Featured Indicator: Maybe Business Isn’t as Good as It Seems

by Bryant Dixon 16. July 2015 10:26

Almost every day we are bombarded with stories of new tech startups or a firm’s lucrative net worth in the news, but despite all the media attention that these projects receive, business dynamism—the process by which a firm enters, exits, expands, or contracts, all while creating new jobs, destroying others, and reallocating some—has declined in recent years. This dynamic process is vital to productivity and sustained economic growth of modern economies, and dependent upon new, innovative, competitive firms pushing out older, less competitive ones.

 

A healthy churn in our dynamic economy is always great sign, and in 2012, there were about 13.4 million private sector jobs created or destroyed each quarter. This healthy churn was however offset by only 600,000 net jobs being created in each quarter of 2012.

 

From 1978 through 2011, since the data series began, firm exit rates have been relatively stable. However, since 2006, firm entry rates have significantly declined, and for the first time in recorded history, firm entrance rates have dropped below firm exit rates. The chart below highlights the national decline in entry rates over time and its’ steep decline in 2006.

 

 

The exact reason for this national decline in firm entry rates is unknown, but can be seen on a national, regional, state, and metropolitan level. Business dynamism has declined in all fifty states and nearly all U.S. metropolitan areas. The charts below show the declining entry rates and increasing exit rates of firms by comparing states and metros.

 

 

Why is this important?

 

While the reasons explaining this decline are still unknown, if the decline continues, it suggest that the U.S. economy will have a continuation of slow growth and a lower standard of living for the indefinite future, unless for other unexplainable reasons these trends are reversed. Also, the decline in business dynamism that occurred broadly across the U.S. economy during the last couple of decades were largely in STEM and high-tech occupations. The slowdown in the high-tech industry may be especially problematic because high-tech firms play an instrumental part in the income, employment, and productivity growth overall, and are generally focused on the technologies that drive sustained economic growth.

 

For more information on where you can find this data, click here for the Bureau of Labor Statistics Business Employment Dynamics website and here for the Census Bureau Business Dynamics Statistics website. Also check out “Declining Business Dynamics in United States: A Look at States and Metros” by Ian Hathaway and Robert E. Litan.

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Can Retail Jobs be “Good Jobs”?

by Ian Flatt 15. July 2015 17:14

As the economy has recovered from the Great Recession, many of the new jobs being created are in low-wage industries, particularly the retail and food service industries. According to the National Employment Law Project, lower-wage industries, such as the retail industry, accounted for 22% of recession job losses. However, as the economy has recovered, these same low-wage industries have accounted for 44% of the jobs being created. This has created a major shift in employment in the United States—in 2014, there were 2 million fewer jobs in mid- and higher-wage industries than before the recession, while the number of jobs in low-wage industries has increased by 1.86 million since the recession.1

 

The retail industry is a major driver of this growth in low-wage jobs. According to Economic Modeling Specialists, Inc. (EMSI), jobs in the retail trade industry account for 10% of total U.S. employment, trailing only government and health care. The retail industry is also projected to account for over 7% of the nation’s employment growth over the next 10 years, adding over 1.2 million jobs. However, wages in the retail industry are low compared to other industries. For example, the average wage of a cashier is just over $9 per hour.2 In addition to low wages, many retail workers are not offered benefits, and 41% of retail employees are part time, while many would prefer full-time work.3 Given the sheer number of workers in the retail industry, these labor practices have serious ramifications for the economy overall. Low wages diminish the purchasing power of workers in the retail industry, hurting sales in the broader economy. In addition, working families earning low wages often qualify for government assistance, creating a financial burden on the local, state, and federal governments that could be alleviated by raising wages.4

 

In addition, these labor conditions have consequences for employees and for a store’s bottom line. Low wages, part-time and seasonal work, and unpredictable schedules lead to high turnover, unmotivated employees, high absenteeism and tardiness rates, and low morale. The labor conditions and their consequences in the retail industry lead to what Zeynep Ton, a professor at MIT’s Sloan School of Management, calls “Retailing’s Vicious Cycle.”5 High turnover and unmotivated employees lead to low profits and further cuts in investments in employees (wages, benefits, training), resulting in even higher turnover and lower morale.

 

What many retailers do not realize is that investing more in labor can actually drive sales and increase the store’s profitability. Some retailers have recognized the benefits of investing in labor, including Nordstrom, Wegmans, the Container Store, and others. However, it is easy to consider these examples as outliers—retailers that can finance investment in labor through high prices. However, there are also several equally prominent examples of low-cost retailers that are able to invest in labor while also competing with peers with low-wage jobs on the price of goods. Examples of these low-cost retailers include Costco, Trader Joe’s, and QuikTrip.6 As middle-income jobs are eliminated and replaced with low-wage jobs, workforce and economic developers need to uncover ways to encourage other retail (and other low-wage) employers to follow these models and turn low-wage retail jobs into high-quality jobs that pay a livable wage.

 

Properly trained and motivated employees are more productive than their low-wage counterparts. Not only do these retailers offer higher wages and other benefits to employees (some even offer tuition reimbursement) but they couple those higher wages with extensive training. The high wages, among other factors, reduce the turnover rate at these retailers, justifying a higher investment in training. To recoup the investment in labor, these retailers cross-train their employees so they perform a variety of tasks, ranging from checking out customers to merchandising and restocking, increasing the worker’s productivity.7 Cross-training workers helps employers address a seemingly intractable labor issue in the retail industry: maintaining appropriate staffing levels as customer traffic fluctuates. At these high-wage, low-cost retailers, cross-trained employees can perform customer-facing tasks when store traffic is high while addressing back-office, restocking, and other needs when customer traffic is low. By more efficiently managing staff through cross training, retailers are able to offer employees more predictable schedules, more hours, and longer shifts.

 

In addition to investing in training, employers also make high wages and low prices feasible by reducing the number of products offered.8 Retailers such as Costco offer significantly fewer products than counterparts such as Sam’s Club. However, these retailers still maintain higher sales per square foot and per employee than their peers. By reducing the number of products offered, retailers simplify the logistics of merchandising and stocking while improving customer service since employees are able to become familiar with the relatively small number of products offered and make recommendations to customers.

 

So what can communities do to improve the vast number of jobs in the retail industry? The first step would be determining what changes are possible at the local or regional level, especially among the larger retailers that account for most of the employment in the industry. For major retail chains, labor, merchandising, and training decisions are often made at the corporate level, leaving little potential for store managers to influence those decisions. Economic development and workforce development professionals should discuss with the retailers in their region what policies they can control and what changes they could make to improve the quality of retail jobs. As training needs are identified that could improve the quality (and wages) of retail jobs, workforce development organizations may be able to access on-the-job or incumbent worker training funds to mitigate the costs of the training and help retailers transition from the low-wage business model to a higher-wage business model.

 

Finally, professional networking events and training for retail workers industry-wide can help advance people in their careers, in the same way these events further the careers of white-collar workers. Networking events can help retail workers find mentors, who can explain the potential of a career in retail and provide guidance and advice. In addition, these events can help workers uncover their next job in the industry, moving up the career ladder into higher-level positions at different companies. Sales and customer service training can also help make retail workers more marketable, enabling them to command higher wages and move up the retail career ladder.

 

With such a large footprint in the economy, the retail industry cannot be ignored by economic and workforce developers. While the path to good wages and benefits may not be as clear as in the advanced manufacturing industry, for example, the potential for quality jobs in the industry has been demonstrated by several extremely successful and profitable companies. The lessons and policies of these companies could be adopted by other retailers, large and small, to improve retail jobs and the quality of life of employees, while also enriching the overall economy.

 

For more information about creating quality jobs in the retail industry and the retail companies mentioned in this post, please visit the following sources:

 

“Why ‘Good Jobs’ are Good for Retailers” - an article in the Harvard Business Review, authored by MIT professor Zeynep Ton. The article includes strategies retailers have implemented to improve the quality of retail jobs while competing on low prices and remaining profitable. The article also includes case studies on Trader Joe’s, Quik Trip, Costco, and Mercadona (Spain’s largest grocery chain).

 

Taking Inventory of Retail Jobs: A Discussion on Work in the Retail Industry - a panel discussion hosted by the Aspen Institute on creating high quality jobs in the retail industry. Panelists include Carrie Gleason of the Retail Action Project, Kim Owen of Quik Trip, and Zeynep Ton of MIT

 

Recovery Has Created Far More Low-Wage Jobs Than Better-Paid Ones - a New York Times article documenting the growth of low wage jobs as the economy has recovered from the Great Recession

 

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5 Tips for Hiring Effective Economic Developers

by Rob Camoin 15. July 2015 12:14

With the recession behind us and public finances in a healthier situation, new economic development hiring positions appears to be strengthening. Both for clients, serving on economic development boards and for Camoin Associates, I've been involved in numerous economic development position searches. Getting the right people in your organization is the number one key to effectiveness and success. Whether you are serving on a board and part of an Executive Director job search, or a small EDO looking to fill an entry level position, here are some things I've learned from undertaking multiple searches over the past 20 years.

1. The best-looking resume is typically not indicative of the candidate's abilities and vice versa. Don't draw immediate conclusions from a resume. A candidate may look great and appear and have all the right economic development experience, because someone has been in the field for years, doesn't make them a good fit for your organization and community. With that said, if we see typos they are not likely to go much further in the selection process.


2. Look for skills and abilities, not experience. Leadership, analytical abilities, and writing skills all supersede prior EDO work experience. If you are looking for someone to run an organization they need to be capable of leading and managing effectively. Don't assume that because they held that role as a lead or number 2 that they excel in those areas. If you are looking for a staff level position, attention to detail, verbal and oral communication, organization, and the ability to think through assignments independently are preferable skills. In short, evaluate candidates based on skills, not experience.


3. As with resumes, don't rely on an interview to assess future job performance. I recall a very informative study that was part of a Masters-level Human Resources class. The ten-year study indicated that how a person did in an interview was only predictive of their performance 18% of the time. Sometimes good candidates just don’t sell themselves or interview well. Likewise, I’ve seen less-skilled candidates say all the right things and then go on to underperform.


4. Because of the type of work we do at Camoin, all the searches we undertake includes a research and written assignment. We have found this to be a strong predictor of performance. If the ability to follow instructions, work and think independently, research, and write concisely are important skills for your position, give the finalists a written assignment. If leadership is critical, give the candidates an assignment that allows you to better evaluate their leadership and management abilities.


5. References, references, and references. Usually by the time you have reviewed resumes and conducted interviews the last thing you want to do is make phone calls with a candidate’s references. It takes time to coordinate 3 reference calls for 3 or more finalists and 9 times out of 10 the feedback you get back glowing. The same study noted above also found that the most effective predictor of future performance is past performance. Throughout your evaluation process, you should be spending most of your time talking with references at length. Be prepared to ask specific questions about the candidate’s experience, and even more importantly, use your network to learn more from others that may have worked with or know the candidate.

Evaluate the candidates from the moment you read their resume until the employment agreement is executed. How a candidate handles the compensation negotiation is part of the process. Don’t be surprised to learn more about the candidate in the final moments, and be prepared to walk away if it just doesn’t feel right. You are better to restart a 3- to 4-month search than deal with an imperfect fit for both the candidate and your organization.

 

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Economic Impact of the Nassau County IDA

by Dan Stevens 15. July 2015 11:14

Much of the new economic activity generated in New York State is a direct result of the efforts of the state’s Industrial Development Agencies (IDAs). Check out this infographic highlighting the economic impacts of the Nassau County IDA’s incentive programs on the county.

 

Click here for the full-size image..

 

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Albany MSA Part II: Return of the Demographics

by Alexandra Tranmer 15. July 2015 10:45

This month we revisit the Albany-Schenectady-Troy MSA, Camoin Associates’ home turf, and explore the region’s demographics. Last week, I explored the housing market trends on a national and regional level but we also need to understand the demographics of the region to understand the dynamics between the housing market and region's population. In this Part II article, I'll look at some demographic trends in age distribution and population. I know you are all religious readers of the Navigator, but in case you missed last week’s housing market trends article, click here.

 

Currently, the population of the Albany-Schenectady-Troy MSA is just over 886,000 people. By 2020 that number is expected to rise to over 900,000, a positive change of 2%. In the previous 5 years, ending in March 2014, Albany and Saratoga counties accounted for 95% of the population growth that occurred in the total MSA.1

 

The average household size is not expected to change in the next five years, while the number of households is expected to increase by 2%, the same rate as population growth. The median household income is projected to rise by over $10,000, to $72,134, an increase of 18%, over the next five years.

 

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The Albany MSA’s population is comprised of a higher percentage of 20-24 year olds when compared to the rest of New York State or the nation. Figure 1 also shows that the MSA has a slightly higher percentage of 50-64 year olds than the other geographies. However, the MSA lacks 30-44 year olds in comparison to New York and the U.S. When looking specifically at the MSA over the next ten years, the green line in Figure 2 shows that the region is projected to lose the large population of 20-24 year olds that it currently retains, while it will gain people in the cohort of 30-34 years old. The population will age significantly, gaining individuals ages 60-84 years old.

 

 

 

The Capital District Regional Planning Commission (CDRPC) recently acknowledged that the region is losing the Baby Boomer and Millennial populations—key demographics driving the housing market trends mentioned last week—to other locations. While the Capital Region cannot compete with those looking for warmer climates—but really, who can blame them for escaping −20° weather?—the CDRPC also notes that young professionals are leaving the area for places that offer a variety of amenities that contribute to a higher overall quality of life.2 This drain of Millennials is a concern for the business community according to Rocco Ferraro, the director of the CDRPC. It is true that workforce and business development is highly dependent on young workers, especially since the Millennial generation officially began to comprise the largest portion of the American workforce in early 2015. There are approximately 53.5 million millennials in the workforce and 44 million Baby Boomers. 3

 

While the relocation of Millennials is a concern for those in the planning and business community, CDRPC reported in their May/June 2015 newsletter that construction of multi-family units are on the rise in the Capital Region, mainly due to Millennial demand. The organization also found that over the last four years, permits for multi-family structures have comprised an average of 47% of the total permits issued.4 This “unprecedented” focus on multi-family units supports the national trends reported last week, and reinforces that the Capital Region real estate market has been driven by the generation aged 18-34 years old.

 

In terms of income, the Albany MSA outperforms New York State and the United States. New York State’s median income is nearly $3,000 less than the Capital Region’s, while the United States median income lags behind by just over $8,000. From Figure 4, we can see that the Albany-Schenectady-Troy MSA has a significantly higher portion of the population that earns between $100,000 and $149,000, when compared to New York State and the U.S. as a whole. Across all three geographies, the income bracket that earns $50,000-$74,999 is the largest cohort. Just less than 10% of the MSA's population earns $15,000 or less, while the same cohort represents 13% of New York State’s population and 12.8% of the United States overall population. Due to the relatively high incomes in the Albany MSA, the market for higher end condo or apartment units may be the most lucrative for developers, taking advantage of market demand.

 

 

 

After examining this data, it is clear that the local housing market and the demographic makeup of the Albany MSA reflect aspects of major national trends. While there are certainly aspects of the Capital Region that make it unique and desirable, the future of the area will be partially dependent on the success of integrating major generational demands into the housing market and business community.  

 

For more demographic information and data on the Capital Region, check out http://cdrpc.org/.

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Supply Chain Analysis 101

by Jim Damicis 24. June 2015 10:16

Co-authored by Jim Damicis and Tom Dworetsky.

What is Supply Chain Analysis?

In an economic development context, supply chain analysis is a tool for identifying growth opportunities related to a given industry within a region. Every industry is part of a greater supply chain—the sequence of industries involved in the production and distribution of a good or service, from raw materials to final products. That industry purchases inputs (raw materials, parts, knowledge) from certain industries, creates an output, and then sells that output on to another industry. Additional value is added to the output as it moves along the supply chain until it reaches its final buyer: the consumer.

 

Supply chain analysis can help a region understand how a regionally significant industry is connected to other industries located both inside and outside the region. By understanding the way the industry fits into its overall supply chain, the region can begin to make strategic decisions about the types of industries it should seek to attract, retain, and help expand.

Camoin Associates recently completed a supply chain analysis of the forestry and wood products industries for Eastern Maine Development Corporation (EMDC), the economic development organization serving Maine’s four Eastern counties. This case serves as a simple example of the use of supply chain analysis. The region is dealing with the closure of a number of pulp and paper mills that were once a manufacturing mainstay. Since these mills will no longer be purchasing forest products (such as wood) and related services (such as transportation and logistics), the region’s forestry industry will need to find new customers. By conducting a supply chain analysis on the forestry industry, we were able to identify the types of wood-related industries that already exist in the region, as well as those that do not have a strong presence but could potentially be a good fit and further understand needs and opportunities for business expansion and attraction for regional economic growth.

Tools and Techniques

 

Supply Chain Mapping – One of the first steps in a supply chain analysis is to understand how the study industry fits into its overall supply chain. There is a wealth of information online for practically any industry, so doing an internet search on supply chain diagrams for your study industry is a good place to start.

For certain industries, like forestry and wood products, the way the supply chain fits together is fairly obvious, and the component industries can be identified fairly comprehensively without having a lot of background knowledge. Other supply chains are far less familiar to an industry outsider and would require more research to understand the production processes involved. IBISWorld industry reports are an excellent resource and provide information on the key buying and selling industries (at the 5-digit NAICS level) for any industry of interest.

The goal of supply chain mapping is to identify the specific NAICS codes that comprise the various pieces of the supply chain. In the forestry example, we developed three clusters that form the basis of the industry’s supply chain: Natural Resources, Wood Products, and Logistics. This can then be used for further analysis around employment trends, drivers of growth, and specific companies both within and outside the region.

Example of a supply chain diagram 

Gap Analysis – The purpose of supply chain gap analysis is to determine where key supply chain industries source their inputs (within or outside the region). EMSI’s Industry Supply Chain module is a useful tool for conducting this analysis. The tool allows the analyst to input the study industries and geography of interest, and it will tabulate purchases made from other industries as well as the share of those purchases made in-region and out-of-region. Significant supplying industries with a large share of purchases being sourced from out-of-region present potential opportunities for business attraction. Industries providing supply chain inputs from within the region represent companies that will likely need support in identifying markets outside the region in the event of significant changes within the region such as a mill closure.

Sample gap analysis from EMSI

Import–Export Analysis – Another useful tool for supply chain analysis is import–export analysis. This technique involves examining trade data to track the flow of an industry’s products into and out of a region. This provides insight into the types of inputs that need to be imported and could point to the opportunities for attracting businesses within certain industries. This information is available from sources including WISER and DataMyne can also often be accessed from your state international trade office.

Market Research and Interviews – Once potential expansion industries are identified, market research should be conducted to determine whether the industries would be a good fit for the region given existing market conditions as well as the regional, national, and global demand drivers and projections. Interviews with industry representatives are also helpful in determining the requirements necessary for an industry to consider expanding in a region. IBISWorld and Hoovers are good sources for this market research. Check your local and university college libraries for other sources.

Applications

The end goal of a supply chain analysis is to identify a targeted list of companies for attraction and expansion and ultimately convince them to set up shop or expand in the region, or in some cases to identify companies that need access to new markets in order to remain in the region. The tools and techniques mentioned above are a way of narrowing down all the potential industries to just a handful that would be the best fit for the region. A database of business listings, such as ReferenceUSA, can then be used to compile a list of companies that fall within the targeted industries for ongoing marketing, attraction, and business support efforts.


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Trends in Growing Local Economies

by Guest Author 24. June 2015 09:26

Jim Damicis recently delivered a presentation to the New Hampshire Economic Development Association on approaches and resources for economic developers tasked with growing local economies.

 

Check it out below.

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Home, Sweet Home?

by Alexandra Tranmer 23. June 2015 16:38

For many students graduating from university this month with undergraduate and graduate degrees, it is time to face the real world, find a job, buy a house… or is it? Buying a house is becoming increasingly difficult for young adults, which in turn is having profound impacts on the national real estate market. Combined with other generational, societal, and economic factors, these changes have reshaped the real estate market over the last ten years, with more change expected in the next decade. But do local trends reflect what’s going on at the national level?

 

In the first article in a two part series, I’ll first briefly discuss national real estate trends and then look at real estate data from Camoin’s local neighborhood, the Albany-Schenectady-Troy MSA. In next month’s article, I’ll explore the demographics of the area and examine the relationships between population and real estate.

 

National Real Estate Trends

It has become clear that two key cohorts, the Baby Boomers (ages 51-69) and Millennials (ages 15-35), will dominate the housing market in the coming years, and have already begun to have an impact on the type of housing styles being constructed across the country.

 

Older Millennials are now entering the housing market, seeking to purchase or lease their first property. This new generation of homebuyers is faced with a variety of factors affecting their housing preferences, some of which include:  

  • Tighter lending policies following the financial crisis are making it more difficult to qualify for loans. 1  

  • Rents are also increasing as we emerge from the financial crisis, making it difficult to save money for a down payment.  

  • Student loan debt is at an all-time high and some studies suggest that this is discouraging homeownership among young adults.2,3

  • Millennials saw what happened to their parents with the mortgage and foreclosure crisis and many families are still stuck in houses worth less than the mortgage.4

  • By waiting longer to get married, having fewer kids, and focusing on building careers, many Millennials do not have a need for larger homes.  

  • Millennials prefer to live in an environment that is pedestrian friendly and amenity-rich.5

     

As a result of these trends, a single-family home is unattainable or simply undesirable for many individuals, even if they have decent full-time jobs. According to the Wall Street Journal, the median sales price of existing single-family homes increased by over 11% between 2012 and 2013. Prices in increasingly popular second-tier cities rose at an even faster rate.6

 

Another cohort having a dramatic impact, Baby Boomers, have been a large force in the economy for over fifty years. This generation is now having a substantial impact on the real estate market across the country because they are staying in the workforce longer than the typical retirement age and increasingly are able to live independently for a longer period of time. At a rate almost as rapid as Millennials, Baby Boomers are seeking alternatives to the single-family home to continue living independently.

 

Real estate giant Cushman and Wakefield reported that with the American economy on an upward swing, the demand for housing has been bolstered over 2014 and will continue to increase. While there is a demand for housing, there has been a shift in the percentage of individuals and households actually owning property. According to data from the U.S. Census Bureau there was a net decline in owner-occupied housing while there was a net increase in renter occupied households between 2007 and 2013. Part of the reason behind the uptake in renter-occupied units is the tighter lending rules that were put in place following the housing market crash in 2008.

 

Regional Real Estate Trends and Statistics  

The Albany Housing Market Area (HMA), which aligns with the Albany-Schenectady-Troy Metropolitan Statistical Area, consists of Albany County, Rensselaer County, Saratoga County, Schenectady County, and Schoharie County. Nested in the HMA are the submarkets of Albany County, Mohawk River and Saratoga County. The population of the HMA is about 880,000.

 

The U.S. Department of Housing and Urban Development (HUD) reports that since 2010, half of the new households formed in the Albany HMA entered into the rental market, which in turn boosted construction in multifamily residential units. It is also interesting to note that the incomes of rental households increased 0.5% more than owner households from 2009-2013.

 

The overall rental vacancy rate (including all types of housing) in the Albany HMA is considered balanced at 7.1%. A vacancy rate of 10% is considered “healthy” as it allows the right level of choice for buyers without an over-supply of housing stock that can drive prices down. However, the rental market specific to apartments has a vacancy rate of 3.8%, showing high and unmet consumer demand for rental units. According to the most recent American Community Survey, of those that rent in the MSA, most pay between $800-$899/month.

 

In the Albany HMA, it is predicted that there will be demand for 2,690 rental units over the next two years, and there were already about 1,450 units under construction as of July 1, 2014. HUD notes that many apartment complexes built in the last five years are located near the Hudson and Mohawk Rivers. Adaptive reuse of former industrial buildings in the Troy and Schenectady area have also been notable apartment construction projects.

 

Of the submarkets, Saratoga County is expected to have the largest demand for rental units. The demand ranges from 1,050 units in Saratoga County and 980 units in Albany County, to 660 units in the Mohawk River submarket. Saratoga County also has the greatest demand for sales units, followed by Albany County and Mohawk River. Saratoga County growth in both the rental and owner occupied markets can be attributed to relatively low property tax rates and job growth in the local area.

 

Between June 2013 and June 2014 in Albany County, sales of new and existing homes, townhomes and condos increased 9%. However, the average home price decreased 2% in that same time period, averaging $202,900. In Saratoga County, the sales of new and existing housing units in the same period was down 11%, while the average existing home price increased 3% to $251,700. Lastly, in the Mohawk River submarket, sales of housing units were up 7%, while the average existing home price remained fairly steady, decreasing 1% from the previous year, to $147,900.

 

Next month I’ll examine the demographics of the Albany-Schenectady-Troy MSA and revisit this data to see what it means for the future of local real estate.

 

The data for the Albany-Schenectady-Troy MSA is sourced from the U.S. Department of Housing and Urban Development’s Comprehensive Housing Market Analysis for Albany, NY as of July 1, 2014.

 

For more national and real estate trends in your local area, check out HUD’s website for regularly updated materials at http://www.huduser.org/portal/home.html.

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Featured Indicator: Educational Attainment of the Foreign Born

by Tom Dworetsky 23. June 2015 16:10

Last month we mapped the foreign-born labor force and found out which metros have the highest share of immigrants. In continuing with the theme of immigration and economic development, we’ll now take a look at the foreign-born population in terms of educational attainment.

 

The chart below shows the share of the native and foreign-born 25-and-up population achieving each level of educational attainment. The downward sloping line representing the foreign-born population indicates that the least educated comprise the greatest share of the population while the most educated make up the lowest. About 31% of the immigrants have less than a high school education, while just 11.5% have a graduate or professional degree.

 

 

In contrast, the line representing the native population is an upside-down “U” shape. The shares of the native population on each end of the education spectrum are roughly equal: 10.6% have less than a high school education, while 10.7% hold a graduate or professional degree. The largest share (31.1%) is made up of those with some college or an associate’s degree.

 

Unsurprisingly, the share of the foreign-born population not completing high school is almost three times greater than that of the native population. What is surprising, however, is that the percent of the population with a graduate degree is higher (if only slightly) for the foreign-born than it is for natives (11.5% compared to 10.7%).

 

There is huge variation in educational attainment levels of immigrants across U.S. metros. The top ten MSAs (metropolitan statistical areas) by share of the foreign-born population with a bachelor’s degree or higher are shown in the table below. While geographically disparate, all ten are relatively small metros that are home to major universities. Immigrants residing there likely work as university faculty or may be students or recent graduates. The immigrant population of Ithaca, NY, home to Cornell University and Ithaca College, has the highest educational attainment, with 73.6% holding a bachelor’s degree or higher. This compares to 29.1% for immigrants nationwide.

 

 

The MSAs in which immigrants have lower levels of educational attainment are shown in the next table. Some of these metros rely heavily on unskilled immigrant labor for agricultural production. Yakima County, WA, for example, is a top producer of apples and hops. Others have manufacturing industries that employ unskilled immigrants willing to perform menial tasks for low wages. Dalton, GA, for example, is known as the “carpet capital of the world”—Hispanic immigrants form the backbone of the carpet industry there.

 

 

Why Is This Important?

 

It’s no surprise that where immigrants choose to settle comes down to economic factors; they migrate to places where they can find jobs that match their skill levels. Immigrants with low education levels are drawn to areas with abundant low-skill farming and manufacturing jobs, while highly educated immigrants are attracted to highly educated cities with major universities and knowledge-based economies.

 

As the national immigration debate rages on, it’s interesting to consider how the economies of different cities will be impacted by tightened or loosened immigration restrictions. Laxer immigration laws will mean that cities with a high concentration of industries relying on low-skilled labor are likely to see reduced labor costs as abundant cheap labor floods the market. As a result, native-born Americans with a high school education or less are likely to see their wages drop.

 

At the other end of the spectrum, companies like Google are practically begging Congress to increase the cap on H1-B visas, which are non-immigrant visas that allow U.S. employers to temporarily employ foreign workers in high-skill specialty occupations. High-tech companies are often unable to adequately fill highly specialized positions drawing from the U.S. labor pool alone. Many argue that allowing more H1-B visas will only make the U.S. more competitive in the global knowledge economy, while others contend that the program leaves fewer jobs for the native-born.

 

Whether a region stands to gain or lose from immigration reform depends greatly on the industries that comprise its economic base and the skill levels of its workers. How are important are foreign-born workers to your region’s economy?

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Humans Need Not Apply

by Michael N'dolo 11. June 2015 10:46

As we have discussed in this blog before (see below), one of the greatest challenges economic developers face these days is the immense transformation of our economy that has allowed us to produce more and more goods and services with fewer and fewer workers. This is perhaps most pronounced in the field of manufacturing, where it has been occurring slowly over the past fifty years. However, rather than abating over time, the trend seems to be accelerating and spreading across virtually every sector in our economy.

Nowhere is this better illustrated than in this fascinating short video I recently came across thanks to a co-worker. As we continue to innovate and as sophisticated technology becomes cheaper and cheaper, automation will accelerate. So, the basic paradigm of "full employment" of everyone in society of working age will absolutely have to change. What does it mean? Part time work for everyone? Reduced work life? Mass unemployment? Social unrest? A utopia of "everyone-gets-all -they-need" and "People work where their passion lies"?

Enjoy! Below are two posts I previously authored on the same topic:


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About Camoin Associates

Camoin Associates is a professional service firm that utilizes its understanding of the public and private sector investment process to assist businesses and developers in capitalizing on funding, financing and tax programs established to encourage private investment. We also specialize in advising economic development organizations and municipalities in creating strategies, policies and programs that support investment and job creation.   [Click Here for More]