Letter to the Editor: Springfield’s job creation overlooked as economic leader

Dear editor,

Nonfarm payroll employment is the broadest economic indicator at the state level. The metric is reported monthly by state economic bureaus and the U.S. Bureau of Labor Statistics. It can be used to examine job creation rates versus national averages or within a state.

From that basis, the news from Springfield is positive. Here’s why: The Springfield metropolitan statistical area had Missouri’s highest percentage growth rate, at 2.6 percent, in 2015, according to BLS data. The Springfield area includes Greene, Taney, Christian, Dallas, Polk, Stone and Webster counties. Other Missouri MSAs are Cape Girardeau, Columbia, Jefferson City, Joplin, Kansas City, St. Joseph and St. Louis.

Springfield area employers also created new jobs at a percentage rate greater than the statewide average last year. Springfield’s 2.6 percent growth rate topped Missouri’s 1 percent growth rate.

Why is payroll employment important? In addition to being the broadest state indicator, it is also coincident with the business cycle. Coincident indicators tend to track the U.S. cycle, determined by the National Bureau of Economic Research in Cambridge, Mass. Other coincident indicators are industrial production, personal income less transfer payments, and manufacturing and trade sales.

Many news media focus on the monthly unemployment rate, but payroll employment is more important because of its relationship to the business cycle. Unemployment is a lagging indicator, as the following example illustrates. According to the NBER, the last U.S. recession started in December 2007. National payroll employment peaked the following month at 138.4 million. The unemployment rate, by contrast, did not peak until October 2009, when it reached 10 percent. By then, a new expansion already was underway, starting in June 2009, according to the NBER’s Business Cycle Dating Committee.

The same process can be observed in the previous cycle. A U.S. recession occurred between March and November 2001. Payroll employment peaked in February 2001, near coincident to the cycle, while the unemployment rate – a lagging indicator – did not peak until mid-2003. By then, a new expansion was already a year-and-a-half old, according to the NBER.

State cycles tend to follow the national cycle, with some leads and lags. Missouri employment, for example, peaked close to national employment in the last cycle.

Where does that leave Springfield in this cycle? Springfield-area employment, from June 2009 to December 2015 expanded 9.8 percent versus the Missouri average of 3.2 percent. Only Columbia had a higher job creation rate in the six-and-a-half-year period, expanding 12.2 percent.

In sum, Springfield’s employment growth led Missouri in 2015, and is a strong second in the current cycle when compared to the state average and other MSAs. The Fayetteville-Springdale-Rogers MSA on the south side of the state border generally leads Arkansas in terms of jobs creation. The positive news about greater Springfield could shape perceptions of the area.

—Greg Kaza, executive director, Arkansas Policy Foundation