Should We Be Concerned About Klamath County’s Labor Force?

by Damon Runberg

November 29, 2017

Across the state and the nation there have been broad concerns about a shrinking labor force and widespread declines in the labor force participation rate. These same concerns are being echoed in Klamath County, but is there any reason for concern?

The labor force includes all those who are employed and unemployed in the economy. Think of these folks as the pool of labor available for businesses to hire from. That pool of labor peaked in Klamath County back in the spring of 2009. The labor force bounced around a bit before rapidly declining from the second half of 2011 through early 2015. This period of rapid labor force declines was fairly extreme. In May 2011 there were 31,500 folks in the labor force. By the start of 2014, the labor force dropped to 28,500, a drop of nearly 10 percent. What happened?
There are two explanations for the sharp drop in the labor force. Most assume that the economic conditions were and continue to be the primary driver of the labor force declines. This doesn’t seem to be the case nationwide, but it may be a larger component here in Klamath County.

The largest employment losses happened before the big drop in the labor force. Some of this lagged labor force decline could be explained by discouraged workers or out-migrants. If someone stops looking for work when they perceive that there are no employment opportunities, they are no longer counted as part of the labor force. Similarly, if someone leaves the county to look for work elsewhere they are no longer counted in the labor force. Together these two forms of discouragement due to a lack of work opportunities likely account for a noteworthy share of the labor force declines.

In 2011 and 2012 there were no notable employment gains, yet the number of unemployed workers continued to steadily decline. If the number of unemployed was not declining due to people finding jobs, why were we seeing fewer unemployed workers? These were likely those discouraged workers who stopped looking for work, folks moving out the region, individuals entering an education or training program, or older workers deciding to retire (more on those last two later).

The relationship between employment opportunities and the labor force is more apparent in our current employment recovery. Job growth began to take hold in 2013 and continues today. At the same time we have seen an impressive rebound in the labor force. As job growth took root, it began to attract workers back into the labor force. Over the past four years, total nonfarm employment rose by 7.3 percent, an additional 1,440 jobs. That same period saw the labor force grow by 6.2 percent.

The past several years also saw many new entrants enter the labor force after completing academic programs. Across the state, we saw the number of degree and certificate completions surge at the end of the 2013 school year and continue at a high level the following years. Many left the labor market looking to retrain for a new career after being laid off. Once completing their degree or certificate program these folks reentered the labor force looking for work. Last school year, Oregon Institute of Technology (OIT) and Klamath Community College (KCC) accounted for 1,023 degree completions (a share of those completions was at the OIT campus in Wilsonville).

However, even if we never experienced a “Great Recession,” the labor force would have seen significant declines in Klamath County. The population and workforce of Klamath County have been aging for years. Eventually this older workforce was going to retire. In the last decade (2000-2010), Klamath County saw population declines from the young adult population ages 20 to 34, but rapid gains in the population over 55. This translated into an older workforce. In 1997, 12 percent of the county’s workforce was 55 or older. By 2007, the share jumped to 20 percent. Today in 2017 the share of workers 55 and older is above 25 percent, one out of four workers. The good news is the aging of the workforce seems to have stalled in the past several years as the peak of the baby boomers move through their career. Additionally, the share of younger workers is no longer declining.
Should these labor force trends be concerning? The slow recovery is creating job opportunities and drawing folks into the labor force. Some of these are new grads, others recently “encouraged” workers, and others recent transplants. Additionally, it looks like Klamath County’s economy has likely weathered the worst of this demographic shift.

According to Portland State University, the largest demographic group in Klamath County back in 2015 was those ages 60 to 64, many of whom are likely retired today or nearing retirement. PSU also forecast Klamath County will maintain consistent net migration going forward.

The challenge is to persuade young people to stay in Klamath County to help backfill the jobs that are becoming vacant due to retirements. These replacement openings are a tremendous opportunity for young people to find good jobs around the Klamath Basin, despite the fact that new job creation is sparse. Klamath Falls has a leg up on other rural communities around the state, with a pipeline of young, educated workers graduating from both OIT and KCC.

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