The Montana Economy and Unemployment Insurance Benefits

Barbara Wagner,Senior Economistbwagner@mt.gov

406-444-5474

House Business and Labor Committee, 2011 Session

January 17, 2011

Today’s Topics

1. Montana’s economy in recession– How unemployed people differ from

unemployment claims

2. Montana’s economy in recovery

3. Future challenge: efficient job matching

Personal Income Growth by Quarter, U.S. and MT

2007.1

2007.2

2007.3

2007.4

2008.1

2008.2

2008.3

2008.4

2009.1

2009.2

2009.3

2009.4

2010.1

2010.2

2010.3

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

US Montana

U.S. and MT Unemployment Rates Since 2000

Source: Bureau of Labor Statistics, Current Population Survey and Local Area Unemployment Statistics.

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100.0

2.0

4.0

6.0

8.0

10.0

12.0

0

1

Recession MT

US

More Unemployed People than Unemployment Insurance Claims

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

0

1

Unemployed Total Claims

Recession

New Claims vs. Change in the Unemployment Estimate

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

-1,000

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

0

1

Recession

Change in Unemployed

New Claims

12-month moving average

Unemployed People is Different than Unemployment Insurance Claims

• Only about 1/3 of unemployed persons receive unemployment insurance benefits– Self-employed– Many do not qualify for benefits

• Reductions in the number of unemployed Montanans may not reduce the number of claims– Churning in the labor force– Some workers have frequent unemployment claims

even during periods of low unemployment

Indexed U.S. and MT Payroll EmploymentEmployment in Dec. 2007= 100%

Source: Current Employment Statistics, Seasonally Adjusted.

Jan-07

Mar-0

7

May-07

Jul-07

Sep-07

Nov-07

Jan-08

Mar-0

8

May-08

Jul-08

Sep-08

Nov-08

Jan-09

Mar-0

9

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-1

0

May-10

Jul-10

Sep-1090.0%

92.0%

94.0%

96.0%

98.0%

100.0%

102.0%

MT US

Employment in Selected Industries During Recession, Dec. 2007 Employment =100%

60.0%

65.0%

70.0%

75.0%

80.0%

85.0%

90.0%

95.0%

100.0%

105.0%

110.0%

De

c-07

Jan-

08

Feb-

08

Mar

-08

Ap

r-08

May

-08

Jun-

08

Jul-0

8

Au

g-08

Sep-

08

Oct

-08

No

v-08

De

c-08

Jan-

09

Feb-

09

Mar

-09

Ap

r-09

May

-09

Jun-

09

Jul-0

9

Au

g-09

Sep-

09

Oct

-09

No

v-09

De

c-09

Jan-

10

Feb-

10

Mar

-10

Ap

r-10

May

-10

Jun-

10

Jul-1

0

Au

g-10

Sep-

10

Oct

-10

No

v-10

Construction

ManufacturingMining and Logging

Education and Health Services Government

Trade and Transportation

Other Business Support Industries

Other Consumer Industries

Take Away Points- Montana’s Economy in Recession

• Huge job losses in Construction, Retail, and Manufacturing

• Most industries had job growth in 2010– Government and Construction did not

• Northeast Montana was the worst hit during the recession

Recovery Expectations:Employment Loss and Duration, U.S. vs. MT

during the Last Three Recessions

US MT

Official Duration of Recession in

Months

Percent Loss of Employment,

Peak to Trough

Months until Employment Recovered

Percent Loss of Employment,

Peak to Trough

Months until Employment Recovered

1990 8 1.5% 32 1.0% 4

2001 8 2.0% 48 0.5% 10

2007 18 6.1% 35 and counting

5.8% 31 and counting

Recovery Expectations: Increased Labor Productivity Means Fewer Jobs

Source: Bureau of Labor Statistics, Quarterly Labor Productivity for the U.S.

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 32005 2006 2007 2008 2009 2010

85

90

95

100

105

110

115

Output Per Hour Output

Hours Worked

Recovery Expectations: Private Job Growth Has Been Slow due to Low

Consumer Spending and Uncertainty• Businesses have cash to hire more employees– Moody’s estimates $1-2 trillion in cash reserves

• Conflicting economic and political news creates uncertainty

• Recession may have long-term impacts on consumer spending– Consumer expenditures represent about 70% of GDP

Relationship between Employment, Wages, and Individual Income Tax Withholding

Indexed to Dec. 2007 = 100%

Dec-02

Mar-0

3

Jun-03

Sep-03

Dec-03

Mar-0

4

Jun-04

Sep-04

Dec-04

Mar-0

5

Jun-05

Sep-05

Dec-05

Mar-0

6

Jun-06

Sep-06

Dec-06

Mar-0

7

Jun-07

Sep-07

Dec-07

Mar-0

8

Jun-08

Sep-08

Dec-08

Mar-0

9

Jun-09

Sep-09

Dec-09

Mar-1

0

Jun-10

Sep-1060%

65%

70%

75%

80%

85%

90%

95%

100%

105%

110%

Payroll Withholding

Employment

Wages

Source: Quarterly Census of Employment and Wages, 6-month moving average. Payroll withholding receipts from the Montana Department of Revenue.

Private Sector Employment Growth in 2nd Half of 2010

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec97%

98%

99%

100%

101%

102%

103%

Private Sector Total

Take Away Points- Recovery Expectations

• Recovery has occurred in – Personal income – Wages– Slow private job growth

• Government job losses has increased unemployment rates throughout 2010

• Post-recession economy will be higher-skill jobs– Health Care, High-tech Manufacturing, Professional Services are

growing– Construction and Wood Products Manufacturing are not expected to

return to pre-recession levels for some time.

Today’s Topics

1. Montana’s economy in recession– How unemployed people differ from

unemployment claims

2. Montana’s economy in recovery

3. Future challenge: efficient job matching

Future Challenge: Structural Unemployment

Source: Bureau of Labor Statistics, JOLTS job openings and CES nonfarm payroll employment.

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

124,000

126,000

128,000

130,000

132,000

134,000

136,000

138,000

140,000U.S. Employment and Job Openings

Job Openings

Employment

Occupations with the Largest Losses Statewide

Occupation Estimated Recession

Losses

Projected Statewide Job

Growth, 2011

Years to Rehire

Carpenters -2,010 108 18.6

Retail Salespersons -1,400 250 5.6

Construction Laborers -1,070 75 14.4

Cashiers -850 126 6.8Bookkeeping, Accounting, and Auditing Clerks -700 182 3.8Truck Drivers, Heavy and Tractor-Trailer -620 113 5.5

Electricians -515 37 14.0Operating Engineers and Other Construction Equipment Operators -450 37 12.2Plumbers, Pipefitters, and Steamfitters -445 22 20

General and Operations Managers -435 31 14.3

Ten Growing Occupations with Unmet Demand for Workers

Occupation

Projected Annual Growth

Registered Nurses 98

Accountants and Auditors 72

Landscaping and Groundskeeping Workers 72

Sales Representatives, Wholesale and Manufacturing 70

Office Clerks, General 66

Cooks, Restaurant 63

Maintenance and Repair Workers, General 61

Nursing Aides, Orderlies, and Attendants 53

Personal and Home Care Aides 52

Lawyers 47

Efficient Job MatchingDuration of Employment for Newly Hired Workers in Montana

Quarter 2006 2007 2008 2009

1 30.3% 31.8% 31.1% 31.0%

2 22.6 22.8 23.1 34.4

3 10.5 10.5 10.7 18.6

4 6.7 6.6 6.8 9.6

5 4.7 4.5 5.0 6.3

High turnover for newly hired workers wastes resources of businesses and workers, plus increases state costs through increased unemployment claims.

Research to explore the causes of and solutions to low retention rates is underway.

QUESTIONS?

PRESENTATION, MONTHLY UPDATES, DATA, AND OTHER ECONOMIC RESEARCH AT

http://www.ourfactsyourfuture.org/