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County Economies: Opportunities & Challenges

COUNTY ECONOMIES 2015

OPPORTUNITIES AND CHALLENGES

NACo TRENDS ANALYSIS PAPER SERIES • ISSUE 5 • JANUARY 2016

KEY FINDINGS

County economies are the building blocks of regional economies, states and the nation.

County economies are the building blocks of regional economies, states and the nation. The conditions of a county economy can constrain and challenge county governments, residents and businesses, while also providing opportunities. This analysis tracks the performance of the 3,069 county economies in 2015 by examining annual changes in jobs, unemployment rate, economic output (GDP) and median home prices. It also explores wage dynamics in 2014 and between 2009 and 2014. The overall analysis indicates both opportunities and challenges, revealing that:

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1. Recovery accelerated in 2015 on unemployment rates and home prices.

2.5 times more county economies recovered on unemployment rate in 2015 than in the previous year.

An additional 462 county economies closed their unemployment gap in 2015, two and a half times more than in the previous year. Most of these county economies that returned to their pre-recession unemployment lows in 2015 were in the South and Midwest. In total, a quarter of county economies across the country got to their pre-recession unemployment lows by 2015. In a similar fashion, 2015 saw home prices reach pre-recession peaks in an additional 448 county economies, up from the previous year. This brings to almost two-thirds the number of county economies recovered or with no recession on home prices by 2015. The trend is most pronounced in Southern county economies, where a majority reached their home price peaks seen before the latest downturn.

Unemployment Rates Recovered to Pre-recession Levels In 2.5 Times More County Economies In 2015 Than In 2014

Number of County Economies That Returned To Their Pre-Recession Lows in 2014 and 2015

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2014

2015

Notes: This report examines only the economies of counties with county governments.

Source: NACo Analysis of Moody's Analytics 2015 data

At the same time, the economic output (GDP) and jobs recovery almost stalled in 2015. Ninety-one (91) county economies that recovered in 2014 slid below their pre-recession peaks on economic output (GDP) in 2015. Oil and gas county economies represented about a sixth of them. A small number of county economies made progress in terms of economic output. Overall, 218 more county economies closed their output gap in 2015, bringing the total share of county economies past their pre-recession levels to 55 percent. Similarly, by 2015 only 28 percent of county economies had closed their job gap, up slightly from 25 percent in the previous year.

2. Most county economies grew in 2015, but economic output (GDP) expansion was less pronounced.

Close to half of county economies saw growth across all indicators in 2015, a 15 percent increase over the previous year. Almost all of the 126 large county economies – in counties with more than 500,000 people – and 60 percent of Northeastern county economies witnessed growth across the board. Job growth accelerated in 40 percent of county economies. This trend was most evident in medium-sized county economies – in counties with populations between 50,000 and 500,000. The faster job growth rates resulted in unemployment rates declining in more than nine in ten county economies. Home prices grew faster in two-thirds of county economies in 2015 than in the previous year.

36 percent of county economies had declines in economic output (GDP) in 2015.

2015 saw slower economic output (GDP) growth in 13 percent of county economies, mostly in small counties — with less than 50,000 residents — and mid-sized counties with populations between 50,000 and 500,000 residents. Further, economic output (GDP) declined in more than a third of county economies, mostly in small counties located in Georgia, Illinois, Kansas, Kentucky, Mississippi, Missouri, Nebraska and Texas. Ten (10) percent of them are oil and gas counties. Overall, more than half of oil and gas county economies experienced declines in economic output (GDP) in 2015.

ECONOMIC OUTPUT (GDP) DECLINED IN MORE THAN A THIRD OF COUNTY ECONOMIES

Economic Output (GDP) Growth Rates, 2014-2015

Note: This report examines only the economies of counties with county governments. The dark grey areas in Conn., R.I., parts of Alaska, Mass. and Va. are counties or county-equivalents without county governments.

3. Economic recovery is spreading out.

By 2015, 214 county economies recovered to their pre-recession levels on all four indicators analyzed, almost three times more than by 2014. Most of these county economies are in Texas, Nebraska and Kansas. For the first time, 17 of the 126 large county economies — in counties with more than 500,000 residents — are part of this group. The majority are in California and Texas.

214 county economies recovered on all indicators by 2015.

Overall, the county economies recovered on all four indicators by 2015 still represent only 7 percent of all county economies. In contrast, almost 16 percent of county economies had not recovered on any indicator by 2015, mostly in the South and Midwest. States such as Florida, Georgia, Illinois and Mississippi have more than a third of their county economies still reeling from the latest downturn across all economic indicators.

214 COUNTY ECONOMIES RECOVERED ON ALL FOUR INDICATORS BY 2015

Number of Indicators County Economies Recovered by 2015

Notes: This report examines only the economies of counties with county governments. The dark grey areas in Conn., R.I., parts of Alaska, Mass. and Va. are counties or county-equivalents without county governments. The four indicators analyzed are jobs, unemployment rates, economic output (GDP) and median home prices in the county economy.

4. Wages increased between 2013 and 2014, especially in large county economies.

67 percent of county economies had rising adjusted wages in 2014.

Adjusted wages in the county increased in about two thirds of county economies between 2013 and 2014. Large county economies — those in counties with more than 500,000 residents — fared the best, with more than three-quarters seeing growth in their cost-of-living and inflation adjusted wages. Northeastern county economies led across regions, with over seven in ten witnessing gains in adjusted wages. Further, more than three quarters of county economies in states such as Florida, New Jersey and Ohio registered adjusted wage growth rates between 2013 and 2014.

Adjusted wages declined in the remainder third of county economies between 2013 and 2014. Eight in ten of these county economies were small, in counties with less than 50,000 residents. Most of them recorded wage rises nominally, but inflation and increases in cost-of-living wiped out these gains. More than one third of county economies in Kansas, Massachusetts and North Dakota fit that description. A small share — 6 percent of county economies — witnessed declines in their nominal wages and adjusted wages, mostly in smaller counties, with less than 50,000 residents.

Adjusted Wages Grew In About Two Thirds Of County Economies In 2014

Cost-Of-Living And Inflation Adjusted Average County Wage Growth Rate, 2013-2014

Notes: This report examines only the economies of counties with county governments. The dark grey areas in Conn., R.I., parts of Alaska, Mass. and Va. are counties or county-equivalents without county governments. This analysis adjusted the average county annual wage for geographical differences in the cost-of-living with a price index based on the U.S. Census Bureau 2013 and 2014 Median Gross Rent at the county level and for inflation adjustment with the U.S. Personal Consumption Expenditures (PCE) Price Index.

5. The recovery is creating an uneven geography of opportunity across county economies.

28 percent of county economies had falling real wages and productivity gains between 2009 and 2014.

Forty-seven (47) percent of county economies experienced increases in both productivity and real wages between 2009 and 2014. Most of them are in small counties, with less than 50,000 residents. The majority of county economies in states such as Kansas, Nebraska, Oklahoma and Texas enjoyed increasing wage opportunity with the economic recovery. By comparison, 28 percent of county economies saw real wages declining while productivity increased. Most often, economic output (GDP) growth outpaced employment gains in these county economies, but total wages grew slower than jobs or even declined. More than one-third of large county economies — those in counties above 500,000 residents — fit this description. Further, in states such as New Jersey and North Carolina a majority of county economies saw real wages drop and productivity rise between 2009 and 2014.

The recovery is creating an uneven geography of opportunity across county economies.

Other county economies had their own challenges. In a small share of county economies (12 percent), real wages grew as productivity declined. While employment, economic output (GDP) and total wages were all on the rise in these county economies, employment grew faster than economic output, but slower than total wages. These county economies are mainly in the Midwest and South in counties on the smaller scale, with less than 50,000 population. Another 13 percent of county economies are in places facing declines on both productivity and real wages between 2009 and 2014.

REAL WAGES DECLINED WHILE PRODUCTIVITY INCREASED IN 28 PERCENT OF COUNTY ECONOMIES BETWEEN 2009 AND 2014

Real County Wages Growth Compared to the Productivity Growth of the County Economy, 2009-2014

Note: This report examines only the economies of counties with county governments. The dark grey areas in Conn., R.I., parts of Alaska, Mass. and Va. are counties or county-equivalents without county governments. This analysis uses the U.S. Producer Price Index to adjust average county annual wages for inflation in order to reflect a production perspective. The productivity of a county economy reflects the real economic output produced by an average job located in the county economy.

COUNTY PROFILES

County Economy:

The economy of a county with county government.

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Adjusted Average County Wage Growth Rate:

Year-over-year growth rate in the average pay in the county economy, adjusted to reflect cost-of-living differences between county economies and price changes over time. This research adjusts for the cost-of-living with a price index based on the median gross rent from the American Community Survey (ACS) and for inflation using U.S. Bureau of Economic Analysis (BEA) Personal Consumption Expenditures Price Index. Data Sources: Census Bureau ACS 5-year estimates, U.S. Bureau of Economic Analysis and U.S. Bureau of Labor Statistics

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County Government:

An organized entity with governmental character, sufficient discretion in the management of its own affairs to be an independent governmental unit and covering the area of a county or county equivalent. Depending on the state, it can be known also as parish government or borough government. This study considers as county governments also the following types of local governments defined by the U.S. Census Bureau: consolidated county-city entities, areas designated as metropolitan governments, cities administering functions performed by county governments and areas with certain types of county offices, but included as part of another government. There are 3,069 county governments in the United States.

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County:

The primary legal division of most states for which the U.S. Census Bureau releases data. It can have a county government or be an unorganized area bearing county designations. In Louisiana, a county is known as parish. In Alaska, the county equivalent entities are organized boroughs, city and boroughs, municipalities and census areas. The state of Alaska and the U.S. Census Bureau created the Alaska census areas for statistical purposes. Four states (Maryland, Missouri, Nevada and Virginia) have independent cities that the U.S. Census Bureau treats as county equivalent entities for purposes of data presentation. The counties in Connecticut and Rhode Island and nine counties in Massachusetts do not have any longer county governments. There are 3,142 counties and county equivalents in the United States.

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Economic Output (gross domestic product - GDP):

Total value of goods and services produced by a county economy, also known as GDP.

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Jobs:

Total wage and salary jobs, whether full or part-time, temporary or permanent in a county economy. It counts the number of jobs, not employed people, for all employers in a county economy, not only for the county government. Data source: Moody’s Analytics

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Large County Economies:

The economies of counties with more than 500,000 residents in 2014. Data Source: Census Population Estimates, 2014 vintage

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Large County Economies:

The economies of counties with more than 500,000 residents in 2014. Data Source: Census Population Estimates, 2014 vintage

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Median Home Sales Prices:

Median sales prices of existing single-family homes in a county economy. Data source: Moody’s Analytics

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Medium-sized County Economies:

The economies of counties with populations between 50,000 and 500,000 in 2014. Data Source: Census Population Estimates, 2014 vintage

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Population:

The number of county residents in 2014. Data Source: Census Population Estimates, 2014 vintage

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Productivity:

The inflation-adjusted economic output (real GDP in 2009 dollars) produced by an average job located in the county. Data Sources: U.S. Bureau of Labor Statistics, Moody’s Analytics

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Real Economic Output (real GDP):

Total gross output of a county economy adjusted for inflation, in this case in 2009 chained dollars. Data source: Moody’s Analytics

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Recession:

The period between the peak and the trough years for an indicator for a county economy during the latest U.S. economic downturn. This research counts a recession only when the difference between the peak and the trough value is larger than one percent of the peak value. It is possible that no recession occurred for an indicator in some county economies during the latest U.S. economic downturn

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Recovered on an indicator:

A county economy recovered on an economic indicator if it underwent a recession on that specific indicator and subsequently grew to reach or exceed its pre-recession peak.

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Recovery:

The period between the trough year to 2015 for an indicator for a county economy, to identify the period of growth after recessionary declines. If a county economy had no recession on a specific indicator, this analysis counts the recovery period from 2009 to 2015. It is possible that a county economy had declines on one or more of the indicators analyzed here and has not yet entered the recovery period for some of those indicators by 2015.

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Unemployment Rate:

The proportion of the civilian labor force that is unemployed in a county economy. Persons are classified as unemployed if they do not have a job, have actively looked for work in the prior four weeks and are currently available for work. Data source: Moody’s Analytics

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Peak:

The highest annual value of a county economy indicator (the lowest for the unemployment rate) between 2002 and 2009. 2002 is the first year after the end of the previous U.S. recession and 2009 marks the end of the latest U.S. recession. The National Bureau of Economic Research (NBER) determines the end of U.S. economic recessions.

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Small County Economies:

The economies of counties with less than 50,000 residents in 2014. Data Source: Census Population Estimates, 2014 vintage

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Oil and Gas County Economies:

Oil and gas county economies have “oil and gas” ( NAICS code 211) as one of their top 5 specialized industries at 3 digit NAICS level, based on economic output (GDP). A specialized industry is an industry more concentrated in a particular county economy compared to the state’s overall industry output composition.

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