preliminary overview of current economic conditions
TRANSCRIPT
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Preliminary Overview
of Current Economic
Conditions
Task Force on the Economic Future of
Western Maryland
September 23, 2020
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Agenda
• Demographics
• Economic conditions
• Recap of key considerations
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Western Maryland’s Population has Experienced a Slight Decline Recently
248,500
249,000
249,500
250,000
250,500
251,000
251,500
252,000
252,500
253,000
253,500
254,000
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Pop
ula
tio
n in
Wes
tern
Mar
ylan
d
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…But the Change in Population is not the Same Everywhere
AreaChange in
Population2010 - 2019
Percent Change in Population
2010 - 2019
Allegany County -4,549 -6.1%
Garrett County -1,127 -3.7%
Washington County 3,328 2.3%
Western Maryland -2,348 -0.9%
Maryland 257,035 4.4%
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Regional Population Growth is Slower For All Age Groups, and Weakest for Those Aged 35-44
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
Under 25 25 - 34 35 - 44 45 - 54 55 - 64 Over 65
Perc
en
t C
han
ge in
Po
pu
lati
on
, 20
10
-2
01
8
Western Maryland Maryland
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Declining Population Can Be a Vicious Cycle
Negative employment
shock
Residents leave to find jobs
Businesses have difficulty finding
workers
Demand drops in local
businesses
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Employment in the Region Has Risen, Though Slower than the State Average
7.3%
0.7%
4.2%3.6%
12.1%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
Garrett Allegany Washington Western Maryland Maryland
Perc
ent
Ch
ange
in P
riva
te E
mp
loym
ent,
20
10
-2
01
9
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Why Does This Matter?
• These cycles can be difficult to break, and it is a struggle playing out across the country, especially in more rural areas.
• Good news is employment is still rising.
• There is a resistance to moving away from your community, which can help slow/reverse the trend – Family ties
– Familiarity
– Moving is expensive
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How Can Shocks be Mitigated?
• Stopping initial employment shocks is difficult.
– Often due to structural reasons, like outsourcing.
– Some businesses can be retained, but at what cost?
• To reduce outmigration, new employment opportunities are needed.
– Business recruitment from outside the region
– Developing entrepreneurship in the region/growing existing businesses
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How Can Shocks be Mitigated?
• To counter decreased demand due to residents leaving, find ways to bring in new demand from outside the region.
– Tourism
– New residents
• If businesses have trouble finding enough workers, focus on education and training opportunities.
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How Can Shocks be Mitigated?
• Correcting downward trends in population and economic dynamism take time
– Plan with a long time horizon
• No single approach will work. If possible, work on multiple strategies.
– Multiple strategies reinforce each other
• Ex: Entrepreneurs more likely to take a risk if other employment opportunities exist in the region.
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Residents of Western Maryland are Less Likely to Have an Advanced Degree
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
2010 2011 2012 2013 2014 2015 2016 2017 2018
Perc
en
t o
f R
esid
ents
wit
h a
Bac
hel
or'
s D
egre
e o
r H
igh
er
Allegany County, Maryland Garrett County, Maryland Washington County, Maryland Maryland
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Why Does This Matter?
• When thinking about key industries to target, a critical component will be providing a workforce with the desired qualifications.
• For example, expanding a focus on healthcare may require additional collaboration with Frostburg State.
• Or, recommendations can focus on industries which suit the existing workforce and can be supported quicker.
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The Number of Businesses is Declining in Western Maryland
-7.1%
-2.3%-2.0%
-3.5%
3.7%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
Allegany Garrett Washington Western Maryland Maryland
Perc
ent
Ch
ange
in T
ota
l Nu
mb
er o
f B
usi
nes
es,
20
10
-2
01
8
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…This is True for Small Firms as Well
-8.1%
-9.0%
-7.3%-7.9%
2.2%
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
Allegany Garrett Washington Western Maryland Maryland
Perc
en
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han
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Nu
mb
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f B
usi
nes
ses
Emp
loyi
ng
Few
er T
han
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mp
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es,
20
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-2
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8
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Why Does This Matter?
• As mentioned earlier, employment in the region has risen, meaning employment is becoming more concentrated.
• Nationwide, large businesses are more responsible for net job gains than smaller businesses.
– 0.3% of the country’s biggest firms supported 36% of net new jobs.
• However, attracting and retaining larger businesses (>500 employees) is difficult
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Why Does This Matter?
• Large businesses have different needs than small businesses and some, like a deep employment pool, can be hard to provide in smaller cities/counties.
• Large businesses also pose more risk. One business closure is more economically devastating if the company is large than if it is small.
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Why Does This Matter?
• Promoting startups are a way around the reliance on larger firms and associated risk.
– Use homegrown talent
– Greater ties to the community
– Can grow quickly and more cost effectively
• Startups are more volatile, but can be a more cost effective way to develop a local economy
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Why Does This Matter?
• As this body develops recommendations, deciding the types of businesses to support (large, small, startups) will impact any eventual policy options, as they have different needs.
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60% of the Region’s Employment is in Washington County
Garrett, 10,372
Allegany, 22,948
Washington, 56,493
Garrett Allegany Washington
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Employment Patterns Vary By County As Well, Such as in Healthcare and Social Assistance
27.4%
18.5%16.4%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
Allegany Washington Garrett
Perc
ent
of
Co
un
ty's
Em
plo
ymen
t in
H
ealt
hca
re a
nd
So
cial
Ass
ista
nce
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…Or Other Key Industries Like Transportation and Warehousing
8.2%
3.7%
2.9%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
Washington Garrett Allegany
Perc
ent
of
Co
un
ty's
Em
plo
ymen
t in
Tr
ansp
ort
atio
n a
nd
War
eho
usi
ng
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Why Does This Matter?
• Western Maryland is not homogenous and no one strategy will work equally well in each county.
• But employment and population are also not distributed equally across the region.
• Basing recommendations on region-level data alone may miss strategies that work best in Garrett and Allegany Counties.
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Wages in Western Maryland are Below the State Average
$37,684$35,074
$43,762$41,205
$60,499
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
Allegany County Garrett County WashingtonCounty
Western Maryland Maryland
Ave
rage
Wag
e
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Why Does This Matter?
• Lower average wages are due to several reasons:
– Lower cost of living means salaries do not need to be as high to attract labor as in other counties
– The region’s industry mix is slightly weighted towards lower-paying industries
• Lower cost of living provides an opportunity to attract both businesses and residents
– Businesses can still access customer bases with lower rents
– Remote work?
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In April, Western Maryland had Unemployment Rates Above the State Average…
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…By July, Unemployment Rates had Generally Dipped Below the State Average
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Why Does This Matter?
• Western Maryland has been able to recover at a faster rate than the state as a whole largely due to lower incidences of COVID-19.
• In Garrett and Allegany Counties, the labor force has remained flat since April, signaling that there is still a long way to go in recovering.
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What are Some Potential Strategies for Future Economic Development in Western Maryland?
• Focus on industries where Western Maryland already has a competitive advantage
• Attract businesses in key industries to develop new strengths
• Develop homegrown talent and support local entrepreneurs
• Increasing population through focus on remote work
• Grow local demand for services by increasing tourism
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What Industries Does Western Maryland Have a Competitive Advantage in?
• We can measure this through the use of a location quotient.
• Location quotients tell us how concentrated employment is in a given industry relative to the country (or state) as a whole.
• Areas with location quotients above 1.5 generally are those where the region has some advantage
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Measuring Industries
• Industries are traditionally categorized by NAICS code.
• But similar industries have different NAICS codes.
• Industry clusters, as defined by Harvard Business School and US Department of Commerce, help simplify some of the analysis by combining similar industries.
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Top Ten Clusters in Western Maryland by Location Quotient
Cluster NameAverage Annual
Employment
US Based Location Quotient
Average Wage
Recreational and Small Electric Goods 819 6.42 $40,386
Coal Mining 247 6.31 $78,811Furniture 1,131 4.22 $38,797Production Technology and Heavy Machinery
1,926 2.78 $77,226
Local Logistical Services 4,651 2.48 $44,397
Paper and Packaging 524 2.02 $92,692Financial Services 2,724 1.93 $64,520Printing Services 583 1.88 $54,107Apparel 160 1.72 $31,787Textile Manufacturing 229 1.63 $46,773
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Top Ten Subclusters by Location Quotient in Western Maryland With Over 150 Employees
Subcluster NameAverage Annual
EmploymentLocation Quotient
Average Wage
Recreational and Decorative Goods 819 12.26 $40,386
Agricultural and Construction Machinery and Components
1,826 9.04 $79,325
Wood Cabinets and Woodwork 899 7.83 $36,449
Coal Mining 247 6.31 $78,811 Soft Drinks and Ice 419 5.79 $47,068 Support Services 565 5.59 $29,546 Paper Mills 371 5.47 $107,284
Dyes, Pigments and Coating 198 5.17 $63,765
Gardening Products and Supplies Retailing
668 4.32 $34,796
Credit Intermediation 2,541 4.03 $59,475
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Location Quotients for Industries Highlighted in Task Force Statute
Cluster NameAverage Annual
EmploymentLocation Quotient
Average Wage
Production Technology and Heavy Machinery 1,926 2.78 $77,226
Local Logistical Services 4,651 2.48 $44,397
Electric Power Generation and Transmission 158 1.29 $100,774
Hospitality and Tourism 2,212 0.94 $21,733
Distribution and Electronic Commerce 3,476 0.81 $42,965
Transportation and Logistics 861 0.67 $46,467
Aerospace Vehicles and Defense 260 0.55 $113,655
Business Services 3,218 0.49 $57,309
Information Technology and Analytical Instruments 157 0.16 $47,799
Biopharmaceuticals 4 0.02 $3,747
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Why Does This Matter?
• Every industry is unique, and will have different barriers and challenges. In designing policies to strengthen these industries, talking with key stakeholders is critical.
• Key areas of focus could include:
– Availability of skilled workers
– Access to customers
– Local supply chain
– Regulatory and tax issues
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Why Does This Matter?
• Many of the industries specified in the statute for this task force have low location quotients.
• Building these industries up will require a lot of time and resources.
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Remote Work is Gaining in Popularity
• In 2017-2018:– 29% of workers could work from home
– 8% worked from home at least 1 day a week
• Currently, some estimates are up to half of the workforce is working remotely
• Recent literature estimates that approximately 34% of private-sector jobs in Maryland can be done from home.
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The Percent of the Workforce Eligible to Work Remotely Varies by Region
25.4% 34.8%
35.1%
24.5%
29.8%
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Top 5 Industries in Western Maryland for Remote Work
9.1%8.5%
7.2%
6.3%
5.1%
CreditIntermediation andRelated Activities
Professional,Scientific and
Technical Services
Ambulatory HealthCare
Administrative andSupport Services
MerchantWholesalers
Perc
ent
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on
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forc
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Top 5 Industries in Suburban Washington for Remote Work
31.9%
6.3% 5.9% 5.2%3.7%
Professional,Scientific and
Technical Services
Administrative andSupport Services
Educational Services Ambulatory HealthCare
Religious,Grantmaking, Civic,Professional, and
SimilarOrganizations
Perc
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Providing Access to Broadband is Critical to Empowering Western Maryland
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Why Does This Matter?
• Rise in remote work is unlikely to mean everyone works remote full-time.
– Instead, likely that many workers are in the office part time.
• This poses an opportunity for Western Maryland relative to Washington DC and the suburbs.
– MARC stations make occasional commuting more tolerable
– Lower cost of living than suburbs of Washington DC
• Providing services for these workers is critical
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Recap of Key Questions for Developing Recommendations
• How do we create new employment to guard against shocks?
– Support established industries and businesses?
– Try to attract companies to locate in Western Maryland?
– Build new companies by supporting entrepreneurs?
• Do we want to focus on the region’s existing strengths or try and develop new strengths?
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Recap of Key Questions for Developing Recommendations
• How does the existing workforce impact the types of industries we want to focus on?
– Will new training/education be needed?
– How difficult will it be to retrain (degrees vs certifications)?
– How long will these programs take?
• How should strategies be designed/measured?
– Based on regional data or county-level data?
– What timeline should be used to gauge effectiveness?
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Recap of Key Questions for Developing Recommendations
• What size of company are we interested in supporting/attracting?
• What business needs will have the most impact if targeted in our recommendations?
– Workforce?
– Supply chains?
– Customer base?
– Regulatory/tax environment?