August 25, 2014
This week we explore State and county job data with a drill down into Michigan and look at another tool for categorizing municipal borrowers.
Drilling Down on Job Growth
With the US employment situation the subject of the Fed’s Jackson Hole meeting, the bond and equity markets were focused last week on the condition of the jobs market and implications for the future path of US monetary policy.
The question of the health of the US job market has many answers. As we have pointed out frequently, there is no single national job market. The pace of recovery from the recession has been uneven across the country. The map below illustrates the significant deviations in the rate of job growth from State to State over the last five years.
The biggest outliers are a familiar story in recent US regional economics: Puerto Rico (-9.4%) is the laggard and North Dakota (+11.5%) is the leader.
Source: DIVER Analytics; BLS
The two largest job gainers after North Dakota are Florida and Texas (both up +11.0%). Job growth in Florida and Texas has been strong and steady. The chart below plots job growth for Florida, Texas and a selection of other large States over the last two years. Many of the largest States are lagging the national rate of job growth.
Source: DIVER Data Solutions; BLS
The under-performance of large issuing States like New Jersey, Illinois, Pennsylvania and Maryland is a cause for concern. These States are all wrestling with long-term fiscal issues related to pensions and OPEB’s. Vigorous economic growth would help ease the pain these States will face when (if?) they address their long-term fiscal challenges. Threats of another potential Federal government shutdown are bad news for Maryland, which is already experiencing anemic job growth.
A somewhat surprising bright spot is Michigan. The rate of job growth in Michigan has been strong. Michigan’s solid performance led us to dig a little deeper. As with the national jobs picture, the jobs situation within Michigan shows large variation.
Source: DIVER Data Solutions; BLS
The slow pace of job growth in Detroit area counties, Wayne, Oakland and Macomb, is no surprise, but the strength of Kent is remarkable. Kent, the 4th largest county by population, accounts for 25% of Michigan’s growth in jobs over the last two years.
Overall, Kent’s employment mix by industry is similar to Wayne County’s. A notable difference is manufacturing, 17% of Kent’s workforce, but only 11% of Wayne’s. Auto suppliers Johnson Controls, Magna International and Lacks Enterprises, and office equipment company Steelcase are the largest industrial employers.
“City Sectors” Highlight Different Metropolitan Growth Patterns
In last week’s Commentary
Job Growth, a Surprise From Michigan and “City Sectors”
August 25, 2014
This week we explore State and county job data with a drill down into Michigan and look at another tool for categorizing municipal borrowers.
Drilling Down on Job Growth
With the US employment situation the subject of the Fed’s Jackson Hole meeting, the bond and equity markets were focused last week on the condition of the jobs market and implications for the future path of US monetary policy.
The question of the health of the US job market has many answers. As we have pointed out frequently, there is no single national job market. The pace of recovery from the recession has been uneven across the country. The map below illustrates the significant deviations in the rate of job growth from State to State over the last five years.
The biggest outliers are a familiar story in recent US regional economics: Puerto Rico (-9.4%) is the laggard and North Dakota (+11.5%) is the leader.
Source: DIVER Analytics; BLS
The two largest job gainers after North Dakota are Florida and Texas (both up +11.0%). Job growth in Florida and Texas has been strong and steady. The chart below plots job growth for Florida, Texas and a selection of other large States over the last two years. Many of the largest States are lagging the national rate of job growth.
Source: DIVER Data Solutions; BLS
The under-performance of large issuing States like New Jersey, Illinois, Pennsylvania and Maryland is a cause for concern. These States are all wrestling with long-term fiscal issues related to pensions and OPEB’s. Vigorous economic growth would help ease the pain these States will face when (if?) they address their long-term fiscal challenges. Threats of another potential Federal government shutdown are bad news for Maryland, which is already experiencing anemic job growth.
A somewhat surprising bright spot is Michigan. The rate of job growth in Michigan has been strong. Michigan’s solid performance led us to dig a little deeper. As with the national jobs picture, the jobs situation within Michigan shows large variation.
Source: DIVER Data Solutions; BLS
The slow pace of job growth in Detroit area counties, Wayne, Oakland and Macomb, is no surprise, but the strength of Kent is remarkable. Kent, the 4th largest county by population, accounts for 25% of Michigan’s growth in jobs over the last two years.
Overall, Kent’s employment mix by industry is similar to Wayne County’s. A notable difference is manufacturing, 17% of Kent’s workforce, but only 11% of Wayne’s. Auto suppliers Johnson Controls, Magna International and Lacks Enterprises, and office equipment company Steelcase are the largest industrial employers.
“City Sectors” Highlight Different Metropolitan Growth Patterns
In last week’s Commentary
In a recent article, Cox observes that the jobs market varies widely within metropolitan areas, with the Earlier Suburban areas losing jobs and the Later Suburban and Exurban areas gaining jobs.
Source: Newgeography.com
We think this kind of analysis is important to municipal bond investors because the mix of City Sectors directly impacts the demographics and also the infrastructure financing needs of a city or metropolitan area. A larger percentage of Urban Core areas is likely to correlate with needs to rehabilitate aging infrastructure and deal with shifting or shrinking school age populations. In contrast, a city dominated by Later Suburban or Exurban areas is likely to being wresting with infrastructure issues related to accommodating growth.
Cox includes maps of several cities with City Sectors plotted. Philadelphia and Phoenix provide an interesting contrast.
Source: Newgeography.com
City Sectors are not a substitute for detailed credit analysis, however, they can provide a helpful tool for thinking about the economy of a metropolitan area and another good framework for categorizing municipal borrowers by type.
This week the team is hard at work gearing up for post Labor Day activities including exciting new releases, conferences and travel across the US.
Wishing all a happy and safe Labor Day weekend,
Michael Craft, CFA, Managing Director, Credit
Lumesis, Inc.
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