June Regional Employment Report: Weak Sectors Cause the Midwest to Suffer
Private sector employment grew in all four U.S. regions last month, according to the ADP Research Institute® June ADP Regional Employment Report (RER). The West and the South led the job-creation charge, with 53,000 roles added in each region, while the Midwest and the Northeast gained 32,000 and 34,000 jobs, respectively. Illinois gained 7,420 jobs but lost 1,100 jobs in the goods-producing sector; New York gained 10,700 jobs but lost 2,200 goods-producing jobs — bringing the recent trouble in the goods-producing sector of these regions into sharper focus.
Here are some key takeaways from the June RER, and analysis on how they could impact your organization's outlook.
Why the West and South Aren't (Really) Suffering
When examined on a national level, June's job market trends were not the strongest of 2016. "Since the start of 2016, average monthly job growth has dropped slightly" states Ahu Yildirmaz, VP and head of the ADP Research Institute®. "While overall growth is still healthy, Yildirmaz attributes regional and sector weaknesses to "lackluster global growth, low commodity prices and an unfavorable exchange rate."
Because manufacturing plays only a relatively minor role in the West and the South, however, the health of the job market in those regions remains strong for the most part. The Economic Policy Institute writes that manufacturing jobs constitute just 7.6 percent of total jobs in the West and 8.1 percent in the South; this figure is 12.3 percent in the Midwest. A higher percentage of professional services roles and fewer goods-producing positions could offer limited protection against the recent reversal in goods-producing industries, which has been largely affected by the U.S. dollar's strength and turmoil in global markets.
Why California's Job Growth Skyrocketed
When examined on a state level, California was among the stars of the June Regional Employment Report, with 26,900 positions added. The figure does reflect a net loss of 1,000 jobs in the goods-producing sector, which was offset by strong growth in service-providing industries.
California's strength could potentially be attributed to the role of small business in the state economy. The U.S. Small Business Administration reports that small firms with employees account for 99.2 percent of all employers and employ approximately half of the state's workforce. When describing recent trends in the U.S. workforce in the ADP Research Institute® June National Employment Report, chief economist of Moody's Analytics Mark Zandi stated that "large multinationals are struggling a bit, and Brexit won't help, but small- and mid-sized companies continue to add strongly to payrolls."
While the full effects of Brexit have yet to be reflected in national or regional employment trends, global economic conditions have dragged down large businesses for months. Multinationals and organizations who participate in international trade have struggled for months against diminished demand for exports, low oil prices and instability in international finance. In addition, many forecasters including the International Monetary Fund have released more conservative outlooks for economic growth after the recent U.K. referendum.
While California's status as the eighth largest economy in the world, according to the LA Times, has certainly left it susceptible to international turmoil, low commodity prices and currency factors, the role of small businesses in their continued economic health is certainly worth noting.
What's Next for Regional Economics?
As HR and business leaders look toward the future, there's a strong possibility that challenges lie ahead, and Brexit's current impact on the currency exchange could continue to drag down large organizations' growth potential in the months to come. While the results of the recent RER were mixed, the South and the West's further growth potential offer hope for the future.