Most states saw dominant employment industry shift from manufacturing to health care just in recent years

Want to see a dramatic shift in jobs? Check out this new post from the U.S. Bureau of Labor Statistics. This is a data visualization map of the United States. This shows the dominant “industry” for each state for each year since 1990. http://www.bls.gov/opub/ted/2014/ted_20140728.htm What you’ll see is that in 1990, the manufacturing industry employed the largest number of workers in most states. Then the economy evolved so that the retail industry had the largest number of workers in most states. Then the economy evolved some more so that the health care and social services industry was the sector with the largest number of workers – for almost every state by 2014. Wow. The Wall Street Journal is pointing this out to its readers at http://blogs.wsj.com/numbers/how-americas-top-industries-have-changed-1990-2013-1619/ BLS says: “Employment in manufacturing declined steadily over the 1990–2013 period. By the mid-1990s, retail trade had become the leading employer in a number of states, and health care and social assistance was emerging as the largest employer in a few. Health care and social assistance became the largest industry in New York State in 1992, and in North Dakota in 1995. “The largest increase in healthcare and social assistance employment in the states occurred in 2009, as retail trade, manufacturing, and other industries showed declines with the onset of the most recent recession. Manufacturing remained the top employer in Michigan until 2009, when it was replaced by health care and social assistance; in 2013, however, manufacturing returned as the largest employer in Michigan. “The accommodation and food services industry was the leading employer in Nevada and Hawaii throughout the 1990–2013 period, and professional, scientific, and technical services remained the top industry in the District of Columbia. “These data are from the Quarterly Census of Employment and Wages program. For industry employment and wage data at the national, state, county, and metropolitan area levels, access the data search tool. The analysis for this edition of The Editor’s Desk was conducted by Frances Osei-Bonsu, a Denison University student who recently served an internship at the BLS Mid-Atlantic Regional Office in Philadelphia.”

Labor Market Polarization, more dramatic than previously thought for America

A series of new data is pointing out that the United States is still stuck in its trend of creating only TWO kinds of jobs: A) High Skill - High Wage jobs (think management, highly technical or high-experience business professional services kinds of jobs). B) Low Skill - Low Wages jobs (think food services, personal care, specialized household services and other kinds of basic jobs that have to be done in and around the customer so those tasks cannot be outsourced overseas). What is being lost are the "routine" jobs, according to a new report by the Federal Reserve Bank of Dallas. The Dallas Fed researchers have named their new report "Middle-Skill Jobs Lost in U.S. Labor Market Polarization." By "routine" jobs they mean many manufacturing production jobs, many crafts jobs, many repair jobs, many clerical jobs, most administrative jobs, and most sales jobs. The core driver for the elimination of these "routine" jobs is not labor unions or a shift to a more educated workforce. The Dallas Fed economists say the shift is really driven by more automation. And as the cost of computing power continues to come down, more jobs are becoming automated - from manufacturing production workers to cashiers to bookkeepers to cooks to engravers to title examiners to sales reps. Another key wrinkle is that the economic shift continues to impact American men and women differently. "While women were hit much harder than men by the disappearance of middle-skill jobs, the majority of women managed to upgrade their skills and find better-paying jobs," said Dallas Fed Economist Anton Cheremukhin in the report. "By comparison, more than half of men who lost middle-skill jobs had to settle for lower-paying occupations. Women's higher rates of education attainment are a potential reason for this difference." Now here’s the rub. America has always shed routine jobs in every recession and then gained back those jobs in the subsequent economic expansion periods following the recession – until the last three recessions. “This pattern changed dramatically in the three recessions since 1990,” Cheremukhin wrote. “None of the routine jobs list in these downturns came back in the following expansions. This fact fully accounts for the overall loss in routine jobs since 1990 and also explains the so-called jobless recoveries from the 1991, 2001 and 2008 recessions.” “Middle-skill, routine jobs still account for almost half of all existing jobs,” Cheremukhin wrote. “Unfortunately, as computing power spreads, and with more non-routine tasks becoming routine (driverless cars, drones, online education, robotic surgery), the pace of labor market polarization is unlikely to slow down anytime soon.” Another issue is a new series of data visualizations provided by the U.S. Bureau of Labor Statistics that shows the United States shifting from a predominantly manufacturing economy to a retail economy to now a health care services economy. We'll discuss those data charts in another post but they can be seen at http://www.bls.gov/opub/ted/2014/ted_20140728.htm and http://blogs.wsj.com/numbers/how-americas-top-industries-have-changed-1990-2013-1619/

Hiring Difficulties for Manufacturers

In just the last couple years, manufacturing employers in Minnesota have seen the labor market suddenly tighten for workers so much that they are shifting from "buying" talent to "making" talent. This is the key conclusion of a new report by the Minnesota Department of Employment & Economic Development. My counterpart there in Minnesota, Alessia Leibert, has put together a series of fascinating and insightful reports about the labor market and the behavior of employers. These reports are often based on anecdotal comments by business leaders and their survey responses to labor market conditions. That's not the hardest of data but it is eye opening. Leibert points out that two-thirds of manufacturing job vacancies in Minnesota are classified as "hard to fill." Minnesota manufacturers seem to be getting proactive and creative in their search for workers, particularly by increasing their internal training efforts. "Hiring difficulties are not synonymous with skills gaps. When employers were asked to identify the causes of their hiring difficulties, only 14% of cases were attributed exclusively to the lack of skilled applicants for current vacancies,” Leibert wrote in her report titled: “Hiring Difficulties in the Manufacturing Sector.” Based on the survey responses that Leibert and her co-workers in the labor market information department at the Minnesota labor department, the majority of hiring difficulties were caused by a mix of skills mismatches in the available workforce, general hiring difficulties, an job candidates’ “lack of work ethic or interest in a manufacturing career.” The toughest jobs to fill are 1) Machinists/CNC Machinists 2) Machine Tool Operators 3) Welders 4) Production Supervisors. Specific comments by hiring managers (unnamed) also spice up this report. “The job is not that specialized. It’s more about the work ethic, the willingness to work from 10 to 14 hours a day, the willingness to live in a small town and the low pay,” said one hiring manager. And those are critical points: Many of the employers are struggling the most to fill jobs are in more rural areas while the more trained, experienced or available workers are residing in the urban areas. Similarly, those rural manufacturers are often paying less than similar jobs in the big cities, so convincing an out-of-work manufacturing worker to move from the Twin Cities to rural Minnesota to take a job that pays less than he was expecting (in a community with a lower cost of living) is not an easy sell. “Failing to account for these factors may lead employers and policymakers to misdiagnose the problem of hiring difficulties as a lack of qualifications along – skills gap – and to prescribe policy responses that address the symptoms rather than the real causes of hiring difficulties,” Leibert wrote. The job applicants who do apply for manufacturing job openings seem to have either inadequate hands-on training or inadequate experience. These gaps may be best filled through employer-provided training, she wrote. “We are looking for a mixed skill set: good mechanical aptitude, physical energy, and the ability to set up and operate a multi-axis lathe,” one hiring manage said. “You can’t come out of school and be able to run these machines. It’s a skill usually built through mentorship programs in companies that stay current with technology. Some people can pick it up after 3 to 5 years, others after a decade.” This leads to the great questions: How do we encourage employers to be patient with worker learning? How do we encourage employers to think long term in a business climate that is short-term focused? Also, education requirements are a self-induced constraint. “Expecting high-school educated external candidates to bring a mid-level skill set clearly presents a challenge for employers, especially after the disappearance of machine shop classes from K-12,” Leibert wrote. She cites a few examples of unnamed employers who are acknowledging the education issues in unique ways. One employer has created an “internship” program where a student worker can spend the summer working at the firm, which in turn pays half the tuition of that student at a local community college. With community college tuitions relatively inexpensive, the employer makes job offers to the best summer workers who graduate and negotiate pay and further training from there. Another company acknowledges that new production line managers cannot be expected to have superior people skills or management skills just because they were great line workers and is trying to get management training for these new managers to become skilled coaches. And another employer openly states that it is one of several manufacturers that has lowered its hiring requirements, particularly work experience requirements, while also increasing training and even incorporating an apprentice program with the local community college and university. As Leibert points out: “As the labor market tightens and competition among firms for qualified workers increases, employers are clearly more willing to hire inexperienced candidates and address their skills gap through training, indicating a shift from ‘buying’ to a ‘making’ approach to skill.”

Referrals from a friend really, really matter according to new research by NY Fed economists

The idea that companies only hire the friends of existing workers is a fascinating complaint. Employee referrals do not seem to account for most hiring in America but job applicants referred by an existing worker do have some real advantages - and even some unique disadvantages - according to a new study by economists at the Federal Reserve Bank of New York. New York Fed economists Meta Brown, Elizabeth Setren and Giorgio Topa did an in-depth study into the hiring practices of a very large financial services firm in New York City that also had offices around the world and employs thousands of people. With assistance from the firm's human resources department, they tracked the job application, interviewing, hiring, promotion and pay of job applicants who were referred by an existing employee as well as applicants who were not referred by a friend on the inside. While most workers hired were not referred by an employee, the results were amazing. To start, this firm took 62,127 job applications and hired 340 people (that's just 0.5% of the applicants landed a job at this main location of the company). From those thousands of applicants, just 29% were referred by somebody already working at the firm. Also, on average, 185.2 individual people applied for each position and an average of 6.7 people were brought in for each open job position. People who were not referred and applied to the company via a job board made up 60% of all the applicants but only resulted in 40% of the interviewees and 24% of the hires. By contrast, referred applicants were only 6% of the job applicants but 21% of the interviewees and 29% of those hired. "In other words, the pool of candidates receiving serious consideration increasinly favors the referred over the course of the hiring process," the researchers stated in their report titled "Do Informal Referrals Lead to Better Matches? Evidence from a Firm's Employee Referral System." Another interesting point is that new hires who were referred started out earning 2.1% more money than their non-referred counterparts. But then things get more interesting. The pay difference between referred hires and non-referred hires diminished after 3 years on the job, meaning the non-referred workers caught up to their co-workers who had a friend on the inside. Also, referred workers stay with the company longer -- on the whole. These numbers can be skewed because lower-level employees who are referred stay a very long time with the company. Meanwhile, mid-level workers who are referred stay a normal amount of time with the firm. And referred executives depart the company quickly. It's also interesting to know that referred executive-level employees earn less than their non-referred counterparts. Again, this is all a study from just ONE employer. Nevertheless, this is a comprehensive and revealing look into current hiring behavior. A key issue is how homogenous the referred workers are. The vast majority (more than 70%) of referred workers were the same age, race, ethnicity and even educational status of their friend already in the company. When the New York Times wrote about this study, the final paragraphs of the article cited the human resources department at Enterprise Rent A Car, which tries to use employee referrals but still wants to limit that practice because that company realizes referrals just give more of the same kinds of people and possibly more of the same kind of thinking that is already inside the firm.

"Not Taco Bell Material" can gross you out or inspire you

"Not Taco Bell Material" is the autobiography of comedian Adam Carolla, who uses the book to explain how he went from a young man who seemed to mess up everything in his life to becoming a millionaire and celebrity. I appreciated the structure of the book in which chapter are listed by the kind of home Adam was living in at different points of his life, which illustrate the change in his mindset and lifestyle. But Adam doesn't give us too many insights about how he changed. I'll admit that I am one of the few fans of Carolla's movie "The Hammer." That movie came out about 5 years ago and stars Adam as a Los Angeles construction worker who also teaches boxing classes. He works his way into an amateur boxing program and gets to try out for the U.S. Olympic team, despite no support from his coaches. There's a particularl moment in that film were Adam's character is in the ring at the Olympic tryouts and has just finished the first round in a match - at which point the coach says he has to go because another boxer's bout is coming up. Adam lowers his head and realizes that he's all alone and has little chance to succeed. Adam then answers the bell at the next round - realizes he has nothing to lose - and knocks out his opponent. That moment of change was great in the movie. A moment of change would have been great in this book. In "Not Taco Bell Material," about three quarters of the book is stories of gross antics from Adam's adolescent years, which essentially stretched into his early 30s. These first three decades are filled with stories of pranks and fart contests and the series of cheap homes Adam lived in with other people who were also living a hand-to-mouth existence in America. The book wraps up very quickly as Carolla seemed to try out improv comedy and got a series of part-time jobs that involved comedy. I assume that the foundation of his life was his construction skills and jobs, but he doesn't discuss how he went from being a carpet cleaner to being a construction site helper to being a construction worker. I assume that he got frustrated with his hand-to-mouth existence and decided to make some serious changes (probably starting with giving 6 a.m. boxing classes or weekend defensive driving classes for $20 a class). But Carolla instead spends more time making fun of Queen Latifa or the rock band No Doubt than he does in explaining his miraculous transformation. "Not Taco Bell Material" is still a funny rags to riches tale that had me laughing and reminded me why I'm so fascinated by Carolla.

Young Americans continue to struggle getting jobs according to Brookings study "The Plummeting Labor Market Fortunes of Teens and Young Adults"

The Great Recession and its recovery have been a tough market for Americans ages 16-24 to find and keep jobs. While this may not seem like any kind of new information to most, the job loss is staggering. The employment rate for people ages 20-24 went from 72 percent in 2000 all the way down to 61 percent in 2011. And the employment rate for Americans ages 25-34 went from 82 percent in 2000 to 74 percent in 2011. Now the U.S. economy was rocking and rolling in the year 2000 and was recovering from a massive recession in 2011. Still, those are big drops. All of this is according to a new study by the conservative think tank The Brookings Institution. Brookings economists recently released the study, which relies on survey data from the U.S. Census Bureau's Current Population Survey. This 2014 report is called “The Plummeting Labor Market Fortunes of Teens and Young Adults.” "Individuals under age 54 were less likely to be working in 2011 than in 2000, with the sharpest declines among teens and young adults, while those 55 and over were more likely to be working in 2011," wrote the Brookings team of Andrew Sum, Ishwar Khatiwada, Mykhaylo Trubskyy, Martha Ross, Walter McHugh and Sherila Palma. To put these numbers in perspective, the employment rate for Americans ages 35-54 was 81 percent in 2000 and 76 percent in 2011. Meanwhile, Americans ages 55-64 saw their employment rates go from 58 percent in 2000 up to 60 percent in 2011. Similarly, Americans ages 65-74 saw their employment rates rise from 19 percent in 2000 to 25 percent in 2011. The Brookings team calls this phenomenon “the Great Age Twist” as people in their younger working ages are crowded out by much older workers. “A variety of factors contributed to older workers’ higher employment rates: delayed retirement due to lost savings from the 2008 financial crisis and ensuing recession; greater levels of education and experience compared to younger workers, which made them (older workers) more competitive job candidates in some cases; and higher average weekly earnings over time that created a higher opportunity cost of dropping out of the labor force,” wrote the Brookings team. Still, another wrinkle in their analysis is who among the younger workers are having the most difficult time getting and keeping jobs: lower-income and lower-educated Americans. “Teens in households with the lowest income levels had the lowest employment rates,” the Brookings team wrote. It’s that simple, more education and more worker experience means better chances of landing a job and keeping a job. And that doesn’t help the young, poor and poorly educated. That was illustrated by looking at Americans ages 20-24, whose employment rates dropped from 72 percent in 2000 to 60 percent in 2011. Yet here is a key finding: “In 2011, the employment rate of (college) degree holders was nearly double the rate of high school dropouts (46 percent).” This is a change from the 1950s through 1970s in America where people who did not go to college tended to earn more money and be more employed in their 20s than those who went to college – showing the advantage of work experience over higher education in the short term. But now in this modern economy we have employers who CAN demand workers with lots of education AND lots of work experience because of the abundance of available workers. The study also found that non-white Anglos had lower levels of employment. It is also concerning how the Brookings team looked at the employment characteristics of the top 100 metropolitan statistical areas (aka the bigger metro areas). For workers ages 20-24, the McAllen-Edinburg-Mission region was the worst in America for employment of these younger adults – with only a 52.9 percent employment rate. I love the McAllen region and am still trying to wrap my head around this. But I’ve been told this anecdotally by young people and workforce professionals in McAllen for years that it was an especially brutal market for young workers. The six members of the Brookings team conclude their short report with a series of suggestions about how to improve employment rates for younger workers. They have seven key suggestions and repeat the term “should” frequently. “Orient career-focused education and training to the regional labor market. Whether operated out of a high school, community college, nonprofit, union, public workforce entity, or other organization, career-focused education must be based on quantitative labor market data that outlines major industries and in-demand occupations in a given region. This quantitative data should be coupled with qualitative intelligence from regional employers about their workforce and skill needs,” the Brookings team declared. Yes, in an ideal world this should be done. But schools (where the students reside) and employers (where the hiring managers reside) are separate territories. It is frustrating to hear teachers complain that they cannot get employers to come to their campus while local managers loudly complain that teachers don’t know what employers need from future workers. “Link high school to post-secondary credentials. High school is becoming the new middle school – an important educational milestone, but lacking the intrinsic value except to prepare youth for post-secondary education,” they wrote and cited the Alamo Academies efforts in San Antonio to get students community college credits while in high school. “To address weak demand for labor, create transitional subsidized jobs programs for young people to help them support themselves, develop work experience, and gain a foothold in the labor market,” said the Brookings Institution team, but they did not explain the source of these tax-payer dollars to fund such employment programs. “The Plummeting Labor Market Fortunes of Teens and Young Adults” is a sobering look at the employment numbers for “young people” under 55. And while the report includes a broad and vague wish list of possible solutions, the report still underscores the concern that many of us have about a “lost generation” of Americans now in their 20s and 30s who are behind in their career paths, which would put them behind in life-time earnings and behind in picking up the work experience they need to become leaders of tomorrow.

Millennials and the Danger of a Lost Generation

Many of us have heard about the troubles that the current Millennial Generation is facing. The Millennials are Americans who are between 19 and 33 years old. They are also the generation struggling the most in the modern American workforce – struggling the most to get jobs and struggling to avoid unemployment. Only 2 years ago, 53% of all job postings in Texas were for jobs that required at least an associate’s degree. Now employers are settling down – a bit. Only 40% of all jobs require a college degree of some kind to apply, according to economists at The Conference Board and Wanted Analytics, which produces the Help Wanted Online report. But employers are still keeping the bar high in order to apply for a job. Employers realize that there are about 2 unemployed people for every 1 job opening in Texas, so they recognize that the “buyer’s market” continues. That’s why job descriptions are often looking for job applicants who have many years of work experience. That’s a problem for the young people in the Millennial Generation, who haven’t been on this planet many years and when they did reach working age they were faced with the worst jobs market amid the worst recession in a century. The unemployment rate for people ages 18-29 years old is a little more than 11% - or about twice the national average – according to research by the non-profit group Generation Opportunity, in Washington, D.C. I’ve looked at the employment data from the U.S. Department of Labor and I think that conclusion is correct – that the unemployment rate for Millennials is twice the national average. And that if the nearly 2 million Millennials who are neither working nor looking for work are counted then the real unemployment rate for these young people is around 16% - or almost 3 times the national average. When I break out the data from the U.S. Department of Labor, what I see is that people ages 18-34 make up about 34% of the workforce. But we know that they only account for a little more than 21% of the workers. That is workforce that is out of balance. And that is a workforce where many millions of young adults are not working. Many in the Millennial generation say that their generation faces the dual threat of: a) Joblessness b) Crushing student loan debt That may be. What I see is that we are facing a potential “Lost Generation” of millions of Americans and millions of Texans who are getting started very late on their career path. That delay (for whatever reason) is setting them back in their career progress and their lifetime earnings. What is needed is for these young people to apply some flexibility in their lives and get jobs – perhaps any jobs. They have to get started on their career paths. They have to progress on their career paths. Do we really want our government and our industries in America run in 30 years by people who have very little experience at work – by people who have gained very little experience at collaborating with co-workers to get things done because they didn’t have co-workers? I don’t think anybody wants that.