February 09 Employment
The Post and Courier had a nice article on the February 09 unemployment rate. The data, as one can imagine, is complex ,and therefore it can be helpful to step back and take a look at the big picture as to the root causes of unemployment and where it might be going.
Currently SC unemployment is 11.5 percent. Unemployment in the Low-Country (Charleston MSA) is 9.1 percent. The unemployment rate is calculated by looking at labor force, employed and unemployed workers. I have captured the graphs from the Bureau of Labor Statistics that display how these different data affect each other.
Note that labor force numbers continue to rise. In other words, there continues to be a net gain of new persons entering the workforce. However, at the same time, there is a decrease in the number of available jobs. This increasing gap is one reason for the spike in the unemployment rate. The other item that one notices is the irregularity of the graphs. The reason is that some industries are seasonal, like hospitality and construction. Therefore, in SC it is not uncommon to see large jumps in employment and unemployment depending on the time of year. I originally thought that the recent one percent jump month to month was unusual. However, after a little research, I found an example of a similar jump in 2007. Only this time it was a drop of .6 percent from March to April.
Unemployment also varies across our state by region. One reason is the variation in industry distribution. The linked table calculates industry employment percentages of SC versus the MSA. Note that 53 percent of SC employment is in industries hard hit by the downturn versus a subset of 47 percent locally. The Charleston region also has a slightly higher percentage of government employment (including education) that adds slightly more stability to the region. This industry distribution is, in fact, born out in the numbers.
The other factor which affects unemployment is type of job and skills required for employment. Many of the jobs that have been brought into SC are low-skill jobs, including warehousing, retail, and some manufacturing jobs. Unfortunately, in a poor economy those are typically the first to see layoffs, regardless of the industry – easy come easy go. As a result of the lower skill level, job characteristics, and industries affected, SC as a whole has taken a harder hit then what would be predicted.
It actually could be significantly worse if we had an uncontrolled construction industry or a financial sector with a larger presence. Fortunately both of those industries were only a part of our overall economy. I believe it is possible for SC’s unemployment to hit 14 percent for reasons mentioned above and then stabilize. It will, of course, take government, educational institutions, and private industry all working closely together to decrease that rate. Time to roll up the sleeves again.
Summerville, SC Flowertown Festival- 200,000 people!
The 37th annual Flowertown Festival was recently held here in Summerville, SC. The spring time in SC is simply amazing (Think Augusta and the Masters, but better) and is a time of year we really need to celebrate. Unfortunately sometimes we get a little overzealous with our visitor estimates. It seems harmless but this error can truly hold back an event, as well as a community. The Flowertown Festival, as reported by The Post and Courier, again stated that they expect the festival to draw about 200,000 attendees.
Let’s put that 200,000 in perspective. If there were 2 persons per car that visited the festival, and we take the average car to be about 14 feet (no room for an SUV in this crowd), that would be a line of cars, bumper to bumper from Summerville to Atlanta! The United States Open Golf Event, a world class draw, attracts a little over 200,000 (documented) over the full seven days (28k/day). The Cooper River Bridge run drew 31K persons in 2009 (documented through registration). Note the picture of the runners in one small section of the race. That is a lot of people, but most of them are local. The North Charleston Coliseum seats a little over 13K packed to the brim. Think of the parking that venue requires.
So what do we have here? – a really cool event that likely attracts 2 to 3 thousand (non-Summerville) visitors. It is these non-local visitors who are most important since they bring money to spend from some other region. Unfortunately many of these persons are from the Low-Country, like myself, so I just shift my spending from Hollywood to Summerville at the expense of the Hollywood vendors.
It is important that all events in the Lowcountry collect, analyze, and then understand their data in order to maximize the positive affect of the event, not only for the small geography in which they operate, but for the greater community, sponsors, and vendors that participate.
Hotel Industry 2008
A recent article in the Post and Courier quoted data on the prosperity for 2008 of the Leisure and Hospitality (L&H) industry here in the Low-Country (Berkeley, Charleston, and Dorchester Counties). It is possible some of this information may not be explained clearly enough, so I have added additional data that provides a more complete analysis of these industries.
The article indicates that L&H employment wages were off about 100 million. That is a lot of money. In fact, the latest figure for total GDP for the accommodation industry alone is approximately 417 million. These data would suggest that a little under 25 percent of GDP was lost in employment wages. Given the size of this number, it probably is a misprint and should read 10 million. However, let’s take a look at these data. A review of CES data suggests that, although there are wild swings in employment, at best the industry average is down probably no more than ~500 jobs year over year. According to quarterly employment statistics, the average annual wage of these workers is approximately $16,186. Simple multiplication indicates that likely the wage loss is closer to $8.1 million. This number is quite a bit lower than the 100 million printed, but close to 10 million if it was a misprint. Regardless, the number represents a relatively small fluctuation in employment compared with total employment in the region. Of course, this interpretation of the correct wage loss does not mean that it is unimportant, only that the industry may be at minimum employment as a result of the structured employment necessary to run a hospitality or leisure business. Note: as recently 3/27/09 both layoffs and new-hires have been announced. I expect L&H to continue to show swings in employment. See Chart 1.
Calculations for economic impact are often based on visitor surveys. To my knowledge it has been a number of years since an accurate visitor survey has been completed and much has changed since that time as indicated in the article by the increase in foreign travelers. Visitor surveys are an important tool for estimating L&H economic impact. A problem with visitor surveys is identifying whether the person interviewed is local or from outside the region. Economic impact, by definition, is NEW money (for retail sales, only the Margin is counted in the impact) brought into the region, so local patrons like myself (a frequent visitor to Charles Town Landing) should not be included in the final count. As a result of this type of error, these data estimating (decreased) economic impact have likely been understated. One of the ways to cross-check the visitor data is to review hotel occupancy. A review of Smith Travel Statistics indicates that occupancy was down on average in 2008 about 7 percent. Smith does a great job of describing the method used and has adhered to their statistically accurate process. However, gaps in the data do leave some hoteliers out of the sample based on size. Typically the smaller and less expensive hotel, catering to construction workers or non-leisure customers, is under counted. We know the negative impact that has besieged the housing market. Typically it is these smaller operators that serve persons in construction. In years past, this phenomenon would not be present in the data, thus not impacting results, but this year the gaps are worth noting. Smith gives us some clues to this issue when analyzing the different regions in the low-country. North Charleston was down 9.1 percent, Charleston 1.4 percent, and Mount Pleasant 8.0 percent. More disturbing though are the huge decreases during some of our busiest months, namely the second and third quarters of 2008. On a weighted average basis, these months play a big role in the industry’s success though out the year. With the above estimates, it is reasonable to estimate that the accommodations industry occupancy rate was actually down close to 14 percent in real terms year over year. Further analysis of tax collections support this estimate. See Chart 2.
Unfortunately, with these estimates, we would expect the decline in economic impact to be significantly more than 1.3 percent. Without having access to the method used to calculate the 1.3 percent, we are not able to determine which numbers were “tweaked” to derive only a slight loss. Barring that information, a back of the envelop calculation reveals a very different picture. The primary reason we would expect a greater decrease in economic impact is that the multiplier effect works just as well in reverse as it does in forward. As an example, for every billion dollars spent in the region within these industries, the area can expect to experience a 400 million dollar indirect and induced effect, or a multiplier of 1.4. Therefore, the 14 percent direct decrease in out-of-region spenders is significant. In spending, a one-to-one relationship 14 percent decrease equates to 140 million. With a 1.4 multiplier, that calculation means a LOST impact of almost 200 million (ouch), of direct, indirect, induced spending, per billion spent in the economy. No wonder everyone is grumbling! These numbers are conservative, since each lost hotel visitor represents a significant multiply of spending (over a local person) and non-recoverable demand. Even with this sizable shortfall, I believe Charleston has fared significantly better than most communities- something to build on.
The bottom line is that these data are important and need to be taken more seriously by all involved since L&H do represent a significant portion our our economy. Therefore, we must look at the data through a clear lens because these analyzes are used both by community leaders and businesses to make strategic plans for the future.
