1. 2015 Labor Day Report: Annual Report on the State of Montana’s Economy (Plus Information for Recruiting and Retaining Workers) Barbara Wagner Chief Economist September 15, 2015 Great Falls, MT

2. Today’s Agenda 1.Overview of Montana’s Economic Performance 2.Worker Shortage Ahead 3.Tools to Help You Manage your Workforce 4.Some Ideas to Consider

3. Montana’s Economic Growth Continues U.S. and Montana Personal Income Growth Source: Bureau of Economic Analysis 3 9 th fastest growth over five years

4. Personal Income by Quarter Source: Bureau of Economic Analysis

5. Personal Income by Quarter Source: Bureau of Economic Analysis

6. Personal Income by Quarter Source: Bureau of Economic Analysis

7. Oil Price Decline Slowed Employment Growth, but Not Wage Growth Source: Quarterly Census of Employment and Wages, BLS and MT DLI

8. Employment and Labor Force Expanding

9. Job growth of over 2,000 jobs per month in 2015

10. Annual Total Employment Growth in Montana and U.S. Since 2004 U.S. MT Source: Local Area Unemployment Statistics, BLS and MT DLI, Current Population Statistics, BLS 10 14 th among states for total employment growth over 10 years

11. Unemployment Rate at Ideal Levels Source: Local Area Unemployment Statistics 5.3% 4.0% 13 th lowest unemployment rate among states in 2014

12. Unemployment Rate at Ideal Levels Source: Local Area Unemployment Statistics 4.0% Normal Unemployment Range

13. Strong Wage Growth Montana Average Annual Wages Source: Quarterly Census of Employment and Wages

15. Real Wage Growth Higher Than Inflation Montana Average Annual Wages Source: Quarterly Census of Employment and Wages

16. Real Wage Growth Higher Than Inflation Montana Average Annual Wages Source: Quarterly Census of Employment and Wages

17. Real Montana Wage Growth by Ownership

18. Strong Wage Growth in All Regions of State Source: Quarterly Census of Employment and Wages, MT Dept. of Labor and Industry

19. Take Away Points Montana’s economy is doing pretty awesome. – 5 th fastest wage growth over five years Wage growth driven by private sector – 5 th fastest GDP growth over five years – 7 th fastest personal income growth over five years – 13 th lowest unemployment rate last year

20. Job Growth Over Last Year By Industry Source: Quarterly Census of Employment and Wages, MT Dept. of Labor and Industry

21. Industry Performance GDP Growth and Employment

22. Unemployment Rates for Regions and Reservations

23. Job Growth by Region Source: Local Area Unemployment Statistics, Montana Dept. of Labor and Industry

24. Reservation Areas Percent Employment Change over Prior Year Source: Local Area Unemployment Statistics for Reservation Areas, Montana Dept. of Labor and Industry

25. South Central Region and Cascade County Employment Change over Prior Year Source: Local Area Unemployment Statistics, Montana Dept. of Labor and Industry

26. Industry Performance Jobs Added in Cascade County over Last Five Years Source: Quarterly Census of Employment and Wages, MT Dept. of Labor and Industry

27. Upcoming Challenges 1.Strengthening dollar 2.Low oil and commodity prices 3.Worker shortage

28. World GDP Growth Source: World Bank Global Outlook, June 2014

29. U.S. Economy Doing Better Than Rest of World Dollar strengthens against other currencies – Harms exporting industries – Imports less expensive Reduced global demand for commodities

30. Montana Foreign Exports in 2012 Including Nontangible Services Source: Exports including services from the Brookings-Rockefeller Project on State and Metropolitan Innovation. Mining, Metals, and Chemical Manufacturing 16%

31. Impacts of Lower Commodity Prices Low oil prices slowed personal income and employment growth in 2 nd half of 2014. – Job losses in Eastern region have stabilized – Related job losses in temporary employment services Mining lost 311 jobs in 2014, but not in oil and gas mining. Petroleum refining expected to remain stable. – Refining comprises over half of manufacturing output. – 3.9% of GDP in 2014 (compared to 1.2% for oil and gas extraction)

32. Labor Force Participation Recovering from Recession in Montana Source: Local Area Unemployment Statistics for Montana and Current Population Survey for U.S., Bureau of Labor Statistics and MT Dept of Labor and Industry (MT DLI) Montana and U.S. Labor Force Participation Rates Since 1976

33. U.S. Labor Force Participation by Age Group Fewer Working in Younger Generations Source: Current Population Statistics, U.S. Bureau of Labor Statistics

34. Montana’s Aging Population Source: Census and Economic Information Center, MT Dept. of Commerce, April 2013 Under 2020 to 64Over 65

35. Worker Shortages Expected Assumes labor force participation will increase in response to more jobs and higher wages. Source: Montana Dept. of Labor and Industry Employment Forecasts

36. Job Forecasts Expect Slightly Slower Growth Due to Worker Shortage Expect per year: 6,500 more jobs 4,100 new workers

37. Solutions to a Worker Shortage 1.Recruit more people into Montana. – Other states also have aging populations. – Wages are higher in other states. 2.Recruit more workers into the labor force. Source: Current Population Survey and 2011-2013 American Community Survey

38. Solutions to a Worker Shortage 3.More full-time employment. – 6 th highest percent of part time work in the nation. – Shortest work week in the nation.

39. Addressing the Gender Wage Gap 39 Pay Gap Ratio Percent Female Source: ACS, 2013 3-Year Estimates. Some small industries removed for simplicity.

40. Solutions to a Worker Shortage 4.Reduce time out of labor force for retraining. – More on-the-job training like internships and apprenticeships. – More business-paid training for specific skills. 5.Improve labor productivity to produce more with fewer workers. – Technology improvements – Better job matching – More training for professionals

41. Take Away Points U.S. and Montana economies have momentum to weather international troubles. Tight labor markets expected. – Workplaces may have different culture in the future as businesses work to recruit atypical workers. – Creativity in hiring and retention practices

42. What does this mean for you? Finding workers www.lmi.mt.gov Wages by Occupation by Region

43. Wage Rates by Region

44. Cost of Living Increases www.bls.gov/bls/escalation.htm

45. Cost of Living Increase versus Raise Cost of Living Increase Adjustment using an inflation metric to keep wages at the SAME level after inflation. Based on the goods purchased by a typical U.S. consumer Raises Increase in pay because of performance. Typically INCREASES standard of living for worker if the raise exceeds inflation.

46. Regional Price Changes U.S. and Metro prices only. Wage growth and price increases similar in most circumstances. – But not necessarily in E. Montana. New data being released soon to provide more county price information.

47. Is your turnover high?

48. Separations and Hires Rate Still Below Pre-Recession Levels Low separation and hire rates despite good unemployment suggests labor market frictions. (i.e. skills gap, geographical gap, wages not responding, etc.) Source: Quarterly Workforce Indicators, U.S. Census LEHD program.

49. What Jobs are In Demand

50. Today’s Agenda 1.Overview of Montana’s Economic Performance 2.Worker Shortage Ahead 3.Tools to Help You Manage your Workforce 4.Some Ideas to Consider

51. Employment Status of the Montana Population

52. Ideas to Consider for Recruiting Workers Provide on-the-job training to hire from within. – Worker shortage will likely shift more worker training to employer. – Increase productivity with skill upgrading for existing professionals. Consider new benefit options. – Transportation in rural areas or for disabled workers. Different benefits for different workers? – Mentoring for young workers vs. leadership training for older professionals. – Student loan repayment instead of retirement benefits for young workers. – Flex or family leave for older workers with ailing parents/spouses. – Maternity or paternity leave for mid-level professionals.

53. Ideas to Consider for Recruiting Workers Remember that you are recruiting among people who are already working. – Make it easy to learn about the job and apply. – Look for similar occupations that pay a little less, then train workers. – Focus on skills, not on tasks, to recruit similar workers from other industries/occupations. Use tools to ensure your pay is equitable. Recessions cause “requirement creep.” Make sure you really need the skills/experience requested.

54. Ideas to Consider for Job Posting and Applications Post a wage range. – “Analyst” jobs can pay anywhere from $20,000 per year to $120,000 per year. – Also reduces gender wage gap due to differences in negotiation styles. Ask for references at appropriate time. Wage rates at prior job vs. expected salary.

55. Retaining Workers Pay for Performance? – Research suggests managerial performance review is often biased – Quantitative and Qualitative measurement Pay transparency vs. Pay Process Transparency – Workers most engaged when they understand WHY pay is awarded, and what to do to get there. Paid parental leave increases likelihood of parents returning after FMLA.

56. MORE INFORMATION AVAILABLE: WWW.LMI.MT.GOV WWW.LMI.MT.GOV