Washoe County-Where the jobs are-Shift Share

Shift-Share analysis is a tool used to account for the competitiveness of local employment sectors.  It is used to show how well the region’s employment sectors are performing by dividing the change in local employment into three components:  national growth share, industry mix, and region share.

The Shift-Share results summarized below show the breakdown of the employment change in the Washoe County economy between 2007 and 2011.  These results show important differences between the industry compositions of employment growth locally versus growth in the nation.

 As discussed in the previous blog, Washoe County employment declined by approximately 37,000 jobs between 2007 and 2011 due to national growth, industry mix and regional shift.

National Growth-This component is the most straightforward.  It estimates the growth in Washoe County employment that may be attributed to overall national conditions and trends.  If the industry composition and growth of employment had been the same locally as nationally, then Washoe County’s employment growth between 2007 and 2011 would have matched the overall national rate of -5.01% and employment would have declined by 11,200 jobs.

Industry Mix-Jobs are not impacted only by the national factors, they are also impacted by changes within each sector, both on a national and local level.  The industry mix component looks at the impact of the changes in each sector on a national level by answering the question: “Was Washoe County employment decline between 2007 and 2011 of 16.5% greater than the overall national average decline (-5.01%) because employment was more concentrated toward faster declining industries when compared to the nation?” That is, did Washoe County employment decline more than the nation simply because its employment (industry mix) is highly concentrated in sectors which performed poorly on a national level?

In this case, had Washoe County employment declined by the average industry mix percentage of -0.95%, approximately 2,100 jobs would have been lost.

Region Shift-The third Shift-Share component, shown as the “Region Shift”, estimates the gain (or loss) in local employment from an industry growing faster (or slower) than the same industry nationally.  When employment in a local industry grows faster (or declines less) than its counterpart nationally, it is said to do so because of local competitive factors.  The above table shows that Washoe County employment declined an additional 10.5% because a larger proportion of industries declined faster locally than nationally.

This is the most important component of the Shift-Share analysis as it takes out overall national and national sector influences on employment and compares how each sector’s employment performs based on local competitive factors only.  This allows us to determine whether the sector is a leading or a lagging sector, which is important information when making public investment decisions or planning economic development strategy.

The table above shows that the Education and Health Services sector was the only sector to experience region shift growth during this period.  While it grew slower than the national Education and Health Services sector (1.41% vs 12.46% respectively), it outperformed all other employment sectors in the County.

The Government and Other Services sectors were the next least impacted sectors.  Though the both lost employment, their region shift rate was the second and third lowest of other Washoe County sectors.  Overall, as with the previous blog, which looked at direct employment changes, the strongest performing sector during this period, the sector that created the most jobs and had the highest local region shift is the Education and Health Services sector.  For economic development purposes, efforts should be focused on attracting companies from this sector, as growth in this sector is likely to have the highest positive impact on the region, at least in the short run.

Washoe County-Where the jobs are

It is common knowledge that Washoe County, along with the rest of the State, is experiencing high unemployment.  Though the unemployment rate has declined from a high of 15.1% in January 2010, to 13% in June 2011, it is still considerably higher than the low of 3.4% in October of 2006.  Since the peak in the employment counts in 2007, Washoe County lost approximately 37,000 jobs, or 17% of all jobs employed in 2007.

This series of blogs discusses the distribution of these job losses among Washoe County employment sectors and compares it to the national employment changes using a technique known as the Shift-Share model.

As mentioned above, Washoe County lost approximately 17% of its jobs since 2007.  The table above shows the numeric and percent change in Washoe County jobs, by sector.  The Construction sector lost the highest number of jobs, dropping from employing 9% of all County workers in 2007 to 5% in 2011.  Other large employers, including Trade, Transportation and Utilities (22% of total employment in 2007), Leisure and Hospitality (18% of total employment in 2007), and Professional and Business Services (13% of total employment in 2007) all lost large numbers of employees during this period.

 In fact, all but two industries lost jobs during this period.  The only sector to grow its employment between 2007 and 2011 was Education and Health Services, which added 1,825 jobs.  The Natural Resources and Mining industry saw now change in employment.  The Government sector has also been less impacted than other sectors, though additional lay-offs in this sector are expected due to declining revenues for public entities.

Washoe County Economic Indicators-Commercial

Washoe County’s commercial market has also been impacted by the recession, though it took longer for this impact to materialize.  Similar to the residential market, with little new construction, it is the existing properties that indicate the health of this market.

*Previous period refers to the same period in the previous year.  For example, second quarter 2011 data is compared to second quarter 2010 data.

Washoe County’s retail, office and industrial properties show a lower vacancy rate than during the same quarter last year.  This is likely in part due to the decreasing rental rates which reduce rent costs and allow businesses to expand into larger properties.  Vacancy rates remain high, especially in the office segment, which had a vacancy rate of 12.2% in the second quarter of 2006.

Washoe County Economic Indicators-Residential

Washoe County’s residential market, similarly to the national market, has been heavily impacted by the recession.  With Nevada leading the nation in the number of foreclosed and distressed properties, Washoe County saw its share of lost home values and “underwater” properties.

*Previous period refers to the same period in the previous year.  For example, April 2011 data is compared to April 2010 data.

Washoe County is showing little recovery in the residential market.  While the price and size of new homes increased from the previous year, the number of new homes fell significantly and new homes still make up a small portion of the residential market.  For existing homes, median prices continue to decline and the number of foreclosed homes continues to grow.

Washoe County Economic Indicators-Employment

Employment is an important component of a successful economy.  Employed workers receive a salary which they spend on purchases of goods and services, housing, and vacations.  This spending ripples through the economy, creating additional jobs and spending.  High unemployment hurts not only the unemployed workers, but also those who are employed by lowering the amount of spending in the economy.

*Previous period refers to the same period in the previous year.  For example, June 2011 data is compared to June 2010 data.

Washoe County’s employment is showing some signs of recovery.  While it lost approximately 4% of its labor force from the same period last year, likely due to discouraged workers exiting the labor force through early retirement, decision not to work, or moving out of the area; other employment indicators show positive changes.  Washoe County’s number of unemployed workers and unemployment rate decreased during this period, though some of the decrease may include the reduction in the labor force.  Also positive is the average hourly and annual wage increase, both grew by 1% from the previous year.

Washoe County Economic Indicators-Tourism

Washoe County’s economy depends heavily on tourism.  Visitors to the area gamble, eat, drink, shop and visit entertainment venues in the area, spending money that would not otherwise exist in the economy.  In addition to generating revenue for local businesses, tourists create jobs and public sector revenue in terms of room tax, sales tax, and gaming tax revenue.

*Previous period refers to the same period in the previous year.  For example, June 2011 data is compared to June 2010 data.

Given the importance of tourism for the Washoe County economy, the above indicators are not a sign of economic recovery.  All tourism-related indicators showed a decline compared to the same period the previous year.  Washoe County saw fewer visitors and, therefore, occupied rooms, which in turn led to lower occupancy rates and a decline int he average room rate.

Washoe County Economic Indicators-General Indicators

We are living in uncertain times with wild swings in the stock market and rumors of a “double dip” recession.  While there is little we can do about the national economic performance, it is helpful to stay informed about the changes in our local economy.  Below is a list of select economic indicators for Washoe County and the change in these values from the same period in the prior year.

*Previous period refers to the same period in the previous year.  For example, first quarter 2011 personal income data is compared to first quarter 2010 data.

General Washoe County indicators show a decrease in population, which is in part due to the out-migration of unemployed workers from the area in search of employment.  Gaming revenue and assessed values are continuing to decline and the consumer price index showed an increase from the previous year, indicating higher prices for goods and services.  The only positive increases in these indicators are from the growth in total State personal income and taxable sales.  A growth in taxable sales is important to the local economy as many public entities receive sales tax revenue derived from taxable sales.

The above general indicators, with the exception of personal income and taxable sales, show that Washoe County economy has not began a recovery.  However, other indicators, such as employment, residential and commercial construction and tourism, must be considered prior to making a conclusion about the overall health of the Washoe County economy.