Motor vehicle body and trailer manufacturing (RVs and camp trailers), other crop farming, cattle ranching, and cement and concrete product manufacturing are also concentrated in the region. Most industries with high location quotients pay above the region s average wage. Table 5: Industries with Highest Location Quotients Private Sector, 2015, U.S. Base Area, Industries with Employment Greater than 25 and Location Quotient of 1.2 or Greater, Industries with Average Wage above Region Average Shaded NAICS Industry Employment Location Quotient Average 3212 Veneer, Plywood, and Engineered Wood Product Manufacturing $52, Motor Vehicle Body and Trailer Manufacturing $49, Sawmills and Wood Preservation $52, Support Activities for Forestry $43, Logging $43, Other Crop Farming $30, Other Wood Product Manufacturing $35, Cattle Ranching and Farming $33, Cement and Concrete Product Manufacturing $75, RV (Recreational Vehicle) Parks and Recreational Camps $23, Vegetable and Melon Farming $37, Agriculture, Construction, and Mining Machinery Manufacturing $32, Foundries $48, Architectural and Structural Metals Manufacturing $40, Miscellaneous Nondurable Goods Merchant Wholesalers $62, Specialized Freight Trucking $39, Support Activities for Crop Production $41, Traveler Accommodation $15, Agencies, Brokerages, and Other Insurance Related Activities $34,954 Wage Source: Business Oregon with data from U.S. Bureau of Labor Statistics, Oregon Employment Department, U.S. Census Bureau ( ), Page 10 of 13

11 Shift-Share Analysis Agricultural industries, including other crop farming (hay, sugar beets, etc.) and vegetable and melon farming, experienced some of the highest competitive share gains amongst competitive traded sector industries in the region between 2005 and Other competitive traded sector industries in the region that experienced competitive share gains were veneer, plywood, and engineered wood products, agriculture, construction, and mining machinery manufacturing, RV parks and campgrounds, and cement and concrete product manufacturing. Forestry and wood products industries experienced the largest competitive share losses amongst competitive traded sector industries in the region between 2005 and Other competitive industries that experienced competitive share losses were accommodations, insurance related activities, and cattle ranching. Emerging traded sector industries (location quotient less than 1.2) in the region that experienced competitive advantage gains between 2005 and 2015 were found primarily in the service sector, including wholesale electronic markets and agents and brokers, management of companies, and professional, scientific, and technical services. Table 6: Competitive Industries with Highest Competitive Advantage Percent Gains, Shift-Share Analysis, Private Sector, U.S. Base Area, Industries with LQ Greater than 1.2 and Employment Greater than 25 Employment Location NAICS Industry 2015 Quotient Competitive Share Percent Competitive Share Jobs 1119 Other Crop Farming % Vegetable and Melon Farming % Veneer, Plywood, and Engineered Wood Product Manufacturing % Agriculture, Construction, and Mining Machinery Manufacturing % RV (Recreational Vehicle) Parks and Recreational Camps % Miscellaneous Nondurable Goods Merchant Wholesalers % Cement and Concrete Product Manufacturing % Support Activities for Crop Production % Motor Vehicle Body and Trailer Manufacturing % 8 Source: Business Oregon; data from U.S. Bureau of Labor Statistics, Oregon Employment Department, and U.S. Census Bureau. Page 11 of 13

12 Table 7: Competitive Industries with Highest Competitive Advantage Percent Losses, Shift-Share Analysis, Private Sector, U.S. Base Area, Industries with LQ Greater than 1.2 and Employment Greater than 25 Employment Location NAICS Industry 2015 Quotient Competitive Share Percent Competitive Share Jobs 4842 Specialized Freight Trucking % Traveler Accommodation % Foundries % Agencies, Brokerages, and Other Insurance Related Activities % Logging % Cattle Ranching and Farming % Sawmills and Wood Preservation % Support Activities for Forestry % Other Wood Product Manufacturing % -14 Source: Business Oregon; data from U.S. Bureau of Labor Statistics, Oregon Employment Department, and U.S. Census Bureau. Table 8: Emerging Industries with Highest Competitive Advantage Percent Gains, Shift-Share Analysis, Private Sector, U.S. Base Area, Industries with LQ Less than 1.2 and Employment Greater than 25 Employment Location NAICS Industry 2015 Quotient Competitive Share Percent Competitive Share Jobs 4251 Wholesale Electronic Markets and Agents and Brokers % Management of Companies and Enterprises % Other Professional, Scientific, and Technical Services % General Freight Trucking % Newspaper, Periodical, Book, and Directory Publishers % 5 Source: Business Oregon; data from U.S. Bureau of Labor Statistics, Oregon Employment Department, and U.S. Census Bureau. Employment Projections by Industry Total regional private sector payroll employment is projected to grow by 1,010 jobs between 2014 and 2024, a 7 percent increase, well below the projected statewide rate of 16 percent. Financial activities, agriculture, professional and business services, and health care are projected to experience the greatest percentage increases in employment. Health care, manufacturing, and wholesale and retail trade are projected to add the most jobs of all major industries. Manufacturing employment is projected to increase 8 percent, less than the statewide projection of 12 percent. Page 12 of 13

13 Table 9: Regional Industry Employment Forecast, Baker, Union, and Wallowa Counties Change % Change Total employment 19,020 20,210 1,190 6% Total payroll employment 17,970 19,070 1,100 6% Total private 13,740 14,750 1,010 7% Natural resources and mining % Mining and logging % Construction % Manufacturing 1,990 2, % Trade, transportation, and utilities 3,510 3, % Wholesale and retail trade 2,770 2, % Transportation, warehousing, and utilities % Information % Financial activities % Professional and business services % Private educational and health services 2,610 2, % Leisure and hospitality 1,680 1, % Other services % Government 4,230 4, % Federal government % State government 1,550 1, % State education % Local government 2,140 2, % Local education 1,000 1, % Self-employment 1,050 1, % Source: Oregon Employment Department Page 13 of 13