ETSU Bureau of Business and Economic Research

Tri-Cities Labor Market Report

East Tennessee State University + Second Quarter 2007 + College of Business and Technology

THE METROPOLITAN AREA (CSA)

The metropolitan labor market continued to achieve new performance records during the second quarter. Over the spring months, area employment rose by 2.8% to 234,371, a gain of over 6,300 jobs compared to the same period in 2006. This marks the ninth quarter in a row of employment growth, and the sixth quarter where the increase has topped two percent. With the continued expansion in jobs, the number of unemployed workers saw a double digit drop of 14.2%, falling to 9,954. The jobless rate for the Tri-Cities metro area during the April to June period was 4.1%, compared to 4.8% a year ago.

Among the fourteen NAICS industrial sectors, employment levels were higher in nine sectors, while falling in four, and unchanged in one. Job growth was led by construction, followed by government, leisure & hospitality, finance, retail trade, information services, education & health, wholesale trade, and transport & utilities. Job losses occurred in professional & business services, durable manufacturing, nondurable manufacturing, and other services. Employment levels were stable in the mining sector.

  Labor Force Employment Unemployment
 Period  Level  Y-Y%Ch  Level  Y-Y%Ch  Level  Y-Y%Ch  Rate_
 2001 232,340 0.25 221,186 -0.47 11,155 17.23 4.80
 2002 233,364 0.44 220,150 -0.47 13,214 18.46 5.66
 2003 236,298 1.26 222,567 1.10 13,731 3.91 5.81
 2004 235,100 -0.51 222,090 -0.21 13,010 -5.25 5.53
 2005 236,188 0.46 223,776 0.76 12,412 -4.60 5.26
 2006 240,674 1.90 229,255 2.45 11,418 -8.01 4.74
 05:1 234,000 -0.38 220,050 -0.35 13,951 -0.90 5.96
 05:2 235,461 0.52 222,898 0.56 12,563 -0.16 5.34
 05:3 236,814 0.62 225,040 1.21 11,774 -9.38 4.97
 05:4 238,478 1.09 227,118 1.61 11,360 -8.29 4.76
 06:1 238,018 1.72 225,761 2.60 12,257 -12.14 5.15
 06:2 239,604 1.76 228,008 2.29 11,596 -7.70 4.84
 06:3 242,312 2.32 230,983 2.64 11,329 -3.78 4.68
 06:4 242,762 1.80 232,270 2.27 10,492 -7.65 4.32
 07:1 242,685 1.96 231,096 2.36 11,589 -5.45 4.78
 07:2 244,325 1.97 234,371 2.79 9,954 -14.16 4.07

THE TRI-CITIES

The record setting labor market performance was reflected in all three urban centers. During the second quarter, job levels were up 3.4% in Johnson City, 2.9% in Kingsport, and 2.3% in Bristol. Matching the regional trends, unemployment levels fell sharply in all three cities. The jobless rate was down to 3.9% in Kingsport, 4.1% in Johnson City, and 4.2% in Bristol.

Bristol TN-VA Urbanized Area Labor Market

 Labor Force Employment Unemployment
  Period  Level  Y-Y%Ch  Level  Y-Y%Ch  Level  Y-Y%Ch  Rate_
 2001 27,153 0.37 25,981 -0.37 1,172 20.28 4.31
 2002 27,194 0.15 25,775 -0.79 1,419 21.14 5.22
 2003 27,618 1.56 26,001  0.88 1,617 13.92 5.85
 2004 27,081 -1.94 25,534 -1.79 1,547 -4.33 5.71
 2005 27,053 -0.11 25,643 0.43 1,409 -8.89 5.21
 2006 27,583 1.96 26,324 2.66 1,259 -10.68 4.56
  05:1 26,744 –1.53 25,177 -1.04 1,567 -8.81 5.86
 05:2 27,030 -0.12 25,590 0.28 1,440 -6.66 5.33
 05:3 27,027 0.36 25,850 0.90 1,357 -8.93 4.99
 05:4 27,230 0.88 25,957  1.56 1,273 -11.35 4.68
 06:1 27,347 2.26 25,980 3.19 1,367 -12.72 5.00
 06:2 27,485 1.68 26,180 2.31 1,305 -9.39 4.75
 06:3 27,792 2.15 26,562 2.76 1,230 -9.39 4.42
  06:4 27,708 1.76 26,575 2.38 1,133 -11.03 4.09
 07:1 27,841 1.81 26,530 2.12 1,311 -4.13 4.71
 07:2 27,966 1.75 26,788 2.32 1,177 -9.79 4.21

Johnson City Urbanized Area Labor Market

  Labor Force Employment Unemployment
 Period  Level  Y-Y%Ch  Level  Y-Y%Ch  Level  Y-Y%Ch  Rate_
 2001 51,885 -0.23 49,322 -0.84 2,563 13.36 4.94
 2002 52,147 0.50 49,107 -0.44 3,040 18.59 5.83
 2003 52,996 1.63 50,008 1.83 2,988 -1.70 5.64
 2004 53,858 1.63 50,964 1.91 2,895 -3.13 5.37
 2005 54,325 0.87 51,506 1.06 2,819 -2.60 5.19
  2006 55,205 1.62 52,611 2.15 2,595 -7.97 4.70
 05:1 53,945 0.63 50,775 0.49 3,170 2.93 5.88
 05:2 54,035 1.02 51,170 0.81 2,865 4.91 5.30
 05:3 54,241 0.85 51,611 1.47 2,630 -9.96 4.85
 05:4 55,079 0.96 52,467 1.47 2,612 -8.24 4.74
 06:1 54,451 0.94 51,658 1.74 2,793 -11.89 5.13
 06:2 55,001 1.79 52,320 2.25 2,681 -6.42 4.88
  06:3 55,406 2.15 52,889 2.48 2,517 -4.31 4.54
 06:4 55,964 1.61 53,576 2.11 2,388 -8.59 4.27
 07:1 55,666 2.23 53,056 2.71 2,610 -6.55 4.69
 07:2 56,406 2.55 54,115 3.43 2,291 -14.54 4.06

Kingsport Urbanized Area Labor Market

 Labor Force Employment Unemployment
 Period  Level  Y-Y%Ch  Level  Y-Y%Ch  Level  Y-Y%Ch  Rate_
 2001 45,468 0.25 43,413 -0.42 2,056 16.99 4.52
 2002 45,401 -0.15 42,967 -1.03 2,435 18.44 5.36
 2003 45,728 0.72 43,043 0.18 2,685 10.29 5.87
 2004 44,896 -1.82 42,340 -1.63 2,556 -4.80 5.69
 2005 44,993 0.21 42,583 0.57 2,410 -5.72 5.36
 2006 45,862 1.93 43,684 2.58 2,179 -9.60 4.75
 05:1 44,468 -0.79 41,749 -0.78 2,719 -0.81 6.11
 05:2 44,968 0.16 42,439 0.19 2,529 -0.31 5.62
 05:3 45,252 0.47 42,922 1.07 2,330 -9.38 5.15
 05:4 45,283 1.01 43,221 1.81 2,062 -13.21 4.55
 06:1 45,277 1.82 42,979 2.95 2,298 -15.50 5.07
 06:2 45,754 1.75 43,498 2.50 2,256 -10.76 4.93
 06:3 46,301 2.32 44,070 2.67 2,230 -4.26 4.82
 06:4 46,116 1.84 44,186 2.23 1,929 -6.44 4.18
 07:1 46,114 1.85 43,981 2.33 2,133 -7.17 4.63
 07:2 46,542 1.72 44,736 2.85 1,806 -19.95 3.88

THE UNITED STATES

Over the spring quarter, the national labor market continued to create new jobs, although at a slowing rate. Employment levels increased for the 20th quarter in a row, and reached 146.0 million for a year-to-year growth rate of 1.3%. Unemployment declined by 2.3% to 6.8 million, dropping the jobless rate to 4.4% (compared to 4.6% in 2006).

Eleven of the fourteen NAICS industrial sectors continued to enjoy higher employment levels. During the April to June period, job gains were led by education & health services, leisure & hospitality services, professional & business services, and government. Smaller employment increases occurred in wholesale trade, finance, transport & utilities, retail trade, information services, other services, and mining. Job declines were reported by durable manufacturing, nondurable manufacturing, and construction.

 Labor Force Employment Unemployment
 Period  Level  Y-Y%Ch  Level  Y-Y%Ch  Level  Y-Y%Ch  Rate_
 2001 143,734 0.81 136,933 0.03 6,801 19.48 4.73
 2002 144,863 0.79 136,485 -0.33 8,378 23.19 5.78
  2003 146,510 1.14 137,736 0.92 8,774 4.73 5.99
 2004 147,401 0.61 139,252 1.10 8,149 -7.12 5.53
 2005 149,320 1.30 141,730 1.78 7,591 -6.86 5.08
 2006 151,428 1.41 144,427 1.90 7,001 -7.77 4.62
 04:1 146,249 0.45 137,333 0.70 8,916 -3.34 6.10
 04:2 147,132 0.29 139,050 0.89 8,082 -9.02 5.49
 04:3 148,190 0.82 140,189 1.50 8,001 -9.71 5.40
 04:4 148,034 0.87 140,435 1.31 7,598 -6.51 5.13
 05:1 147,507 0.86 139,180 1.35 8,326 -6.61 5.64
 05:2 149,159 1.38 141,662 1.88 7,497 -7.23 5.03
 05:3 150,476 1.54 143,001 2.01 7,475 -6.57 4.97
 05:4 150,139 1.42 143,075 1.88 7,064 -7.04 4.70
 06:1 149,601 1.42 142,082 2.09 7,518 -9.70 5.03
 06:2 151,154 1.34 144,221 1.81 6,933 -7.52 4.59
 06:3 152,436 1.30 145,332 1.63 7,104 -4.96 4.66
 06:4 152,520 1.59 146,073 2.10 6,446 -8.74 4.23
 07:1 152,013 1.61 144,692 1.84 7,321 -2.63 4.82
 07:2 152,811 1.10 146,040 1.26 6,771 -2.34 4.43
 Note: Data are in thousands.

ANALYSIS

To revive an expression of the 1990s, the regional labor market is “smoking”. After the incredible performance in the first quarter, no-one expected the second quarter to come in even stronger. Well, it did! And behind the regional statistics, all three cities are participating in the record setting job growth. But again, this growth rate is not sustainable and must slow down.

But when the regional labor market does begin to cool off, and growth rates again become a fraction of one percent, please do not despair. Remember that we have had this incredible two years where we have added thousands of jobs to our employment base. This solid gain is not going to go away – and these new jobs are creating new paychecks which show up in higher retail sales and more tax revenues.

In contrast to the “smoking” regional economy, the national labor market is showing the desired signs of an orderly slowing. During 2005 and 2006, employment growth in the United States averaged nearly two percent. In 2007, the rate of job creation has dropped in each quarter and is now a fraction above the target one percent level.

This slowing of the national labor market is good news. The two percent rate of job expansion in 2005 and 2006 was not sustainable since it exceeded the natural rate of growth of the labor markets (one percent). The threat was that tighter labor markets would result in inflationary pressures driven by higher labor costs. But with employment growth around the magic one percent level, the spectre of cost-push inflationary pressures is gone.

And just in time for the Federal Reserve System. The major role of the Fed is to use interest rates to deal with problems of inflation and unemployment. However, recent problems in the financial markets linked to the end of the speculative bubble in home mortgages may take precedence in setting policy. So the removal of a possible source of inflationary pressures from the labor markets will make life simpler for the Fed policy makers. Now the Federal Reserve System can focus its attention on maintaining orderly financial markets.

As a final overview, the regional and local labor markets are facing slower growth in the near future, but that growth will be built upon the solid job gains of the past two years. The national economy is transitioning to a slower but sustainable growth rate, which is another factor which will affect the Tri-Cities. The overall business expansion is expected to continue into 2008. With slower growth, the Fed will be better able to deal with the threat posed by the meltdown in the subprime mortgage markets.

Technical Note. This report was prepared in August 2007, and is based upon the 2006 Benchmark of the Current Population Survey, U.S. Department of Labor. The labor markets for Bristol, Johnson City, and Kingsport are presented in terms of the U.S. Census Bureau concept of the "urbanized area" which includes the core city and the contiguous urban fringe. The urbanized area for each city is based upon demographic patterns from the 2000 Census of Population. The data in this report are not adjusted for seasonality, so comparisons should be made on a year-to-year basis.

More information. This report was prepared by Dr. F. Steb Hipple, Professor of Economics, and Research Associate, BBER. For more information, please contact Dr. Hipple c/o Department of Economics, Finance, Geography, and Urban Studies, Box 70686, East Tennessee State University, Johnson City, Tennessee 37614. Phone/Voicemail: 423-439-5304. Fax: 423-439-8583. E-Mail: hipples@etsu.edu . Website: http://faculty.etsu.edu/hipples.