March 17, 2013

Charles Lawton: Thermometer also takes economic temperature

What is it with this employment picture? Last month we learned from "Portland's Economic Scorecard" by the Community Chamber that regional employment growth is "lagging." Then last week, Forbes -- infamous for regularly ranking Maine as the worst state in the nation for doing business -- named the Portland metro area "the best city for job prospects this spring."

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Portland's Economic Scorecard

What gives?

As with most confusion surrounding the dismal science, the answer lies in the meaning attached to measurement.

The chamber's scorecard uses data gathered after the fact. Each month, the U.S. Department of Labor surveys nearly 600,000 employers across the country, asking, "How many jobs were on your payroll on the 12th of the previous month?" Following answers to this question over time, we can see how businesses did or did not increase employment, both in total for an entire region and for specific industries.

The Forbes ranking, on the other hand, was forward-looking. It was based on a nationwide ManpowerGroup survey of 18,000 employers (about 150 in the Portland region), asking, "Over the coming quarter (the second quarter -- March, April and May -- of 2013), do you plan to increase the number of workers on your payroll, decrease that number or keep it about the same?"

For the Portland metro region -- defined as York, Cumberland and Sagadahoc counties -- 27 percent of the employers surveyed said they planned to increase jobs and 4 percent said they planned to decrease jobs. That net increase of 23 percent ranked Portland first in the nation.

Great news, right? Well perhaps, but probably not in the way attention-grabbing headlines seem to imply.

Last December, the same survey (asking about the first quarter of 2013) ranked the Portland region second-worst in the nation for job growth prospects.

The first conclusion, therefore, seems to be: Don't sell your house and move across the country based on the Manpower employment prospects survey!

A second conclusion might be: Let's think about the difference between the first and second quarter.

Is there any reason, apart from a suddenly welcoming business climate, that Portland area employers might be thinking about adding to their payrolls? How about the warming meteorological climate? Come springtime, any Maine employer who isn't thinking about adding workers either isn't awake or hasn't gotten back from Florida yet.

Unless the survey makes some effort to adjust for natural seasonal changes in hiring patterns, Portland is always going to be near the top of the pack in spring and summer and at the bottom of the pack in fall and winter.

This fact doesn't make the survey right or wrong, it just means that we need to think clearly about what is being measured before we jump to any conclusions about the health of our economy.

And that is the overall point to be made about any measure of economic activity -- what does it mean and how will that meaning help you get to where you want to go?

Chris Hall, president of the Portland Regional Chamber; Greg Mitchell, Portland's economic development director; and all who have helped them assemble a city and regional economic development plan are to be congratulated for making it a data-driven, living document rather than just another study to line a shelf. And they should be encouraged to keep returning to their selected data points to measure their progress.

That means not being distracted by the latest data headline that, like new medical studies and fad diets, makes claims designed more to sell their own products than to promote the health of the consumer.

Charles Lawton is chief economist for Planning Decisions, Inc. He can be reached at:

clawton@planningdecisions.com

 

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