Regional Competitive Industry Analysis Baker, Union, and Wallowa Counties May 2014

Wallowa Union

Baker

Michael Meyers, Economist (503) 229-6179 [email protected]

Global Strategies Section One World Trade Center 121 SW Salmon Street, Suite 205 Portland, OR 97204

Table of Contents EXECUTIVE SUMMARY ..................................................................................................................... 3 INTRODUCTION...................................................................................................................................... 4 SECTION 1: SOURCES AND METHODOLOGY ................................................................................. 4 Regional Indicators ............................................................................................................................................ 4 Competitive Industry Indicators ...................................................................................................................... 5 Employment Growth Projections ................................................................................................................... 5 Caveats and Limitations .................................................................................................................................... 5 SECTION 2: OVERVIEW OF THE REGIONAL ECONOMY ............................................................. 6 Employment, Total Payroll and Average Wage per Job .............................................................................. 6 Employment Growth ........................................................................................................................................ 6 Manufacturing Employment and Wages ........................................................................................................ 7 Unemployment Rate.......................................................................................................................................... 8 SECTION 3: REGIONAL COMPETITIVE INDUSTRIES................................................................... 9 Location Quotient Analysis .............................................................................................................................. 9 Shift-Share Analysis .........................................................................................................................................10 Regional Employment Projections by Industry ..........................................................................................11

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Regional Competitive Industry Analysis Baker, Union, and Wallowa Counties Executive Summary This region in the northeast corner of the state is made up of Baker, Union, and Wallowa counties. Framed by the Elkhorn and Wallowa mountains, most of the employment in this region lies in the Grande Ronde and Baker valleys. Natural resource industries in agriculture and forestry are the economic base of the region. Tourism and recreation are also important to the region’s economy. Private sector employment in the region grew by 0.2 percent between 2002 and 2012, much slower than the statewide growth rate of 4.1 percent. The region’s average annual wage is 32 percent lower than the statewide average annual wage, due in part to lower paying jobs in agriculture, tourism, and recreation. Manufacturing was 14 percent of the region’s private sector employment in 2012, higher than the statewide average of 12 percent. With a location quotient of 1.26, manufacturing is very important to the region and its competitive advantages. Only 7 percent of manufacturing employment is published by subsectors in this region due to confidentiality restrictions. Fabricated metal products, food, and nonmetallic mineral product manufacturing are the largest, published manufacturing subsectors in the region. Based on the limited data available, other large manufacturing subsectors in the region include wood products, transportation equipment, and primary metals. The region has a much higher percentage of very small manufacturers compared to the statewide average, and a much lower percentage of large manufacturers. Agricultural industries, including vegetable and melon farming, other crop farming (hay, sugar beets, etc.), and cattle ranching experienced some of the highest competitive advantage gains amongst competitive traded sector industries in the region between 2002 and 2012. Other competitive traded sector industries in the region to experience competitive advantage gains were professional, scientific, and technical services, newspaper, periodical, book, and directory publishers, and industries related to tourism and recreation. Support activities for crop production, along with logging and support activities for forestry, had the largest competitive advantage losses amongst competitive traded sector industries in the region between 2002 and 2012. Emerging traded sector industries (location quotient less than 1.0) in the region that experienced competitive advantage gains between 2002 and 2012 included wholesale electronic markets and agents and brokers and professional, scientific, and technical services. Employment in the region is projected to grow 10 percent between 2012 and 2022, well below the projected statewide rate of 15 percent. Natural resources and mining, construction, professional and business services, and health care are projected to grow the fastest between 2012 and 2022. Health care, leisure and hospitality, manufacturing, and wholesale and retail trade are projected to add the most jobs of all major industries in the region over the ten year period. Manufacturing is projected to grow 10 percent, a little slower than the projected statewide rate of 11 percent. Page 3 of 12

Introduction The purpose of this report is to present a competitive industry analysis of the regional economy consisting of Baker, Union, and Wallowa 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 four 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. Section four analyzes ten year employment projections of the region’s main industries and identifies industries with above average growth potential.

Section 1: Sources and Methodology This report is based on analysis of statistical data from the Oregon Employment Department, U.S. Census Bureau, Bureau of Economic Analysis, and Bureau of Labor Statistics. 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 wage 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 analysis is followed by 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 was 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.

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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 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 shiftshare 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. Growth projections are a good way to identify industries where employment growth is projected to occur. Current projections cover the period from 2012 to 2022.

Caveats and Limitations Employment and wage data throughout the report comes from Quarterly Census of Employment and Wage data from the Bureau of Labor Statistics and Oregon Employment Department. This data is limited to employment and wages that are covered under unemployment insurance in Oregon. The Employment Department estimates that about 90 percent of jobs in Oregon are covered by unemployment insurance. Employment data presented in the Table 9 is total non-farm employment and not limited to covered employment in Oregon. The manufacturing establishments by size data in Table 3 is a combination of two data sets. The total number of manufacturing establishments comes from Quarterly Census of Employment and Wage (QCEW) data from the Oregon Employment Department. 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 Page 5 of 12

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.

Section 2: Overview of the Regional Economy Employment, Total Payroll, and Average Wage per Job •

Private sector employment in this region accounted for 0.9 percent of Oregon’s total private sector employment in 2012.

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Over half of the region’s employment is in Union County. Baker County has about one-third of the region’s employment.

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The 2012 private sector average annual wage in the region was $29,769, 31.8 percent lower than the statewide average annual wage.

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The private sector average annual wage is highest in Union County and lowest in Wallowa County.

Table 1: Employment, Total Wages, and Average Wage per Job, Private Sector, 2012

Area Baker Union Wallowa Region Oregon

Employment 3,930 7,222 1,686 12,838 1,373,607

Total Payroll $113,255,229 $224,768,491 $44,146,879 $382,170,599 $59,948,736,635

Average Wage $28,818 $31,123 $26,184 $29,769 $43,643

% of Region Employment 30.6% 56.3% 13.1% 100.0% N/A

% of Statewide Ave. Wage 66.0% 71.3% 60.0% 68.2% 100.0%

Source: Oregon Employment Depart ment , Quart erly Census of Employment & Wages.

Employment Growth •

The region’s ten year private sector employment growth ranked 10th in the state.

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Private sector employment in the region only grew by 0.2 percent between 2002 and 2012, much slower than the statewide rate of 4.1 percent over that time.

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Private sector employment grew in Wallowa County and Baker County between 2002 and 2012, but was offset by employment losses in Union County.

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Table 2: Change in Private Sector Employment, 2002-2012

Area Baker Union Wallowa Region Oregon

2002 Employment 3,858 7,310 1,645 12,813 1,320,125

2012 Employment 3,930 7,222 1,686 12,838 1,373,607

Employment Change 1.9% -1.2% 2.5% 0.2% 4.1%

Employment Change Rank 17 24 16 10 N/A

Source: Oregon Employment Depart ment , Quart erly Census of Employment & Wages.

Manufacturing Employment and Wages •

Manufacturing was 13.5 percent of the region’s private sector employment in 2012.

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With a location quotient of 1.26, manufacturing is very important to the region’s economy and competitive advantages.

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Only 7 percent of manufacturing employment is published by subsectors in this region due to confidentiality restrictions. Fabricated metal products, food, and nonmetallic mineral product manufacturing are the largest, published manufacturing subsectors in the region.

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Based on limited data from the Oregon Employment Department and employment information from Hoover’s, other large manufacturing subsectors in the region include wood products, transportation equipment, and primary metals.

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The region has a much higher percentage of very small manufacturers compared to the statewide average, and a much lower percentage of large manufacturers. Table 3: Manufacturing Employment and Wages, 2012

NAICS 31-33 332 311 327 337

Industry Manufacturing Fabricat ed Metal Product Manufacturing Food Manufacturing Nonmet allic Mineral Product Manufact uring Furnit ure and Relat ed Product Manufact uring

Employment 1,735 71 20 11 11

Total Pay $67,847,264 $2,514,773 $262,730 $218,400 $238,751

Location Quotient 1.26 0.44 0.12 0.26 0.27

Average Wage $39,105 $35,419 $13,137 $19,855 $21,705

Source: Business Oregon; data from Bureau of Labor Statistics, Quarterly Census of Employment & Wages.

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Table 4: Manufacturing Establishments by Size, 2012

Area Baker Union Wallowa Region Oregon

Total Manufacturing Establishments 29 29 19 77 5,608

Percent of Manufacturing Establishments by Employment-Size Class 250 or 1-19 20-99 100-249 More 82.1% 10.7% 7.1% 0.0% 72.4% 13.8% 13.8% 0.0% 100.0% 0.0% 0.0% 0.0% 82.9% 9.2% 7.9% 0.0% 75.8% 18.2% 4.2% 1.8%

Source: Tot al est ablishment s from Oregon Employment Depart ment , Quart erly Census of Employment & Wages; employment -size class dat a from U.S. Census Bureau, Count y Business Pat t erns, 2011.

Unemployment Rate •

The region’s unemployment rate was a little higher than the state’s rate from 2003 to 2008, but equaled the Oregon rate in 2009 and 2010. Since then, the region’s unemployment has not declined as fast as the state’s and is now above both the Oregon and U.S. rates.

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The region reached its highest unemployment rate over the ten year period, 11.1 percent, in 2009 and has since declined at a slower rate than Oregon and the U.S.

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The region’s lowest unemployment rate over the ten year period, 5.7 percent, occurred in 2007.

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Section 3: Regional Competitive Industries Location Quotient Analysis •

Natural resources, namely agriculture and forestry, is the dominant industry group in the region with very high location quotients. Jobs in agriculture tend to pay below average wages, while jobs in forestry pay above average wages.

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Based on limited data from the Oregon Employment Department and employment information from Hoover’s, it is estimated that high location quotients also exist in wood product, transportation equipment, and primary metal manufacturing.

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Industries related to tourism and recreation, such as RV parks, campgrounds, and other accommodations, also have high location quotients in the region. Table 5: Industries with Highest Location Quotients

Private Sector, 2012, U.S. Base Area, Industries with Employment Greater than 25, Industries with Average Wage above Region Average Shaded

NAICS 1153 1119 1133 8131 1121 7212 1112 4471 6213 4842 6233 1113 1151 4451 8133 2373 4532 5313 8134 2389 5111 7211 6212 6241 7225 4441 5221

EmployLocation Industry ment Total Pay Quotient Support Act ivit ies for Forest ry 49 $1,598,024 29.83 Ot her Crop Farming 98 $2,518,162 13.41 Logging 67 $2,901,557 11.83 Religious Organizations 184 $3,076,139 8.68 Cat tle Ranching and Farming 101 $2,541,544 6.16 RV (Recreat ional Vehicle) Parks and Recreat ional Camps 34 $639,066 5.27 Vegetable and Melon Farming 43 $1,076,466 3.82 Gasoline St at ions 315 $5,615,020 3.23 Offices of Ot her Healt h Pract it ioners 258 $6,671,280 3.07 Specialized Freight Trucking 147 $5,715,032 3.04 Continuing Care Ret irement Communit ies and Assist ed Living 210 Facilit$3,565,736 ies for t he Elderly2.29 Fruit and Tree Nut Farming 47 $550,636 2.13 Support Act ivit ies for Crop Production 66 $1,640,296 1.86 Grocery St ores 536 $11,227,913 1.85 Social Advocacy Organizat ions 37 $1,109,660 1.63 Highway, Street , and Bridge Const ruct ion 52 $3,117,250 1.57 Office Supplies, St at ionery, and Gift St ores 54 $665,024 1.54 Act ivit ies Relat ed to Real Est at e 100 $2,515,413 1.50 Civic and Social Organizat ions 64 $600,447 1.41 Ot her Specialt y Trade Cont ract ors 85 $2,746,100 1.39 Newspaper, Periodical, Book, and Direct ory Publishers 72 $1,602,981 1.38 Traveler Accommodat ion 264 $3,536,133 1.30 Offices of Dent ists 120 $4,666,489 1.22 Individual and Family Services 177 $4,711,131 1.16 Rest aurant s and Ot her Eat ing Places 1,123 $14,334,890 1.07 Building Mat erial and Supplies Dealers 127 $3,358,627 1.07 Deposit ory Credit Int ermediat ion 210 $7,399,723 1.04

Average Wage $32,613 $25,696 $43,307 $16,718 $25,164 $18,796 $25,034 $17,825 $25,858 $38,878 $16,980 $11,716 $24,853 $20,948 $29,991 $59,947 $12,315 $25,154 $9,382 $32,307 $22,264 $13,394 $38,887 $26,617 $12,765 $26,446 $35,237

Source: Business Oregon; data from Bureau of Labor Statistics, Quarterly Census of Employment & Wages.

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Shift-Share Analysis •

Agricultural industries, including vegetable and melon farming, other crop farming (hay, sugar beets, etc.), and cattle ranching experienced some of the highest competitive advantage gains amongst competitive traded sector industries in the region between 2002 and 2012.

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Other competitive traded sector industries in the region to experience competitive advantage gains were professional, scientific, and technical services, newspaper, periodical, book, and directory publishers, and industries related to tourism and recreation.

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Support activities for crop production, along with logging and support activities for forestry, had the largest competitive advantage losses amongst competitive traded sector industries in the region between 2002 and 2012.

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Emerging traded sector industries (location quotient less than 1.0) in the region that experienced competitive advantage gains between 2002 and 2012 included wholesale electronic markets and agents and brokers and professional, scientific, and technical services.

Table 6: Competitive Industries with Highest Competitive Advantage Percent Gains, 2002-2012 Shift-Share Analysis, Private Sector, U.S. Base Area, Industries with LQ Greater than 1.0 and Employment Greater than 25

NAICS 6213 5313 5419 1112 5111 1119 8134 1121 7212 4532 2389 4842 4471 2361 1113 4451 8133

Employment Location Competitive Competitive Industry 2012 Quotient Share Percent Share Jobs Offices of Other Health Pract itioners 258 3.07 609.1% 207 Act ivities Relat ed t o Real Est at e 100 1.50 538.8% 81 Ot her Professional, Scientific, and Technical Services 72 1.02 163.5% 41 Vegetable and Melon Farming 43 3.82 117.5% 23 Newspaper, Periodical, Book, and Directory Publishers 72 1.38 112.1% 46 Ot her Crop Farming 98 13.41 109.4% 61 Civic and Social Organizations 64 1.41 106.4% 34 Cat t le Ranching and Farming 101 6.16 48.8% 28 RV (Recreat ional Vehicle) Parks and Recreational Camps 34 5.27 44.0% 10 Office Supplies, St ationery, and Gift St ores 54 1.54 28.7% 16 Ot her Specialt y Trade Cont ractors 85 1.39 23.6% 17 Specialized Freight Trucking 147 3.04 20.6% 24 Gasoline St at ions 315 3.23 19.8% 55 Residential Building Construction 68 1.02 16.7% 13 Fruit and Tree Nut Farming 47 2.13 14.2% 5 Grocery Stores 536 1.85 9.0% 44 Social Advocacy Organizat ions 37 1.63 8.3% 2

Source: Business Oregon; data from Bureau of Labor Statistics, Quarterly Census of Employment & Wages.

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Table 7: Competitive Industries with Highest Competitive Advantage Percent Losses, 2002-2012 Shift-Share Analysis, Private Sector, U.S. Base Area, Industries with LQ Greater than 1.0 and Employment Greater than 25

NAICS 1151 1133 6212 8131 1153 7211 5221

Industry Support Act ivities for Crop Product ion Logging Offices of Dentist s Religious Organizat ions Support Act ivities for Forestry Traveler Accommodat ion Depository Credit Int ermediation

Employment Location Competitive Competitive 2012 Quotient Share Percent Share Jobs 66 1.86 -36.0% -30 67 11.83 -18.8% -24 120 1.22 -16.6% -20 184 8.68 -14.8% -29 49 29.83 -8.3% -5 264 1.30 -2.6% -7 210 1.04 -1.6% -3

Source: Business Oregon; data from Bureau of Labor Statistics, Quarterly Census of Employment & Wages.

Table 8: Emerging Industries with Highest Competitive Advantage Percent Gains, 2002-2012 Shift-Share Analysis, Private Sector, U.S. Base Area, Industries with LQ Less than 1.0 and Employment Greater than 25

NAICS 4251 2362 2383 8139 4461 5413 5411 2381 4431 5617 8141

Employment Location Competitive Competitive Industry 2012 Quotient Share Percent Share Jobs Wholesale Elect ronic Markets and Agents and Brokers 52 0.51 232.4% 33 Nonresident ial Building Const ruct ion 59 0.78 82.7% 29 Building Finishing Contract ors 70 0.96 67.8% 34 Business, Professional, Labor, Polit ical, and Similar Organizat ions 36 0.73 44.4% 11 Healt h and Personal Care St ores 71 0.61 34.7% 17 Archit ectural, Engineering, and Related Services 71 0.46 27.8% 15 Legal Services 102 0.78 22.3% 18 Foundation, St ructure, and Building Exterior Cont ractors 47 0.60 19.8% 10 Elect ronics and Appliance Stores 33 0.56 17.5% 5 Services t o Buildings and Dwellings 144 0.68 16.2% 18 Private Households 67 0.80 7.8% 3

Source: Business Oregon; data from Bureau of Labor Statistics, Quarterly Census of Employment & Wages.

Employment Projections by Industry •

Total regional employment is projected to grow by 1,720 jobs between 2012 and 2022, a 10 percent increase, well below the projected statewide rate of 15 percent.

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Natural resources and mining, construction, professional and business services, and health care are projected to experience the greatest percent increases in employment between 2012 and 2022 in the region.

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Health care, leisure and hospitality, manufacturing, and wholesale and retail trade are projected to add the most jobs of all major industries in the region between 2012 and 2022.

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Manufacturing employment is projected to increase 10 percent between 2012 and 2022, a little less than the statewide projection of 11 percent.

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Two industries – information and federal government – are projected to lose jobs in the region between 2012 and 2022. Table 9: Regional Industry Employment Forecast, 2012-2022 Baker, Union, and Wallowa Counties

2012 Tot al payroll employment 18,080 Tot al privat e 13,550 Nat ural resources and mining 900 Mining and logging 160 Const ruct ion 740 Manufacturing 1,750 Trade, transport at ion, and ut ilit ies 3,520 Wholesale and ret ail t rade 2,740 Transportation, warehousing, and ut ilities 780 Informat ion 210 Financial act ivit ies 700 Professional and business services 860 Privat e educational and healt h services 2,580 Leisure and hospit alit y 1,670 Ot her services 620 Government 4,530 Federal government 550 State government 1,690 Local government 2,290

2022 Change % Change 19,800 1,720 10% 15,020 1,470 11% 1,050 150 17% 170 10 6% 860 120 16% 1,920 170 10% 3,750 230 7% 2,910 170 6% 840 60 8% 200 -10 -5% 750 50 7% 1,000 140 16% 2,970 390 15% 1,850 180 11% 670 50 8% 4,780 250 6% 520 -30 -5% 1,820 130 8% 2,440 150 7%

Source: Oregon Employment Department

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