Tri-Cities Area Jobs Rebounding

In case you missed this article in the Johnson City Press, I thought I would use it as my blog entry for this month. This is good news for the Tri-Cities!

With two consecutive quarters of employment growth, the Tri-Cities is leading the national recovery from the recession, according to a report distributed by local economist Steb Hipple.

In 2010’s third quarter, Tri-Cities metro area employment expanded by more than 5,900 jobs as compared to the same period in 2009, a 2.7 percent increase. In the second quarter, the area saw a gain of more than 800 jobs in year-over-year figures, a 0.5 percent increase.

To see the Tri-Cities leading the recovery “was not the expectation, as we lagged the national economy going into the recession,” said Hipple, who authors a quarterly labor market report for the East Tennessee State University Bureau of Business and Economic Research. “When the national recession began in 2008, labor market conditions here remained pretty good. In 2009, we started to see a downturn in employment, and when it happened, we got two years of decline in one year.”

But the Tri-Cities has bounced back “dramatically,” restoring more than half of the almost 14,400 jobs lost in 2009, Hipple said. At the end of 2008, regional employment neared its highest levels at 232,851 jobs. By the first quarter of 2010, 218,531 jobs remained. The most recent third quarter numbers show a recovery to 228,407 jobs.

In 2010, more than 6,000 jobs were added in the second quarter from first quarter figures. From the second quarter to the third, there was a gain of more than 3,400 jobs. Most of the job growth occurred in the government, and education and health sectors, with smaller gains in retail trade, leisure and hospitality, and wholesale trade. The manufacturing, transport and utilities, finance and construction industries continued to cut jobs, according to the report.

Almost 2,400 fewer people in the region are out of work than at the same time last year. Over the July to September period, the unemployment rate for the Tri-Cities area was 8.6 percent, compared to 9.7 percent a year ago, and all three cities saw employment gains in line with regional trends. On a year-to-year basis, employment gains were 3.4 percent in Johnson City, 3.3 percent in Kingsport, and 2.1 percent in Bristol. The rate of unemployment was 8.8 percent in Bristol, 8.6 percent in Johnson City, and 8.1 percent in Kingsport (compared to 9.6 percent in all three cities in the same period in 2009).

“We’re one of the parts of the U.S. leading the economy, and that’s good,” Hipple said.

But according to the report, “the problem is that ultimately the slow recovery in the nation could have a negative impact on business conditions in the Tri-Cities area.”

Though the national labor market finally began to show signs of recovery in the third quarter with lower unemployment and a smaller rate of job loss, it lacks one key element to recovery.

“Most national economic indicators are pointing in the right direction: production is increasing, consumer spending is higher, retail activity is reviving, the stock market is higher, and unemployment is falling. The missing element is job creation – strong job creation. And significant job growth is not in the short-run economic outlook,” the report said. “So the business outlook is for continued low growth in output, minimum job creation, and lingering high unemployment.”

For jobs, the “critical number” to watch will be the real gross domestic product growth rate, Hipple said, which needs to increase at an annual rate of more than 3 percent to create enough new jobs to account for both new workers and for the out-of-work existing labor force. The most recent data shows real GDP increasing at only a 2 percent rate, and the problem is getting the figure to grow faster, he said.

While the fiscal policy stimulus of $800 billion seems to have helped, Hipple said, the current political climate makes a second stimulus unlikely. Instead, the Federal Reserve has enacted a second round of monetary policy changes. Previously, the Fed dropped short term interest rates to almost zero, and simultaneously expanded the liquidity of the banking system by over $1,200 billion, which was called quantitative easing, the report said. Between now and next summer the Fed plans to expand liquidity in the banking system by another $600 billion (quantitative easing round two, or QE2).

“Changes in monetary policy, whether it’s tight money or easy money, have a delay before they work their way into the economy,” said Hipple, who estimates it will be 12-18 months before QE2 has an effect. “It will help, but it won’t kick in short term. For short term, you need a fiscal stimulus. Because of the political climate, the only part of the government now in a position to provide a stimulus is banking. It’s the weakest way and it will take longer.”

By: Kate Prahlad
Johnson City Press Business Writer