Regional Competitive Industry Analysis

Jackson and Josephine Counties

October 2016

Jackson Josephine

Michael Meyers, Economist (503) 229-6179

Economic Strategies and Policy Division michael.meyers@oregon.gov One World Trade Center

121 SW Salmon Street, Suite 205 Jill Cuyler, Research Analyst Portland, OR 97204

(503) 229-5484 jill.cuyler@oregon.gov

Table of Contents

EXECUTIVE SUMMARY .............................................................................................................. 3

INTRODUCTION ............................................................................................................................. 4

SECTION 1: SOURCES AND METHODOLOGY ........................................................................4

Regional Indicators .............................................................................................................................. 4

Competitive Industry Indicators ..................................................................................................... 5

Employment Growth Projections .................................................................................................... 6

Caveats and Limitations ..................................................................................................................... 6

SECTION 2: OVERVIEW OF THE REGIONAL ECONOMY ....................................................7

Employment, Total Payroll and Average Wage per Job .........................................................7

Employment Growth............................................................................................................................ 7

Manufacturing Employment and Wages .....................................................................................8

Unemployment Rate ............................................................................................................................ 9

SECTION 3: REGIONAL COMPETITIVE INDUSTRIES ........................................................ 10

Location Quotient Analysis ............................................................................................................. 10

Shift-Share Analysis .......................................................................................................................... 11

Regional Employment Projections by Industry ......................................................................12

Regional Competitive Industry Analysis Jackson and Josephine Counties

Executive Summary

This region in southwest Oregon includes the Medford Metropolitan Statistical Area (Jackson County) and the Grants Pass Metropolitan Statistical Area (Josephine County). Jackson County accounts for over three-quarters of total private sector employment in the region, and has a higher average wage than Josephine County. Forestry and wood products, food and beverages, and agriculture have been staples of the economy here, along with competitive industries in performing arts and e-commerce. Between 2005 and 2015, private sector employment in the region grew by just 0.5 percent, well below the statewide average of 8.8 percent. The average wage in the region is also 23 percent lower than the statewide average.

Manufacturing was 11 percent of the region’s private While forestry and wood sector employment in 2015, slightly less than the products continue to be statewide average of 12 percent. With a location competitive industries in quotient of 1.08, manufacturing is important to the the region, food and region’s economy and competitive advantages. Wood beverages, performing product manufacturing is the largest manufacturing arts, and professional subsector in the region, followed by food and services provide unique transportation equipment manufacturing. The region opportunities for growth. has a higher than average number of very small

manufacturers (under 20 employees).

Fruit and vegetable preserving and specialty food manufacturing experienced the highest competitive advantage percent and job gains between 2005 and 2015 in the region. In the forestry and wood products industry group, some industries experienced competitive advantage gains, like veneer, plywood, and engineered wood product manufacturing and support activities for forestry, while others such as logging and sawmills experienced losses in competitive advantage. Metalworking machinery manufacturing, beverage manufacturing, and performing arts companies were additional industries that had high competitive advantage percent gains between 2005 and 2015. Electronic shopping and mail-order houses experienced the largest competitive share percent and job losses between 2005 and 2015. Amongst emerging industries in the region, motor vehicle parts manufacturing, management, scientific, and technical consulting services, pharmaceutical and medicine manufacturing, and the combined industries of software

and computer systems design experienced the largest competitive advantage percent and job gains between 2005 and 2015.

Private sector payroll employment in the region is projected to grow by 10 percent between 2014 and 2024, significantly lower than the statewide rate of 16 percent. Health care is projected to grow the fastest and add the most jobs in the region. Manufacturing is projected to grow by 11 percent, slower than the statewide average of 12 percent.

Introduction

The purpose of this report is to present a competitive industry analysis of the regional economy consisting of Jackson and Josephine counties. Regional trends in employment and wages are analyzed and compared to trends in Oregon and the U.S. This report provides data and analysis to help economic development practitioners, policy makers, and businesses identify strengths, weaknesses, opportunities, and threats that pertain to their regional economy. The information in this report can be used to help guide strategic economic development efforts in the region.

This report is composed of three sections. Section one outlines the data sources and methodology behind the creation of this report. The second section provides an overview of the regional economy by analyzing employment and wage trends over time. Section three supplies a framework to identify industries in the region that may have a competitive advantage in developing or expanding regional industry specialization. Ten year employment projections of the region’s main industries are provided to help identify industries with above average growth potential.

Section 1: Sources and Methodology

This report is based on analysis of statistical data from the U.S. Bureau of Labor Statistics (BLS), Oregon Employment Department (OED), and U.S. Census Bureau. The majority of data is presented for traded sector industries only. However, non-traded sector employment data is provided as part of OED’s projections (Table 9).

The methodology for this report uses a series of indicators to provide a framework for evaluating the competitive strengths and growth opportunities of the regional economy. The following indicators are used for this report.

Regional Indicators

Section two begins with a comparative analysis of the regional economy focusing on private sector business establishments, employment, total payroll, and average wages to

show the geographic distribution and characteristics of employment in each region. Recent employment and wage trends are also analyzed and compared to the state.

This is followed by an analysis of manufacturing employment and wages. Employment and average annual wages of leading manufacturing subsectors are presented, along with their location quotients. A location quotient measures the employment concentration of a given industry in a region compared to that industry’s employment concentration in the nation as a whole. Location quotients above 1.0 indicate that an industry’s share of employment in the region is greater than its share of employment nationwide. For example, an industry with a location quotient of 2.0 has twice as much employment locally as the national average for that industry. Location quotients are a simple way to help identify industries in the region that have a competitive advantage as demonstrated by a greater than average employment concentration. An analysis of manufacturing establishments by size class follows, which shows the distribution of manufacturers in the region amongst four different size classes. This analysis shows how much a region may be dependent on small, medium, or large-size manufacturers.

The unemployment rate analysis reveals how well the region has done at creating and retaining jobs for its working-age population. The analysis compares the regional unemployment rate to rates from Oregon and the U.S., which shows whether the region has performed better or worse than average. This comparative analysis also provides insight into how autonomous the region’s economy is from Oregon and the U.S.

Competitive Industry Indicators

Section three begins with two detailed analyses that attempt to identify industries that have a competitive advantage in the region. A detailed location quotient analysis by four digit NAICS codes shows industries in the region that appear to have a competitive advantage based on high location quotients. This analysis includes all traded sectors of the economy, not just manufacturing. Industries with high location quotients and higher than average wages are highlighted.

Following the location quotient analysis is a shift-share analysis. Shift-share analysis, like location quotient analysis, is useful in identifying industries with a competitive advantage in the region. Unlike a location quotient analysis that is a point-in-time analysis, shift-share analysis looks at industry performance over time to measure how employment in an industry changed in relation to national and industrial trends. If a region’s industry consistently outperforms its peers nationwide over a period of time this indicates a growing competitive advantage for that industry. The shift-share analysis examines the ten-year growth rates for regional and nationwide industry employment. Employment change over the past ten years for each industry is broken out by change due to national total employment trends, change due to national industry employment trends, and change due to competitive advantage. Tables 6, 7, and 8 present competitive share percent

changes and competitive share job gains and losses for industries in the region that had the largest gains and losses in competitive advantage.

Employment Growth Projections

Section four examines employment growth projections for the major industries in each region. Current projections cover the period from 2014 to 2024.

Caveats and Limitations

Employment and wage data throughout the report comes from Quarterly Census of Employment and Wages (QCEW) data from the BLS and OED. Data was also used from the U.S. Census Bureau’s Local Employment Dynamics (LED) program, which is also based on QCEW data. All of these sources are limited to employment and wages covered under unemployment insurance. The final table in this report (Table 9) is not limited to covered employment and includes total non-farm employment.

A substantial amount of industry employment and wage data for Oregon counties is confidential and not published by BLS or OED. Estimates were created for confidential three and four digit NAICS industries by county. The primary method used to create estimates was wage share calculations from LED data. Unlike BLS and OED employment and wage data, LED data includes wages for many industries for which employment is confidential. As a result, one can produce employment estimates for industries with confidential employment by calculating the share of wages in a particular industry compared to other confidential industries under the same parent industry and applying that ratio to the amount of unpublished confidential employment amongst those industries. Estimates were done for industries with at least $3 million in annual payroll.

Local knowledge and analyst judgment were used to vet the reliability of final employment data. In just in few cases, more reliable employment figures from other sources such as Hoovers (Dun & Bradstreet), newspapers, or company websites were substituted for wage share employment estimates. In these instances, the wage column reads “N/A” in relevant tables.

The manufacturing establishments by size data in Table 3 is a combination of two data sets. The total number of manufacturing establishments comes from QCEW data from the BLS. The percent of manufacturing establishments by employment size-class data comes from County Business Patterns (CBP) data from the U.S. Census Bureau. The two data sets are combined in this table because the QCEW data is more accurate in its total count of establishments, but it does not include size class data for counties. The CBP data does have size class data for counties, but its overall number of establishments by county is not as accurate as the QCEW. Combined, one can estimate the number of establishments by employment-size class.

Tables 6, 7, and 8 include ten year employment change analyses by industry. Due to the administrative nature of QCEW data, changes in industry employment can occur that are not the result of actual economic changes within the industry. Some, but not all, of these so-called non-economic changes were identified in the ten year analyses and industry employment adjustments were made so that industry employment trends could be more accurately captured.

Section 2: Overview of the Regional Economy

Employment, Total Payroll, and Average Wage per Job Private sector employment in this region accounted for 6 percent of Oregon’s total

private sector employment in 2015.

The 2015 private sector average annual wage in the region was $36,944, 23 percent lower than the statewide average.

Jackson County accounts for over three-quarters of total private sector employment in the region.

Jackson County also has a higher average annual wage in the region, $38,057.

Table 1: Employment, Total Wages, and Average Wage per Job, Private Sector, 2015

Average % of Region % of Statewide Area Employment Total Payroll Wage Employment Avg Wage Jackson 71,375 $2,716,358,698 $38,057 76.9% 79.7% Josephine 21,488 $714,371,946 $33,245 23.1% 69.6% Region 92,863 $3,430,730,644 $36,944 100.0% 77.3% Oregon 1,509,651 $72,125,345,230 $47,776 - 100.0%

Source: Oregon Employment Department, Quarterly Census of Employment & Wages.

Employment Growth The region’s ten year private sector employment growth ranked 9th in the state out

of 11 regions.

Private sector employment in the region grew much slower than Oregon over the past ten years.

Private sector employment in Josephine County grew nearly five times faster than Jackson County, but was still well below the statewide average.

Table 2: Change in Private Sector Employment, 2005-2015

2005 2015 Employment Employment Area Employment Employment Change Change Rank Jackson 71,148 71,344 0.3% 24 Josephine 21,191 21,498 1.4% 22 Region 92,339 92,842 0.5% 9 Oregon 1,386,917 1,508,680 8.8% N/A

Source: U.S. Bureau of Labor Statistics, Quarterly Census of Employment & Wages.

Manufacturing Employment and Wages Manufacturing was 11 percent of the region’s private sector employment in 2015.

With a location quotient of 1.08, manufacturing is somewhat important to the region’s economy and competitive advantages.

Wood product manufacturing is the largest manufacturing subsector in the region, followed by food and transportation equipment manufacturing.

The region has a higher percentage of small manufacturers than the statewide average, as well as a lower percentage of medium and large manufacturers.

Table 3: Manufacturing Employment and Wages, 2015

Location Average NAICS Industry Employment Quotient Wage 31-33 Manufacturing 10,438 1.08 $43,378 321 Wood Product Manufacturing 2,705 9.06 $45,031 311 Food Manufacturing 1,640 1.38 $33,703 336 Transportation Equipment Manufacturing 946 0.75 $59,267 337 Furniture and Related Product Manufacturing 726 2.44 $37,931 325 Chemical Manufacturing 646 1.02 $58,933 332 Fabricated Metal Product Manufacturing 641 0.56 $40,781 334 Computer and Electronic Product Manufacturing 572 0.69 $56,118 339 Miscellaneous Manufacturing 559 1.21 $34,829 333 Machinery Manufacturing 440 0.50 $42,789 323 Printing and Related Support Activities 358 1.02 $32,850 312 Beverage and Tobacco Product Manufacturing 354 2.01 $26,247 327 Nonmetallic Mineral Product Manufacturing 277 0.89 $39,167 326 Plastics and Rubber Products Manufacturing 204 0.38 $43,198 335 Electrical Equipment, Appliance, and Component Mfg. 147 0.49 $49,548

Source: Business Oregon with data from U.S. Bureau of Labor Statistics, Oregon Employment Department, U.S. Census Bureau (2014-2015), and other public documents.

Table 4: Manufacturing Establishments by Size, 2015

Percent of Manufacturing Establishments by Employment-Size Class

Total Manufacturing 250 or Area Establishments 1-19 20-99 100-249 More Jackson 323 81.3% 14.8% 2.6% 1.3% Josephine 117 79.8% 14.7% 3.7% 1.8% Region 440 80.9% 14.8% 2.9% 1.5% Oregon 5,850 74.3% 19.0% 4.4% 2.3%

Source: Total establishments from U.S. Bureau of Labor Statistics, Quarterly Census of Employment & Wages; employment-size class data from U.S. Census Bureau, County Business Patterns, 2014.

Unemployment Rate For the ten year period from 2005-2015, the region’s unemployment rate has been

higher than Oregon’s and the U.S.’, particularly at the height of the last recession when it reached a peak of 13.2 percent in 2009.

Since its recessionary peak, the region’s unemployment rate has declined, although at a slower rate than the state’s, but at a faster rate than the nation.

The region’s lowest unemployment rate across the ten year period, 5.9 percent, occurred in 2006.

Chart 1: Average Annual Unemployment Rate 2005-2015

Une

mpl

oym

ent R

ate

14%

12%

10%

8%

6%

4%

2%

0%

Region

Oregon

U.S.

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Source: US Bureau of Labor Statistics, Local Area Unemployment Statistics.

Section 3: Regional Competitive Industries

Location Quotient Analysis Forestry and wood products is the industry group with the highest location

quotients in the region, with many of these jobs paying above average wages.

E-commerce stores (includes Harry & David), performing arts companies (includes Oregon Shakespeare Festival), and food and beverages, chemical products, furniture, aerospace, and ship and boat manufacturing are other competitive industries in the region.

Table 5: Industries with Highest Location Quotients Private Sector, 2015, U.S. Base Area, Industries with Employment Greater than 100 and Location Quotient of 1.2 or Greater,

Industries with Average Wage above Region Average Shaded

Location Average NAICS Industry Employment Quotient Wage 1153 Support Activities for Forestry 1,187 98.84 $34,027 3212 Veneer, Plywood, and Engineered Wood Product Mfg. 1,660 28.66 $49,890 1133 Logging 429 10.57 $46,119 4541 Electronic Shopping and Mail-Order Houses 2,441 9.18 $36,586 3114 Fruit and Vegetable Preserving and Specialty Food Mfg. 956 7.12 $39,107 7111 Performing Arts Companies 519 5.64 $37,972 3219 Other Wood Product Manufacturing 812 4.81 $33,645 3259 Other Chemical Product and Preparation Manufacturing 297 4.64 $59,704 1113 Fruit and Tree Nut Farming 626 4.05 $25,829 3371 Household and Institutional Furniture Manufacturing 728 3.89 $36,874 3211 Sawmills and Wood Preservation 233 3.24 $43,963 4239 Miscellaneous Durable Goods Merchant Wholesalers 509 2.20 $38,352 3121 Beverage Manufacturing 354 2.14 $26,247 3364 Aerospace Product and Parts Manufacturing 706 1.84 $54,088 3399 Other Miscellaneous Manufacturing 404 1.83 $32,029 5614 Business Support Services 1,144 1.63 $30,422 3119 Other Food Manufacturing 251 1.63 $31,894 4249 Miscellaneous Nondurable Goods Merchant Wholesalers 419 1.63 $39,512 3366 Ship and Boat Building 172 1.59 $39,635 7224 Drinking Places (Alcoholic Beverages) 409 1.40 $14,661 3335 Metalworking Machinery Manufacturing 173 1.21 $34,943

Source: Business Oregon with data from U.S. Bureau of Labor Statistics, Oregon Employment Department, U.S. Census Bureau (2014-2015), and other public documents.

Shift-Share Analysis Fruit and vegetable preserving and specialty food manufacturing experienced the

highest competitive share percent and job gains between 2005 and 2015.

Metalworking machinery manufacturing, beverage manufacturing, and veneer, plywood, and engineered wood product manufacturing were additional industries that experienced the highest competitive share percent gains between 2005 and 2015.

Forestry and performing arts companies also experienced high competitive share job gains between 2005 and 2015.

Electronic shopping and mail-order houses was the industry that experienced the largest competitive share percent and job losses between 2005 and 2015.

Logging and fruit and tree nut farming were additional industries that experienced large competitive share percent and job losses.

Amongst emerging industries in the region with location quotients below 1.2, motor vehicle parts manufacturing, management, scientific, and technical consulting services, pharmaceutical and medicine manufacturing, and the combined industries of software and computer systems design experienced the largest competitive share percent gains between 2005 and 2015.

Table 6: Competitive Industries with Highest Competitive Advantage Percent Gains, 2005-2015

Shift-Share Analysis, Private Sector, U.S. Base Area, Industries with LQ Greater than 1.2 and Employment Greater than 100

Employment Location Competitive Competitive NAICS Industry 2015 Quotient Share Percent Share Jobs 3114 Fruit and Vegetable Preserving and Specialty Food Manufacturin 956 7.12 629.0% 829 3335 Metalworking Machinery Manufacturing 173 1.21 217.1% 122 3121 Beverage Manufacturing 354 2.14 201.7% 218 3212 Veneer, Plywood, and Engineered Wood Product Manufacturing 1,660 28.66 53.9% 783 3119 Other Food Manufacturing 251 1.63 44.0% 66 7224 Drinking Places (Alcoholic Beverages) 409 1.40 37.7% 110 7111 Performing Arts Companies 519 5.64 25.2% 102 4249 Miscellaneous Nondurable Goods Merchant Wholesalers 419 1.63 24.6% 89 1153 Support Activities for Forestry 1,187 98.84 16.4% 169 5614 Business Support Services 1,144 1.63 14.2% 124 3399 Other Miscellaneous Manufacturing 404 1.83 13.5% 58 4885 Freight Transportation Arrangement 449 2.79 8.9% 32 4239 Miscellaneous Durable Goods Merchant Wholesalers 509 2.20 4.2% 20 3371 Household and Institutional Furniture and Kitchen Cabinet Man 728 3.89 1.8% 20

Source: Business Oregon; data from U.S. Bureau of Labor Statistics, Oregon Employment Department, and U.S. Census Bureau.

Table 7: Competitive Industries with Highest Competitive Advantage Percent Losses, 2005-2015

Shift-Share Analysis, Private Sector, U.S. Base Area, Industries with LQ Greater than 1.2 and Employment Greater than 100

Employment Location Competitive Competitive NAICS Industry 2015 Quotient Share Percent Share Jobs 4541 Electronic Shopping and Mail-Order Houses 2,441 9.18 -57.8% -1,597 1133 Logging 429 10.57 -42.0% -479 4248 Beer, Wine, and Distilled Alcoholic Beverage Merchant Wholesal 172 1.16 -42.0% -82 1113 Fruit and Tree Nut Farming 626 4.05 -33.8% -247 3211 Sawmills and Wood Preservation 233 3.24 -9.7% -34 3366 Ship and Boat Building 172 1.59 -6.1% -12 3219 Other Wood Product Manufacturing 812 4.81 -3.0% -37 3259 Other Chemical Product and Preparation Manufacturing 297 4.64 -2.2% -9

Source: Business Oregon; data from U.S. Bureau of Labor Statistics, Oregon Employment Department, and U.S. Census Bureau.

Table 8: Emerging Industries with Highest Competitive Advantage Percent Gains, 2005-2015

Shift-Share Analysis, Private Sector, U.S. Base Area, Industries with LQ Less than 1.2 and Employment Greater than 100

Employment Location Competitive Competitive NAICS Industry 2015 Quotient Share Percent Share Jobs 4251 Wholesale Electronic Markets and Agents and Brokers 387 0.54 348.6% 286 3363 Motor Vehicle Parts Manufacturing 129 0.29 319.0% 102 5416 Management, Scientific, and Technical Consulting Services 321 0.32 308.5% 216 3254 Pharmaceutical and Medicine Manufacturing 108 0.49 80.5% 49 5415 Computer Systems Design and Related Services 312 0.21 63.5% 89 5222 Nondepository Credit Intermediation 268 0.58 41.6% 94 3323 Architectural and Structural Metals Manufacturing 126 0.44 33.6% 34 5112 Software Publishers 276 1.06 22.5% 38 3345 Navigational, Measuring, Electromedical, and Control Instrumen 314 1.00 20.0% 56 3339 Other General Purpose Machinery Manufacturing 196 0.94 16.4% 28 7211 Traveler Accommodation 1,708 1.18 13.5% 194 4231 Motor Vehicle and Motor Vehicle Parts and Supplies Merchant W 302 1.17 8.9% 26 3353 Electrical Equipment Manufacturing 120 1.07 8.5% 10 4234 Professional and Commercial Equipment and Supplies Merchan 177 0.37 7.1% 12 3391 Medical Equipment and Supplies Manufacturing 154 0.64 4.4% 6 3231 Printing and Related Support Activities 358 1.02 4.2% 20

Source: Business Oregon; data from U.S. Bureau of Labor Statistics, Oregon Employment Department, and U.S. Census Bureau.

Employment Projections by Industry The Oregon Employment Department projects total private sector employment in

the region to grow by 8,800 jobs between 2014 and 2024, a 10 percent increase. This growth rate is less than the projected statewide growth rate of 16 percent.

Health care, construction, professional and business services, and leisure and hospitality are projected to experience the largest percent gains in employment

Health care, leisure and hospitality, and manufacturing are projected to add the most jobs between 2014 and 2024.

Manufacturing is projected to grow by 11 percent, slightly less than the statewide rate of 12 percent.

Information, state education, and federal government employment are expected to decline in the region.

Table 9: Regional Industry Employment Forecast, 2014-2024 Jackson and Josephine Counties

2014 2024 Change % Change Total employment 111,570 121,260 9,690 9%

Total payroll employment 105,440 114,590 9,150 9% Total private 90,500 99,380 8,880 10%

Natural resources and mining 2,940 3,180 240 8% Mining and logging 540 580 40 7%

Construction 4,060 4,540 480 12% Manufacturing 10,090 11,170 1,080 11%

Durable goods 6,860 7,430 570 8% Wood product manufacturing 2,500 2,700 200 8%

Trade, transportation, and utilities 22,940 24,430 1,490 6% Wholesale trade 3,210 3,410 200 6% Retail trade 16,380 17,420 1,040 6% Transportation, warehousing, and utilities 3,350 3,590 240 7%

Information 1,600 1,450 -150 -9% Financial activities 4,830 5,020 190 4% Professional and business services 8,780 9,800 1,020 12% Private educational and health services 18,410 21,170 2,760 15%

Private educational services 900 990 90 10% Health care and social assistance 17,510 20,180 2,670 15%

Health care 15,330 17,500 2,170 14% Leisure and hospitality 12,660 14,130 1,470 12%

Accommodation and food services 10,930 12,220 1,290 12% Other services and private households 4,190 4,490 300 7%

Government 14,940 15,210 270 2% Federal government 1,970 1,960 -10 -1% State government 3,280 3,270 -10 0%

State education 810 790 -20 -2% Local government 9,690 9,980 290 3%

Local education 5,690 5,800 110 2% Self-employment 6,130 6,670 540 9%

Source: Oregon Employment Department