OLMIS

by Phoebe Colman
Published Aug-16-2012

Third-Quarter Trends Highlight Difference Between Oregon and the Nation Labor Market Dynamics Vary by Industry Climate Patterns and Job Flows: What's the Connection? Conclusion: A Normal Pattern at an Abnormal Time

In the third quarter of 2011, Oregon's private sector produced a seasonally adjusted net gain of 21,533 jobs. This stands out as the largest quarterly increase in the Business Employment Dynamics (BED) data series since the second quarter of 1994. It is also the largest seasonally adjusted net gain for Oregon in any third quarter, representing 1.6 percent of private-sector employment. By comparison, net job growth for the nation as a whole held steady at 0.6 percent in the third quarter. This is a respectable rate of growth, on par with the expansion seen in 2005, but it does not depart from trend as extravagantly as the figure for Oregon.

How can we explain this record-breaking third quarter? Did Oregon really experience runaway economic growth between June and September 2011, far outpacing that of the nation? Or is there something unique about Oregon's labor market that was highlighted to an unusual degree during this reference period?

BED job flow data provide information that can help explain variations in net job change. Oregon's impressive third quarter growth was fueled by a large increase in gross job gains combined with a significant decrease in gross job losses. At the national level, however, gross job gains and gross job losses both remained relatively flat.

In each of the last five years, Oregon's third quarter net job change outpaced that of the U.S. overall (Graph 1). Gross job gains as a percent of employment tended to be elevated in Oregon during the third quarter, while the rate of gross job losses usually shrank from June to September. By contrast, the rate of gross job gains at the national level during these years was flat or decreasing from June to September, with gross job losses generally tending toward a slight increase. The pattern is most pronounced in 2008, 2010, and 2011. These observations suggest that in recent years, the dynamics of Oregon's labor market during the third quarter are somehow different from those of the nation as a whole.

To make sense of dynamics data, it helps to make a clear distinction between job levels and job flows. In the BED series, net change is a measure of how job levels rise or fall from one quarter to the next. This is like comparing a checking account balance at the end of a quarter to the balance at the beginning. On the other hand, gross job gains and losses measure the flow of jobs in individual establishments over the reference period. In the checking account analogy, this would be like counting up all the deposits (gains) or withdrawals (losses) over the course of the quarter. Two bank accounts might have the same balance at the end of a quarter, but the amount of money flowing in and out of those accounts could be quite different.

Just as checking account owners have different spending patterns, businesses have different patterns of hiring and releasing workers. The amount of "job churn" in an economy can be quantified by adding up gross job gains and gross job losses. This sum is called "gross job reallocation", and it varies according to numerous factors including industry and locality.

One way to illustrate the difference in job flow dynamics between Oregon and the U.S. is to compare job reallocation rates in the various industry sectors at the state and national levels (Graph 2). In most industries, the average seasonally adjusted rate of quarterly job churn in Oregon is within 2 percentage points of the national rate. The outstanding exception is natural resources and mining. The average quarterly job reallocation rate in this sector is 15.9 percentage points higher for Oregon than for the nation as a whole. This means that Oregon's natural resources and mining industry is more seasonally dynamic than that of the U.S. overall. In Oregon, a disproportionately large share of natural resources and mining jobs are being created or destroyed from one quarter to the next.

This large volume of job churn in natural resources and mining has the potential to affect Oregon BED data. Currently, jobs in this sector account for about 4 percent of private employment in Oregon compared with about 2 percent throughout the U.S. However, gross job reallocation in this sector represents an average of about 12 percent of seasonally adjusted quarterly job churn in Oregon, but only about 4 percent at the national level. Job flows in this industry carry more weight in Oregon. An atypical seasonal employment pattern in this sector could significantly alter statewide trends.

Before examining the employment pattern in Oregon's natural resources and mining sector in the third quarter of 2011, it is helpful to know how jobs are distributed within the various industries that make up this sector. In Oregon, agriculture and related industries currently account for 96.6 percent of sector employment, while the remaining 3.4 percent can be found in mining, quarrying, and oil and gas extraction (Table 1). Crop production and its support activities account for nearly 70 percent of covered private employment in Oregon's natural resources and mining sector, while forestry and related support activities represent an additional 19.8 percent. It is worth noting that not all agricultural employers are covered by Employment Department law, so the figures given here are not an exhaustive description of the role of agriculture in the labor market.

At the national level, mining industries are much more prominent, currently representing more than one-third of private employment in the natural resources and mining sector. On the other hand, crop production and related support activities account for just 45.4 percent of sector employment nationwide, while the share held by forestry and its support activities is slightly less than 4 percent.

The dominance of crop production in Oregon's natural resources and mining sector has a definite effect on employment data. More than any other subsector, crop production exhibits a strongly seasonal hiring pattern that is primarily influenced by weather and climate conditions rather than by the calendar itself. For all the advances of modern technology, farmers still look to the earth and the sky to tell them when to plant and harvest. Weather patterns also help dictate how much labor will be required for pest control or disease prevention tasks, and other fieldwork throughout the growing season. The number of workers needed and the timing and duration of their employment are strongly tied to local conditions.

Graph 3 shows the monthly private employment in Oregon's natural resources and mining sector from 2001 to 2011. During these years, employment peaked in the third quarter at around 65,000 to 72,000 jobs, while falling to about 33,000 to 38,000 jobs in January. Employment levels in June are typically higher than those in September, sometimes by as little as 2,000 jobs but often by a wider margin. Departures from this pattern occurred in 2008 and 2010, when the third quarter brought a small net job gain rather than the usual loss. The third quarter of 2011 was a major anomaly, registering a net gain of 10,287 jobs. The issue in these years is one of timing. The basic shape of the seasonal hiring pattern did not change, but peak hiring happened later in the third quarter.

What happened in 2008, 2010, and particularly in 2011 that could account for this shift? All three of these years were characterized by unusually cold springs (Graph 4), and 2010 and 2011 were also wetter than normal. The slow start to the growing season resulted in late harvests for many crops in these years. The 2011 growing season was one of the latest and coolest ever in Oregon, significantly impacting labor-intensive crops such as cherries, pears, grapes, and apples.

These facts help explain the gross job flow patterns observed in Graph 1, which were also most pronounced in 2008, 2010, and 2011. In the BED program, gross job flows are calculated by comparing employment levels in the third month of the current quarter to levels in the third month of the previous quarter. The quarterly gross job gain is the sum of jobs gained at establishments that opened or expanded over the reference period, while the quarterly gross job loss is the sum of losses at closing and contracting establishments. In 2008, 2010, and 2011, a smaller-than-usual number of hires had taken place by June and a larger-than-usual number of those seasonal hires were still working in September. BED data are seasonally adjusted to smooth out regular seasonal fluctuations, but the atypical weather patterns of 2008, 2010, and 2011 resulted in hiring that was far enough outside the norm to be clearly visible in seasonally adjusted data.

Oregon's seasonally adjusted net job gain in the third quarter of 2011 was one of the largest in the BED series. Some industry sectors did indeed experience growth between June and September 2011, but not to the record-breaking degree that the data suggest. A portion of this apparent growth is likely the result of a shift in normal seasonal hiring patterns within the natural resources and mining sector brought on by an unusually cold spring and late growing season. If this is the case, we may expect to see fewer gross job gains and more gross job losses in the fourth quarter as agricultural hiring winds down for the year. While it may be disappointing to learn that third-quarter job growth was less vigorous than it first appeared, there is value in the discovery that climate patterns can affect job flow data, and that these data may be used to explore connections between Oregon's labor market and its physical environment.

Data on the quarterly gross job gains and losses come from the Business Employment Dynamics program at the U.S. Bureau of Labor Statistics. A more detailed Business Employment Dynamics Report is available at www.QualityInfo.org on the Publications page in the News box.