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  1. Changing Face of the Texas Labor Market January 15, 2009 Richard Froeschle richard.froeschle@twc.state.tx.us Texas Workforce Commission/LMCI (512) 491-4941 www.lmci.state.tx.us

  2. Tell Me About the Labor Market… 1. Current labor market conditions- Snapshot of current economic measures. What do the numbers tell us about the labor market relative to historical periods, e.g. Urate, payroll job growth, labor force growth, personal income, sales taxes, GDP growth, college enrollments & graduations, etc. 2. Where is the labor market headed. What do we expect the labor market will look like in the foreseeable future. How will the present situation change, e.g projected industry and occupational job growth and decline, expected demographics 3. What is the environmental context, business climate and likely structural transformations that will shape future job growth and creation. What are the larger trends that will influence business decisions and the demand for workers, e.g. impact of globalization, technology, demographic trends etc.

  3. Economic Truth About Predicting Recessions “ Nobody ever sees anything coming. Nobody saw stagflation coming, nobody saw the Great Depression coming, nobody saw Pearl Harbor or 9/11 coming. Really big, bad things tend to be surprises.” Laurence Ball, economist at Johns Hopkins University

  4. Understanding the Texas Economy: In Search of Convergent Validity

  5. The Japanese eat LESS red meat and drink less red wine than do Americans or the British—and they have a much lower incidence of heart attacks. The Italians eat MORE red meat and drink much more red wine than do Americans or the British--and yet they too have a lower incidence of heart attacks. Gleaning Wisdom from Data… Conclusion: Go ahead and eat whatever you want. It's pretty clear that speaking English is what kills you

  6. What has the economy been doing? Macroeconomic Growth Patterns and Changes in Consumer Behaviors

  7. We’re from Texas: What country are you from? • We have NASA so we control the space industry. • We have all the oil and gas that we will need for the next 300 years & refine over 85% of the gasoline in the U.S. • We have 65% of the Defense Industry; The term "Don't mess with Texas," takes on a whole new meaning. • We got technology: Texas leads the nation in producing computer chips and communications equipment. • We have our own food; Texas is self-sufficient in beef, poultry, hogs, sea food & several types of grain, fruit and vegetables; and every Texan knows how to cook. • We have a ready supply of workers.  We could just open the border when we need some more.

  8. Single Family Housing Permit (units)

  9. Harry Truman is purported to have said, All my economists say, “on the one, or on the other hand”…what I really need is a one-handed economist.

  10. The Rise of Behavioral Economics “Behavioral economics focuses on the ways humans fail to act as rational, self-interested beings that economic models call for—we aren’t good at thinking about the future, we’re susceptible to peer pressure, we overestimate our abilities and underrate the odds of bad things happening.” Robert Shiller, Yale University economist

  11. Difficult for smaller companies to compete Widening income and wealth inequality Job instability, job portability, job volatility, offshore potential of American jobs Big Box retailers give us one-stop shopping convenience (the WalMart premium) Global investment opportunities, diversified portfolio & higher rates of return More productive & profitable ways to do business; offshoring, temps, outsourcing, foreign skilled labor The “Two Minds” of the Global Economy I As Consumers/Investors, we like… As Citizens, we don’t like…

  12. Soaring CEO pay relative to worker wages Lowered sense of “community” in a global world Reduced loyalty: firms to workers, workers to firms, consumers to firms (brand loyalty) More opportunities for entrepreneurs, more millionaires per capita! Better shopping! Access to “stuff” created anywhere in the world Global competition results in lower product prices The “Two Minds” of the Global Economy II As Consumers/Investors, we like… As Citizens, we don’t like…

  13. The Downward Cycle for Consumers 3. Wealth Effect4. Job Losses/Unemployment 1. Real Estate/Home Values 2. Stock Prices/Investment Portfolio 5. Borrowed Money/Credit Consumer Spending

  14. National Average Credit Scores

  15. Credit Scores Affect Consumer Borrowing

  16. Texas Industry and Occupational Growth Patterns: Historical Change and Projected Employment

  17. Unemployment has Many Faces • Frictional – Lack of information makes it difficult for employers and jobseekers to locate each other in a timely & efficient way • Seasonal– Different calendar periods are normally slower or more robust than average • Structural – Mismatch between skills in demand and the skills and abilities of the workforce • Cyclical or demand deficient – Insufficient economic activity causes even appropriately skilled workers to have trouble finding suitable employment

  18. It’s doing well if…. Employed w/ marketable & transferable skills Nursing, Home Health Care Medical/Drs. Assistants Therapists &Therapy Aides IT, DBA, Network Systems Construction & Utilities Wind, Renewable Energy Teaching, all levels Oil & Gas industry Cross/Multi-disciplinary It’s not doing well if… Unemp w/Undefined skills Repetitive, Rules-based Jobs Textile/Apparel Sector Small Farmer/Rancher Telemarketer/Travel Agent Financial Sector Production Assembler Order, Grocery or File Clerk Mail & Postal Clerks Low education, technophobic Geographically immobile How is the Texas Economy Performing? It Depends on Your Personal Perspective!

  19. Texas Industry Job Growth from 2005 to 2008

  20. Texas Industry Job Growth from 2005 to 2008

  21. Fastest Growing Texas Occupations -- Bachelors Plus

  22. Most Openings Texas Occupations -- Bachelors Plus

  23. Fastest Growing Texas Occupations -- Associates/Cert

  24. Most Openings Texas Occupations -- Associates/Cert

  25. National Demand vs. Available Supply Conference Board

  26. Registered Nurse (27,219) Engineers (all) (9,984) Customer Service Reps (8,439) Computer System Analysts (8,167) Retail Sales Supervisors (6,884) Physical Therapists (6,602) Accountants (6,149) Admin Assistants (6,051) Computer Support Specialist (5,580) Heavy Truck Driver (5,538) Retail Salesperson (5,179) Sales Managers (5,112) Sales Reps, Man/Wholesale (4,629) Occupational Therapist (3,970) Applications Programmers (3,968) Web Developers (3,705) Online Job Openings in Texas September 2008372,529 total unique ads placed

  27. Decomposition of Work: Net Job Change Masks Important Market Dynamics 1. Real industry growth viewed in terms of revenues, profits & market share, not necessarily jobs, e.g. Who’s making money vs. Who’s creating jobs? 2. Technological obsolescence & Labor substitution work activities made obsolete through technology, some replace workers 3. Emergence of new & blended occupations -combining job duties from 2 or more occupations into a single, “new” job… you’re a what? e.g. windmill turbine mechanics, cable installers 4. Connecting education and the economy:How to best match educational coursework & majors to employer skill needs, What do I study to become more employable?

  28. Decomposition of Work:Labor Market Skill Needs are Getting Tougher to Measure 5. Outsourcing arrangementse.g. IBM and Marriott change work arrangements on paper affecting labor market data, but not training needs 6. Patterns in use of temporary & contract workers – Increasingly common use of the contingent workforce 7. Global Supply Chain Leakages -- lost jobs & $$$ through global supply chain mgmt. (decoupling of production, labor and stock price) 8. Work Activity Off-loading --passing off lower value-added work to assistants/technicians 9. High resolution globalization -- tradable skills, outsourcing specific work functions, not occupations

  29. Where does the U.S. Fit Into an Increasingly Globalized Economy?

  30. Globalization is Altering Our Perspective 1. Economic theory: what’s wrong with Keynesian economics…global leakage! 2. Employer business practices: the drive for greater productivity and market share in a globally competitive economy 3. Labor supply options: not just U.S. FTEs 4. Decoupling of the labor market, stock market and aggregate production 5. Creating competition for Commodities, Kapital and Natural Resources

  31. “”The world has arrived at a rare strategic inflection point where nearly half its population—living in China, India and Russia—have been integrated into the global market economy, many of them highly educated workers, who can do just about any job in the world. We’re talking about three billion people.Craig Barrett, CEO Intel 01/08/2004

  32. Top 10 Richest World Economies 2006 and growth rate 2000-2006 (mil$)Where are the Growth Markets? • United States $13,163,870 34.8% • Japan $4,368,435 -6.4% • Germany $2,896,876 52.4% • China $2,644,681 120.7% • United Kingdom $2,376,984 64.8% • France $2,248,091 69.3% • Italy $1,850,961 68.7% • Canada $1,271,593 75.4% • Spain $1,224,676 110.9% • Brazil $1,067,472 65.6% • Russian Federation $986,940 280.0% • India $911,813 98.1% 77% 52%

  33. YUM Brands34.5% (50.1%) Ford 30.4% (53.1%) Boeing 34.3% (40.8%) Intel58.8% (84.3%) Coca Cola61.0% (73.8%) Corning (70.7%) Emerson Electric40% (51.6%) Accenture(60.5%) Microsoft(38.7%) IBM57.9% (57.9%) Motorola 52.5% (49.4%) JNJ38.2% (47.1%) John Deere25.1% (34.6%) Colgate69.4% (80.3%) Nike50.3% (62.6%) Campbell Soup (31.0%) Molson Coors (55.4%) 3M Corporation (61.4) Emerging Markets in a Global Economy:Percent of 2000 & 2007 Revenue Outside U.S.

  34. AIH Inc. (Delaware) Alco Controls S.A (Mexico) Artesyn Technologies Inc. (Florida) Astec International Holdings (UK & China) Branson Ultrasonic S.A. (Switzerland) Daniel Industries Inc. (Delaware) EECO, Inc. (Delaware) Emerson Capital Corp (Canada) Emerson Electric Nederland BV (Netherlands) Bristol Inc. (Australia) Subsidiaries of Emerson Electric Company

  35. Where Does U.S. MNC $$$ Go (2006)?

  36. Texas Exports 2007 • Chemicals Manufacturing $34.9 bil 20.8% • Computer/Electronics $33.7 bil 20.0% • Industrial Machinery $24.8 bil 14.7% • Transportation Equipment $16.3 bil 9.7% • Petroleum Products $14.7 bil 8.8% • Electrical Components $6.7 bil 4.0% • Primary Metal Manufacturing $5.8 bil 3.5% • Fabricated Metals $5.4 bil 3.2% • Agricultural Products $4.6 bil 2.7% • Food & Kindred Prod $3.7 bil 2.2% • Plastic & Rubber Prod $3.4 bil 2.0% • Misc. Manufactured Commodities $2.8 bil 1.7% • Oil & Gas Extraction $1.8 bil 1.1% **94.5 percent of Texas Exports**

  37. How Does Globalization and Free TradeAffect U.S. Industry? “…Global markets expand the scope for specialization. We do what we do best and trade for the rest.” Dallas FRB So, what does the U.S. do best? How does specialization affect job growth, business practices and educational preparation?