Economist: Clark County recovery could take many years
Sunday, May 22, 2011
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The earliest and most realistic timeline for Clark County’s economy to recover is five years — and even then the odds aren’t good, according to Scott Bailey, regional labor economist for the state Employment Security Department.
To recover in five years and drive down the unemployment rate to 5 percent, the county’s job growth would have to average 4 percent a year — or 5,300 jobs annually — Bailey wrote in an analysis he conducted at the request of The Columbian.
Bailey’s report comes as Clark County struggles to shake off the economic doldrums. In February, the county’s jobless rate was 12.9 percent. That month, more than 28,000 county residents were unemployed and looking for work.
To get a better handle on what the future might hold, The Columbian asked Bailey, who’s tracked the county’s economy since 1989, to crunch the numbers for a forward-looking report.
While achieving an economic recovery in five years is “within the realm of possibility,” Bailey wrote in his report, “this is a daunting figure.”
Tough road ahead
The answer rests on two points — one grounded in history, the other rooted in the present. Clark County’s historic, long-term employment growth rates for the 10-year and five-year periods before the Great Recession were each under 4 percent.
From February 1998 to February 2008, the county’s nonfarm employment grew at an average annual rate of 2 percent. This period included the 2001 recession.
From February 2003 to February 2008, job growth averaged 3.2 percent per year.
Those historic growth rates suggest it won’t be easy to reach the 4 percent annual job growth necessary to recover within five years.
Making it even more difficult to reach that level of job growth are the local and national economic challenges Clark County faces today.
“Given all the challenges in the current economy — the phasing out of fiscal and monetary stimulus, the continued weakness in the housing market, the extended fragility of financial markets, the drag from cutbacks in state and local government spending and perhaps federal spending, the odds of a recovery within even a five-year period are not good,” according to Bailey.
Bailey’s analysis is not a prediction of when the county will return to full employment. Instead, it shows how long a recovery might take under different employment growth rates. The unemployment-rate target is 5 percent for each of Bailey’s recovery scenarios.
‘A huge hole’
Just as the economic downturn was under way, Clark County’s nonfarm employment peaked at 135,600 jobs in February 2008. In February 2011, employment was estimated at 125,400 — a loss of 10,200 jobs or 7.5 percent.
The Great Recession “left a huge hole in the Clark County labor market,” Bailey wrote in his report. “Recoveries after meltdowns are notoriously slow.”
For the county to restore its job counts, employment would have to increase by the 10,200 jobs that were lost to the recession, Bailey wrote, “plus whatever would be needed to match population growth.”
Bailey’s analysis included an assumption that Clark County’s population would grow as projected by the state Office of Financial Management. Then he applied county labor force participation rates by age and sex to the population projections to determine how many residents would be in the labor market.
He then figured out how many nonfarm jobs would be needed to match the pre-recession labor market of 2006.
Using those projections, Bailey addressed the question of how fast employment would have to grow for Clark County’s economy to recover in a given number of months.
Here are the recovery scenarios illustrated by Bailey:
- For the county’s economy to recover in one year — by February 2012 — annual job growth would have to be 13.2 percent, or 16,600 jobs per year — “clearly an unrealistic rate.”
- To recover by February 2013, annual job growth would have to be 7.4 percent, or 9,600 jobs per year, “also unrealistic.”
- To recover by February 2014, annual job growth would have to be 5.5 percent, or 7,200 jobs per year.
- To recover by February 2015, annual job growth would have to be 4.5 percent, or 6,100 jobs per year.
- To recover by February 2016, annual job growth would have to be 3.9 percent, or 5,300 jobs per year — “within the realm of possibility” but a “daunting figure.”
What makes the timeline for Clark County’s recovery even more challenging is the possibility that “another recession would occur before recovery from this recession is complete.
“On the other hand,” Bailey wrote, “if population grew at a slower rate, then achieving a recovery could happen more quickly.”