December 6, 2013
OECD Chicago Economy Conference
By Emily Engel and Susan Longworth
On Friday September 27, 2013, The Federal Reserve Bank of Chicago hosted the Summit on Regional Competiveness (Summit) with The Alliance for Regional Development (Alliance) and the Chicagoland Chamber of Commerce. The Alliance is an economic development group working to implement recommendations contained in a 21-county, tri-state (Illinois, Indiana, and Wisconsin) analysis completed by the Organization for Economic Co-operation and Development (OECD).
According to the OEDC report, cooperative and regionally oriented economic development offers opportunity for sustainable growth in key industries within the Chicago MSA. Please read our blog from last year to learn more about how ‘Federal Agencies Align to Support Regional Growth'.
The goal of the Summit was to demonstrate that the tri-state region can cooperate to find solutions to the challenges in the OECD report.The agenda included welcome remarks from Daniel Sullivan, Director of Research and Executive Vice President, Federal Reserve Bank of Chicago, and a keynote address from Austan Goolsbee, the Robert P. Gwinn Professor of Economics, University of Chicago’s Booth School of Business (link to http://www.ustream.tv/search?q=ChicagoFed). The emcee for the event was Theresa E. Mintle, President and Chief Executive Officer, Chicagoland Chamber of Commerce. Governors Scott Walker of Wisconsin; Governor Pat Quinn of Illinois; and Governor Mike Pence of Indiana all attended the Summit. Video from the summit is available here.
The Summit addressed the following topics:
• Matching Skills to Jobs in the Tri-State Region—to explore potential regional approaches and programs that satisfy business needs while closing the skills gap;
• Innovation in the Tri-State Region—to explore how best to enhance the region’s performance in innovation-driven business clusters;
• Transportation and Logistics in the Tri-State Region—to explore how connectivity including, air, road, port, and rail transportation can help grow the region’s future as a mega-logistics hub; and
• Increasing the Region’s Competitiveness through Green Growth—to explore environmental factors impacting economic growth and development.
Takeaways from the Summit included the following points.Panelists highlighted the need to brand the region in a manner that capitalized on regional assets like the Great Lakes and a central location. Concerns were raised about balancing municipal needs with regional ambitions. As municipalities struggle to retain and raise revenue and jobs, there is unresolved tension between collaboration and competition that is most acutely felt by local officials.The region’s significant transportation assets were mentioned frequently, along with the need to address growing congestion and manage natural resources, such as the Great Lakes and other inland waterways responsibly. Workforce development was discussed at length and strategies for engaging and training new workers were emphasized. Panelists recognized the increasingly technical nature of today’s jobs and the challenges faced by those seeking higher education.
For the full agenda, please see the Federal Reserve Bank of Chicago’s website.
For more background information, please read the Chicago Tri-State Metropolitan Area OECD report.
November 12, 2013
Michigan Automotive, More Than Production
The dispersion of auto assembly line-type jobs from Michigan to the rest of the U.S. has been widely discussed. But it may be important to examine whether other jobs in the automotive value chain have also dispersed, particularly R&D and headquarters-administrative jobs. It is possible that a sizable part of automotive R&D and administration are spatially separable from production, with important implications for the economic health and growth prospects of Michigan.
To shed some light on this, we use microdata from the IPUMS CPS to track trends in production, office, and R&D jobs in both Michigan and the rest of the U.S. We sort any individual who reports working in the auto industry into one of these three occupational categories. For example, we classify engineers and technicians as R&D and assembly line workers as production workers. (We further classify as “other” those occupations that could fall into multiple categories, such as security or janitor).
Figure 1 shows that total employment in the automotive industry has been relatively steady in Michigan, averaging 413,000 from 1970 to 2005. Since then, there has been a distinct decline; by 2012, Michigan’s auto employment was 262,000. In contrast, auto employment steadily increased in the rest of the U.S., rising from 588,000 in 1970 to a peak of 974,000 in 2007. The rest of the U.S. also saw heavy losses in the second half of the 2000s, with auto employment at 710,000 in 2012.
Trends in the R&D segment of the auto assembly are quite different. As figure 2 shows, R&D employment in Michigan grew steadily until the 2000s, from 28,000 in 1970 to a peak of 90,000 in 2001. Growth in R&D jobs in the rest of the U.S. generally kept pace, though with the exception of a couple years in the early 2000s, the majority of R&D jobs have resided in Michigan.
And so we see that R&D employment has made up an increasing share of overall auto employment in Michigan. In 1970, 6 percent of Michigan’s auto employment was found in R&D. By 2012, this share had climbed to 22 percent. This contrasts sharply with the rest of the U.S., where the proportion of auto employment in R&D grew from 1 percent in 1970 to 6 percent in 2012. Looking more broadly, 46 percent of Michigan’s employment is in either R&D or office occupations, compared with 24 percent in the rest of the U.S. At least by this measure, Michigan remains the nerve center and the creative engine of the U.S. auto industry, even as production jobs have dispersed.
This glimpse of the changed employment composition of Michigan’s auto assembly sector raises further questions. In particular, what is the outlook for Michigan’s R&D activities in light of the shifting geography of auto production activities? And what, if any, public policies might be influential to R&D’s continued success in the state?
cps.ipums.org. IPUMS CPS provides an occupation variable that is unified across changing occupational coding schemes from 1968 to present. The CPS survey combined Michigan and Wisconsin from 1968 to 1976. To allow the time series to extend back to 1968, we calculated by employment category the proportion of worker-years Wisconsin contributed to combined MI-WI totals from 1977 to present. We then used that proportion to scale down the pre-1977 MI-WI employment numbers to represent only Michigan and to scale up the ROUS numbers so to include Wisconsin. (Return to text)Posted by Testa at 1:38 PM | Comments (0)
October 24, 2013
The Energy Industry's Positive Contribution to the U.S. Economy
The U.S. Census Bureau announced in August in its U.S. International Trade in Goods and Services Report for June 2013 that the petroleum deficit had fallen to its lowest level ($17.4 billion) since August 2009 ($17.9 billion). This decline was the result not only of declining imports but also of an increase in exports. The petroleum trade deficit was reported to be down $34 billion dollars, year over year, through June. The use of new technology and techniques to extract natural gas and other petroleum products has allowed the U.S. to go from being a net importer of refined petroleum to being a net exporter. What impact will this new technology have on U.S. economic growth in the years to come?
According to an August 18, 2013, Financial Times article, “the value of petroleum and coal exports more than doubled from $51.5 billion in the year to June 2010 to $110.2 billion in the year to June 2013.” To look deeper into the role the U.S. will play in the future in the global energy markets, we constructed a combined energy trade category using U.S. Census Bureau’s trade data by North American Industry Classification System (NAICS), among other sources. Chart 1 shows just how much the balance in energy related trade has changed since 2002 by quarter.
Based on this total energy trade category, the United States imported about 10 times more petroleum related products than it exported in 2002, as indicated by the bars in the chart. This ratio of imports to exports grew to as high as 14 in the fourth quarter of 2005. The lines in the chart show that this happened while exports and imports grew by relatively the same ratio compared with 2002. However by 2006:Q4, this relationship started to change. Even with the sharp decline in both imports and exports during the recession in 2008, the ratio of imports to exports continued to decline. The latest data for 2013:Q2 indicate that the U.S. is exporting about 12 times more energy related products than it did in 2002, bringing the import to export ratio down to 2.8. This represents a 360% reduction in the trade deficit for these combined categories, with almost all of that achieved in the past six years.
According to the U.S. Energy Information Administration (EIA), the U.S. is one of the world’s leading producers of crude oil and petroleum products. Table 1 below shows the total value of exports and imports by NAICS classification and their share by category for calendar years 2002 and 2012.
Although the deficit did grow from 2002 to 2012, in 2002 crude petroleum and natural gas accounted for almost 85% of the total trade deficit, while petroleum refinery products accounted for about 70% of exports. Also in 2002, coal was the only product of the four NAICS classifications that made a positive contribution to the trade balance. By 2012, crude petroleum accounted for almost the entire energy-related trade deficit, while the contribution to the deficit from liquid natural gas had fallen to just 0.3%. In addition, petroleum refinery products’ positive contribution to the trade balance jumped past coal’s to reach 81% of the total energy-related export products.
So far in 2013 the picture has improved even more. The following charts show just how much faster the exports of each of these energy-related products have grown relative to imports to the degree that three of the four categories shown here had a positive contribution to the trade balance in Q2 2013 evidenced by the exports to imports ratio of less than one. In fact, in Q2 2013 the U.S. exported three times more liquefied natural gas than it imported. In addition, the exports of petroleum refinery products have grown by an astonishing 1,380% since 2002.
Coal exports, which had grown 1,000% by 2011, have slowed more recently, likely reflecting slowing economic growth in China and falling prices in Asian markets. As the chart 6 suggests, U.S. energy exports and the pace of emerging market growth have gone hand in hand in the past.
Given the somewhat slower global growth expectations for this year and next, it is reasonable to assume that U.S. energy exports are being somewhat limited by the global slowdown of emerging economies in particular, implying that the U.S. trade deficit reduction might otherwise have been even greater this year.
For January through June 2013, the petroleum trade deficit was reported to be down $34 billion dollars, year over year. If we include coal and refined petroleum products, the trade deficit decline was somewhat smaller at $31 billion, when adjusted for inflation, mostly due to a slowing global demand for coal. However, this trend is expected to reverse itself in the near future, according to the EIA International Energy Outlook for 2013. The EIA forecasts that global demand for all types of energy will continue to grow at an annual rate of 1.5% for the next 30 years; and that, by 2015, the world’s demand for energy will increase by 9.1% compared with 2010 and an additional 10.1% by the year 2020. Also, by 2015, global demand for natural gas and coal is expected to increase by 9.3% over 2010 levels and an additional 9.5% by 2020. All of this is good news for the U.S. trade balance, because most of the growth in demand is expected to come from other countries. Based on EIA’s 2013 projections, non-OEDC countries will account for 86% of the total increase in energy consumption between 2015 and 2040.
Through the first two quarters of 2013, the U.S. economy is thought to have grown by just $227.2 billion compared with the first half of last year, while energy trade accounted for a $31 billion reduction in the trade deficit for the same period. This means that through the first half of 2013, while the total U.S. economy is estimated to have grown by just 1.5%, the increase in energy exports accounted for 13.6% of total growth in this period by significantly reducing the trade deficit.
Since 2008, the global demand for energy has continued to increase; it is presently expected to grow by 1.2% in 2013 compared with just 0.7% in 2012. This projected increase in global demand for energy should contribute further to economic growth in the U.S. through additional reductions in the trade deficit.
The petroleum products aggregated in the end-use commodity classification system include virtually the same energy related products as those aggregated in the Standard International Trade Classification (SITC). The end-use petroleum products, however, include some products such as ethane, butane, benzene, and toluene which are included in “Manufactured Goods” in the SITC. (Return to text)
The “Total Energy Trade” category contains the following NAICS series: Crude Petroleum and Natural Gas (211111), Liquid Natural Gas (211112), Coal (excluding Anthracite) and Petroleum Gases (212112), and Petroleum Refinery Products (324110). (Return to text)Posted by Testa at 10:36 AM | Comments (0)