Economic Analysis of West Tennessee FOR THE SOUTHWEST HUMAN RESOURCE AGENCY & LOCAL WORKFORCE INVESTMENT AREA 11

Economic Analysis of West Tennessee FOR THE SOUTHWEST HUMAN RESOURCE AGENCY & LOCAL WORKFORCE INVESTMENT AREA 11 Analysis of the Regional Economy, with Workforce & Career Pathways Implications JUNE 2015 SOUTHWEST HUMAN RESOURCE AGENCY & LOCAL WORKFORCE INVESTMENT AREA 11 1

Executive Summary Local Workforce Investment Area 11 (LWIA 11) partnered with the two other workforce boards in West Tennessee LWIA 12 and LWIA 13 to conduct this economic analysis of the 21 counties that comprise West Tennessee. This report outlines the economy of this 21-county region with geographic breakouts of specific metropolitan areas within the region, and comparisons with the two other Grand Divisions of Tennessee. The following are some of the key findings of the analysis: RECOMMENDED NEXT STEPS Based on our thorough scan of the regional economy, and our discussions with key players in the private and public sectors, EMSI recommends that SWHRA consider the following actions to help create a more prosperous and stable economy: Unemployment prevails where jobs are outdated; work with economic development to diversify particularly in service sectors. As the national economy becomes less production-based and more service-based, your region will be left with either higher skill workers (such as nurses, accountants, engineers and software engineers) or lower skill workers (such as call center workers, hairdressers, and clerks). This cannot be the sole responsibility of the workforce investment boards, as economic development agencies are typically determining which target industries to focus on and how to prioritize opportunities. Due to availability of new educational programs, messaging to youth and young adults is more important than ever. There is no shortage of opportunities for young people in Tennessee to pursue their educational goals, but if these opportunities are not promoted to parents and high school students, the impact of these opportunities will be severely muted. The SWHRA and each of the WIBs should find every way to support these initiatives, including making the pitch to every young person that comes through their doors that they ought to fill out their FAFSA forms and utilize the Tennessee Promise scholarship. Work closely with most active and influential businesses to develop the talent pipeline. As in any region, there are some businesses that are more active than others. EMSI spoke with several business leaders who have an active interest in developing the talent pipeline for the region. These are the agents who will be willing to work cooperatively to develop new training programs to suit the needs of multiple companies. Furthermore, oftentimes seeing productive work being done by government agencies can draw more businesses to the table. With advent of WIOA, it is critical to track all activities, both on the employer side and the job seeker side. There is no legitimate way to determine if you are making progress in the number of individuals and businesses that are helped by the region s WIBs if you cannot start with counting the number of people who are served. In the new era of accountability, budgets will flow to organizations that can demonstrate that they are using their dollars efficiently, to help a large number of people. West Tennessee has an average of 56,000 unemployed people per month. This availability of labor should be emphasized in all business recruitment strategies, particularly in manufacturing. Every economic development professional will echo the same statement-- other issues matter, but availability of workforce is the largest factor when considering company relocation and expansion. Although having unemployed workers is not a fact to brag about, emphasizing their existence may be the quickest way to absorb them back into the labor force. Among those interviewed, there is a concerning refrain 2 JUNE 2015 ECONOMIC ANALYSIS OF WEST TENNESSEE

of low motivation within the workforce. The WIBs should seek to systematize the presentation of labor market information to all individuals who enter the WIB system. The issue of low motivation has deep roots that cannot be quickly and easily ameliorated, but there are a large number of people in that camp who could be motivated if presented with the proper incentives. Many youth and adults alike are desperately unfamiliar with the types of work that are available in fields such as manufacturing, transportation, installation/repair, and healthcare. The WIBs cannot change those who are unwilling to change, but they can persuade some by empowering them with information and the proper incentives. Advanced manufacturing should be promoted as a legitimate career pathway for residents. Though West Tennessee has shed many manufacturing related jobs, these still compose 11% of the regional economy and form a critical pillar of the region s export base. Employers in these fields and EMSI s gap analysis indicate that there is undersupply of the workers needed to support this industry. Beating the stigma of manufacturing as a dirty and dangerous career choice is not easy, but there are several tactics. For example, the WIB should consider sponsoring or assisting in industry days to expose young people to advanced manufacturing facilities. Ask for better articulation of state s target industry clusters and consider developing sector navigator system to promote support of these industries. The state of Tennessee is aggressively pursuing economic development. However, the Tennessee Department of Economic & Community Development s website promotes 10 different industry sectors and has very little information on the strengths of each metro area in each of these sectors. The WIB will be more capable of supporting these clusters if the priorities are further regionalized and simplified. This report is packed with information on the regional economy, and the various sub-regions within it. Some of the key points are summarized below: ECONOMIC OVERVIEW The three largest industry sectors in West Tennessee are Government, Health Care & Social Assistance, and Retail Trade. Together these sectors made up 315,069 jobs or approximately 34% of total regional employment in 2014. Beyond the well-paying Health Care & Social Assistance sector, other industry sectors with notable projected growth are Administrative & Support & Waste Management & Remediation Services (+24,244 jobs); Other Services (+14,888 jobs); and Finance & Insurance (+8,708 jobs). However the majority of these jobs are in low wage industries, which is a concern. Three industry sectors have the highest location quotients (LQ) in West Tennessee: Transportation & Warehousing (2.16), Administrative & Support & Waste Management & Remediation Services (1.44), and Other Services, Except Public Administration (1.36). The LQ of Transportation & Warehousing is expected to drop to 2.06, which signals that other regions are projected to catch-up in this field and hiring for this mature sector is likely to slow down. Further, it should be noted that most of the region s strengths in terms of LQs, outside of Transportation & Warehousing, are in fields that are relatively low-skill and low wage. Memphis is the sole driver of the region s competitive advantage in Transportation & Warehousing. Manufacturing is relatively low in the Memphis MSA (0.86) but is high in both the Jackson MSA and All Other Rural Counties (1.72 and 1.93, respectively) - an unusual, but understandable, phenomenon. COMPARISON OF GRAND DIVISIONS West Tennessee has trailed Middle and East Tennessee in total job creation over the past ten years. Though the difference may not appear significant when viewed in average annual growth terms, if West Tennessee had seen the marginally higher job growth of East Tennessee it would have gained 11,000 more jobs over this period of time. Looking forward over the next ten years, West Tennessee is expected to outperform East Tennessee and under-perform compared to Middle Tennessee. Every year over the past ten years, West Tennessee has experienced a higher unemployment rate than Middle and East Tennessee, and the United States. It is SOUTHWEST HUMAN RESOURCE AGENCY & LOCAL WORKFORCE INVESTMENT AREA 11 3

concerning that that gap has increased since the end of the recession in 2009. This signals that other parts of Tennessee, and the United States in general, have adapted to new economic realities, but West Tennessee is still struggling up-hill to compensate for jobs lost during the recession. When traditionally blue-collar industries such as agriculture, transportation and manufacturing are removed from the comparison, West Tennessee lags its peer regions by even more. By way of comparison, Middle Tennessee s economy experienced a notable structural shift over the past ten years. Though it lost jobs in agriculture, and manufacturing it saw outstanding growth in fields such as finance, real estate, and professional, scientific and technical services. The difference between West and Middle Tennessee is drastic on these metrics, as Middle Tennessee grew at double the rate of West Tennessee in these categories between 2004 and 2014. West Tennessee clearly lags other parts of the state in total educational output, with less than 10 graduates per 1,000 people, compared to 10.7 in Middle Tennessee and 10.4 in East Tennessee. The difference is particularly pronounced at the associate s and bachelor s degree levels. Despite all the bad news are some encouraging signs for West Tennessee. West Tennessee only slightly trailed East Tennessee in terms of STEM employment growth and non-agricultural, non-transportation, and nonmanufacturing job growth. West Tennessee is projected to outperform East Tennessee in percentage growth on both of these metrics over the next ten years. Furthermore, earnings of STEM workers are higher in West Tennessee than in either of the other two Grand Divisions. TAX REVENUE BENEFITS OF INCREASING EMPLOYMENT Lowering the unemployment rate to the state average (6.7%) would bring an estimated 10,622 workers back into the workforce. The increased income and spending would generate an estimated $3.9 million in increased tax revenue for the state of Tennessee and $3.3 million in increased tax revenue for the counties of West Tennessee. Based on the amount of tax revenue collected in fiscal year 2014, this would increase revenue for the state by 0.33% and for the counties by 0.77%. This is the lower bound of economic impact. Lowering the unemployment rate to the national average of 5.9% would bring 16,227 individuals back to the workforce. The taxes assessed on their increased income and spending would generate $6.0 million in state taxes, and $5.0 million in local taxes. Compared to fiscal year 2014, these values would increase revenues by 0.5% for the state and 1.2% for the counties. This is the higher bound estimate. OCCUPATIONAL GAP ANALYSIS For all educational levels, there were a total of 24 significant gaps in the occupations. The most number of gaps occurred at post-secondary certificate level. Truck and bus driver/commercial vehicle operator and instructor occupation has the largest gap (281) at the PSV level. First line supervisors of retail workers (gap of 142) and bookkeeping, accounting, & auditing clerks (gap of 80) are the second and third largest regional gaps respectively at the PSV level. Police & sheriff s patrol officers (gap of 68) and farmers, ranchers, & other agricultural managers (gap of 65) have the sixth and seventh largest gaps. Sales representatives, wholesale & manufacturing, except technical & scientific products (gap of 60); insurance sales agents (gap of 56); and billing & posting clerks (gap of 55) round out the top ten gaps at this level. At the associate s level, there was only one occupation with a significant gap: diagnostic medical sonographers (16). For the bachelor s degree level, medical & clinical laboratory technologists have the largest gap (54). Sales representatives, wholesale & manufacturing, technical & scientific products is the second largest gap (51), followed by industrial engineers (43). Training & development specialists (27); computer systems analysts (26); kindergarten teachers, except special education (25); clergy (22); medical & health services managers (16); and mental health & substance abuse social workers (15) round out the significant gaps at this level. 4 JUNE 2015 ECONOMIC ANALYSIS OF WEST TENNESSEE

There were 16 occupations associated with significant workforce surpluses. Five of these occupations had a surplus at the postsecondary certificate level; two at the associate s and the rest were at the bachelor s degree level. The top two surpluses at the PSV level are in pharmacy technicians (214) and emergency medical technicians & paramedics (119). Dental assistants have the third largest surplus with 136 completers for 36 job openings; followed by surgical technologists (surplus of 29). At the associate s level, the largest reported surplus is in registered nurses (252 annual openings compared to 309 regional completers). Respiratory therapists have the second largest surplus (31) at this level. There are nine occupations with a significant surplus of workers at the bachelor s degree level. The top two surpluses are in secondary and elementary school teachers (with surpluses of 125 and 112 respectively). Accountants & auditors have the second largest surplus with 199 completers for 126 job openings; followed by sales managers (surplus of 66). For the regional breakout at the post-secondary certificates and below, the gaps are common to high turnover, low wage jobs: first-line supervisors of food preparation & serving workers; cooks, restaurant; first-line supervisors of retail sales workers; and customer service representatives all show gaps in all three regional breakouts. At the associate s level, registered nurses are in surplus in both the Jackson MSA and rural county areas, but in a gap in the Memphis area. At the bachelor s degree level occupations, the Jackson MSA and rural counties are showing surpluses in many programs, four in the Jackson MSA and eight in the rural counties supporting the hypothesis that completers in those regions may be seeking jobs in the larger Memphis area where gaps exist. SKILLS GAP ANALYSIS The list of top 45 skills for the region s most critical occupations is dominated by skills of the technical variety, followed consecutively by other skills, business skills and soft skills. Though there are not many business skills in the top 45, those on the list are critical important, evidenced by the fact that business and sales are ranked numbers one and two on the list. Some of the technical skills with universal application include technology, which is mentioned in 8% of job postings, and accuracy & precision, which is mentioned in 5% of job postings. Diagnostic medical sonographers and ophthalmic medical technicians have the highest forecasted job growth over the next five years (20%). The unique skills that are in demand and advertised the most frequently for those occupations respectively include: diagnostic medical sonography, medical ultrasonography, echocardiography, anatomy & intraocular, ophthalmology, optometry, and diagnostic testing. The top three geographic areas for these two jobs are: Memphis (with 13 combined unique postings), followed by Bartlett, Covington, and Jackson TN each with two unique postings. The third fastest growing occupational group (19.6%) is mental health & substance abuse social workers. The unique skills demanded in this occupation are: work education, disorders, psychiatric, social work, family therapy, and psychosocial. Memphis was once again the top city with 20 unique postings, following by Whiteville (3) and Jackson (2) in February and March 2015. SOUTHWEST HUMAN RESOURCE AGENCY & LOCAL WORKFORCE INVESTMENT AREA 11 5

Contents 2 EXECUTIVE SUMMARY 2 Recommended Next Steps 3 Economic Overview 3 Comparison of Grand Divisions 4 Tax Revenue Benefits of Increasing Employment 4 Occupational Gap Analysis 5 Skills Gap Analysis 7 INTRODUCTION 9 CHAPTER 1: ECONOMIC ASSESSMENT OF WEST TENNESSEE 9 Introduction 10 Economic Overview of West Tennessee 17 Comparison of West Tennessee with Other Grand Divisions 20 CHAPTER 2: TAX REVENUE IMPACTS OF REDUCING UNEMPLOYMENT 20 Introduction 20 Regional Unemployment Overview 21 CHAPTER 3: LABOR MARKET GAP ANALYSIS 21 Skills Gap Analysis 22 Occupational Gap Analysis 23 Interpreting Gap/Surplus Analysis Results 23 Postsecondary Certificate Level Gap Analysis 27 Associate s Level Gap Analysis 28 Bachelor s Level Gap Analysis 31 Gap Analysis Conclusion 32 CHAPTER 4: CAREER PATHWAYS RECOMMENDATIONS 33 CHAPTER 5: DISCUSSIONS WITH KEY PERSONNEL 33 Negative Economic Trends 33 Positive Economic Trends 35 APPENDIX 1: ABOUT THE DATA 35 General Description of EMSI Data 35 Methodology of Tax Impact Model 36 APPENDIX 2: PROGRAM-TO-OCCUPATION MAPPING 46 APPENDIX 3: PROGRAM GAP ANALYSIS METHODOLOGY 46 Supply and Demand Model 46 Occupation Demand 48 APPENDIX 4: HOT JOBS 51 APPENDIX 5: DETAILED EMPLOYMENT PROJECTIONS 6 JUNE 2015 ECONOMIC ANALYSIS OF WEST TENNESSEE

Introduction Like many states in the Midwest and South, Tennessee is in the midst of a turning point in its economic history. Extending back the agricultural era of the 19th and early 20th century to the large scale manufacturing industries during the late 20th century the state s economy has long been reliant on staple industries. Although these industries still play an important part of the regional economy, their impact has clearly decreased with time. For example, in 1975 36% of the state s employment was in in the manufacturing sector, in 2014 that has moved to just 11%. 1 Employment in other industries is springing up in their stead- healthcare, professional, scientific & technical services, and advanced manufacturing, to name a few. Unlike many states in the Midwest and the South, Tennessee has instituted some aggressive educational and economic policies to propel the state forward. Governor Haslam has decreed his desire for 55% of the state s population to have a college degrees or certificates by the year 2025. Using the most currently available statistics, that will require an increase of 20 percentage points over the next ten years within the state, and if West Tennessee is to keep pace it will require the accrual of 72,000 degrees or certificates, or 7,240 degrees per year. To enable Tennesseans to achieve this, the Governor s office has implemented both the Tennessee Promise and Tennessee Reconnect scholar- 1 Bureau of Labor Statistics, Quarterly Census of Employment and Wages. http://www.bls.gov/cew/. Accessed: 5/19/2015. ships, which provide last-dollar funding for students to attend state community colleges and trade schools tuition free, as long as they are making academic progress and maintaining an adequate GPA. This program will be under the nation s microscope over the coming years, as many other states are interested in improving their workforces. Accompanying these policies is the Tennessee LEAP grant program, designed to fund educational programs that will have significant economic gains for the state, and Pathways to Prosperity, which provides support to secondary students transitioning to postsecondary institutions. To gain better insight into the surrounding economic conditions and its implications to the workforce development system of West Tennessee, Local Workforce Investment Boards (LWIA) 11, 12 and 13 have partnered with Economic Modeling Specialists Intl. (EMSI) to conduct an economic assessment of the area, particularly focused on diagnosing the reasons for high unemployment in the region, quantifying the economic impacts of that unemployment, and providing recommendations to improve the situation. In order to diagnose the economic problems of the region we deeply analyzed labor market data and compared West Tennessee with the two other Grand Divisions, Middle and East Tennessee, which broadly speaking, have better economic circumstances. To reduce unemployment the WIBs must know what job opportunities are available and which are not oversaturated by existing training programs. Secondly, the WIBs must also understand the long-term career opportunities available to workers coming through the workforce system, so EMSI highlights the career pathways opportunities for workers in high-priority occupations, particularly when these pathways can lead to greatly improved labor market outcomes for students. The regional backdrop used in this report is defined by Shelby, Madison, Tipton, Gibson, Fayette, Dyer, Weakley, Henry, Obion, Henderson, Carroll, Lauderdale, McNairy, Hardeman, Hardin, Haywood, Chester, Benton, Crockett, Decatur, and Lake Counties. There are also occasional breakouts that identify specific dynamics by individual county and by the region s predominant Metropolitan Statistical Areas (MSAs) Memphis, and Jackson and SOUTHWEST HUMAN RESOURCE AGENCY & LOCAL WORKFORCE INVESTMENT AREA 11 7

by the non-metropolitan counties within the area. This entire 21 county region, which will be referred to as West Tennessee is represented in Figure 1.1. The report is broken into five chapters. Chapter 1 provides an economic assessment of West Tennessee with high-level information about current and projected job trends, educational attainment levels, and statistics comparing West Tennessee to other parts of the state. Chapter 2 provides a summary of the expected ramifications of tax revenue for reducing unemployment in West Tennessee. Chapter 3 contains a gap analysis, explaining the major workforce gaps associated with the WIBs high priority occupations and other occupations. Chapter 4 highlights the career pathways opportunities available to low- and middle-skill workers as they look for bigger and better employment opportunities after their initial visit to the workforce boards. Chapter 5 contains EMSI s summary of our conversations with workforce personnel and employers, providing anecdotes and qualitative information which guides and supports the quantitative portions of this analysis. After a brief conclusion, detailed information and data are provided in the appendices. 8 JUNE 2015 ECONOMIC ANALYSIS OF WEST TENNESSEE

1 Economic Assessment of West Tennessee INTRODUCTION This chapter provides a high level economic assessment of West Tennessee, defined by the 21 counties highlighted in Figure 1.1 and compares this region to the other two Grand Divisions of Tennessee, displayed in Figure 1.2. 2 The 2 In alphabetical order the counties in West Tennessee include: Benton, Carroll, Chester, Crockett, Dyer, Fayette, Gibson, Hardeman, Hardin, Haywood, Henderson, Henry, Lake Lauderdale, Madison, McNairy, Obion, Shelby, Tipton and Weakley. goal of the chapter is to provide data on the economic and workforce employment trends that either already exist or are developing in the region. To start, we examine employment and demographics in West Tennessee according to the following five indicators: jobs by industry, jobs by occupation, commuting patterns, unemployment, and educational attainment. Afterward the region is compared with the other two Grand Divisions in several critical economic metrics in order to shed light on why the region has struggled economically more than other parts of the state. FIGURE 1.1: Analysis Regions within West Tennessee Memphis MSA Jackson MSA All Other Counties FIGURE 1.2: Map of Tennessee Grand Divisions West Middle East SOUTHWEST HUMAN RESOURCE AGENCY & LOCAL WORKFORCE INVESTMENT AREA 11 9

ECONOMIC OVERVIEW OF WEST TENNESSEE In this section we provide an overview of the economy from the industry and occupation perspectives, while also examining unemployment and educational attainment. Jobs by Industry Evaluating current and future employment by industry provides information on the economic diversification of a given region. Industries consist of groups of companies that are primarily engaged in producing the same product or service. The North American Industry Classification System (NAICS) is the structure used by the U.S. Census Bureau to classify establishments into industries based on their production process (although the final product or service is usually similar for the firms in a given industry). NAICS applies a six-digit hierarchical coding system to organize more than 1,100 detailed industries into twenty larger industry sectors. The breakdown of current and future employment by major industry sector in West Tennessee appears in Table 1.1 and Figure 1.3 on the next page. As shown, the three largest industry sectors in West Tennessee are Government, Health Care & Social Assistance, and Retail Trade. Together these sectors made up 315,069 jobs or approximately 34% of total regional employment in 2014. Health Care & Social Assistance and Retail Trade added new jobs between 2009 and 2014, and all three are projected to continue to grow through 2024. Though not one of the highest ranking in jobs in Memphis, the Manufacturing industry is in the top three in both the Jackson MSA and the non-metropolitan Coun- TABLE 1.1: Current and Projected Jobs and Job Change by Industry Sector, 2014 to 2024 NAICS CODE DESCRIPTION 2014 JOBS 2024 JOBS CHANGE % CHANGE 11 Agriculture, Forestry, Fishing and Hunting 15,995 14,318 (1,677) (10%) 21 Mining, Quarrying, and Oil and Gas Extraction 684 751 67 10% 22 Utilities 543 443 (100) (18%) 23 Construction 41,755 44,473 2,718 7% 31 Manufacturing 73,466 69,645 (3,821) (5%) 42 Wholesale Trade 38,234 40,601 2,367 6% 44 Retail Trade 93,092 98,265 5,173 6% 48 Transportation and Warehousing 66,616 70,844 4,228 6% 51 Information 8,903 9,637 734 8% 52 Finance and Insurance 41,291 49,999 8,708 21% 53 Real Estate and Rental and Leasing 35,840 41,548 5,708 16% 54 Professional, Scientific, and Technical Services 36,691 41,925 5,234 14% 55 Management of Companies and Enterprises 7,709 8,412 703 9% 56 Administrative and Support and Waste Management and Remediation Services 85,049 109,293 24,244 29% 61 Educational Services 16,730 19,823 3,093 18% 62 Health Care and Social Assistance 110,004 137,388 27,384 25% 71 Arts, Entertainment, and Recreation 14,565 17,655 3,090 21% 72 Accommodation and Food Services 65,015 72,702 7,687 12% 81 Other Services (except Public Administration) 70,547 85,435 14,888 21% 90 Government 111,973 113,125 1,152 1% Total 934,735 1,046,284 111,549 12% Source: EMSI Complete Data 2014.4 10 JUNE 2015 ECONOMIC ANALYSIS OF WEST TENNESSEE

00+0+0+0+0+0+0+0+0+0+0+0+0+0+0+0+0+0+1+3 FIGURE 1.3: Jobs and Job Change by Industry Sector in West Tennessee, 2014 to 2024 2014 Jobs 2014 2024 Job Change (20,000) 20,000 40,000 60,000 80,000 100,000 120,000 23+20+12+7+6+5+4+4+4+3+3+2+2+1+1+1+0+0+0+0Manufacturing Health Care and Social Assistance Admin. & Support and Waste Mgmt. & Remediation Services Other Services (except Public Administration) Finance and Insurance Accommodation and Food Services Real Estate and Rental and Leasing Professional, Scientific, and Technical Services Retail Trade Transportation and Warehousing Educational Services Arts, Entertainment, and Recreation Construction Wholesale Trade Government Information Management of Companies and Enterprises Mining, Quarrying, and Oil and Gas Extraction Utilities Agriculture, Forestry, Fishing and Hunting 92+71+59+34+54+30+31+78+56+14+12+35+32+93+7+6+1+0+13+61 Source: EMSI Complete Data 2014.4 ties of West Tennessee. Though the region is projected to see relatively healthy job growth over the next ten years, it is concerning that the majority of these jobs are in low wage industries. Beyond the well-paying Health Care & Social Assistance, other industry sectors with notable projected growth are Administrative & Support & Waste Management & Remediation Services (+24,244 jobs); Other Services (+14,888 jobs); and Finance & Insurance (+8,708 jobs). Industry sectors are expected to contract between 2014 and 2024 include Crop & Animal Production (-1,677), Utilities (-100) and, most notably, Manufacturing (-3,821 jobs). Table 1.2 that follows on the next page shows the employment concentration of the industry sectors in West Tennessee, measured in terms of location quotients (LQs). LQs are used to assess national competitiveness by comparing the concentration of employment in a given industry against the concentration of employment for that same industry across the nation. An LQ equal to 1 means that the percentage of total employment comprised by an industry in the region exactly matches the percentage of total employment comprised by that industry in the nation. An LQ greater than 1 means that the industry comprises a greater proportion of total employment in the region than it does in the nation. High LQs (usually anything greater than 1.2) are an indication that the region has a comparative advantage or specialization in certain industries relative to the rest of the nation, or potentially to other competing regions. When evaluated jointly with job counts and expected job growth, high LQs give a sense of the industry sectors that have the greatest potential for workforce investment and where regional economic development professionals are likely to be focusing their efforts. This information is of particular importance as WIBs seek to engage in larger conversations with economic development, and education about aligning resources to help meet with workforce needs. The following three industry sectors have the highest location quotients in West Tennessee: Transportation & Warehousing (2.16), Administrative & Support & Waste Management & Remediation Services (1.44), and Other Services, Except Public Administration (1.36). The only other industry that would be considered above average in competitiveness would be Wholesale Trade (1.17). Other the next ten years, the location quotients of most industry sectors in the region will remain relatively stable. However, the LQ of Transportation & Warehousing is expected to SOUTHWEST HUMAN RESOURCE AGENCY & LOCAL WORKFORCE INVESTMENT AREA 11 11

TABLE 1.2: Employment Concentration by Industry Sector in West Tennessee, 2014 and 2024 NAICS CODE DESCRIPTION 2014 LOCATION QUOTIENT 2024 LOCATION QUOTIENT 11 Agriculture, Forestry, Fishing and Hunting 0.91 0.82 21 Mining, Quarrying, and Oil and Gas Extraction 0.10 0.09 22 Utilities 0.19 0.16 23 Construction 0.88 0.85 31 Manufacturing 1.14 1.07 42 Wholesale Trade 1.17 1.12 44 Retail Trade 1.00 0.99 48 Transportation and Warehousing 2.16 2.06 51 Information 0.53 0.55 52 Finance and Insurance 0.78 0.76 53 Real Estate and Rental and Leasing 0.82 0.80 54 Professional, Scientific, and Technical Services 0.57 0.56 55 Management of Companies and Enterprises 0.67 0.67 56 Administrative and Support and Waste Management and Remediation Services 1.44 1.58 61 Educational Services 0.74 0.75 62 Health Care and Social Assistance 1.04 1.08 71 Arts, Entertainment, and Recreation 0.69 0.73 72 Accommodation and Food Services 0.96 0.96 81 Other Services (except Public Administration) 1.36 1.46 90 Government 0.93 0.90 Source: EMSI Complete Data 2014.4 drop to 2.06, which signals that other regions are projected to catch-up in this field and hiring for this mature sector is likely to slow down. 3 There are some concerning signs in these data, namely that most of the region s strengths, outside of Transportation & Warehousing, are in fields that are relatively low-skill and low wage. In Figure 1.4 and Table 1.3 on the following page we display location quotient scores for each of the region s sub-regions the Memphis MSA, the Jackson MSA and All Other Rural Counties. Figure 1.4 focuses exclusively on the top five sectors within West Tennessee, ranked by location quotient. The dotted line across 1.0 symbolizes the nation s average concentration. The chart displays that the Memphis MSA is the sole 3 Note that because LQs represent regional employment relative to national employment, a decreasing LQ does not necessarily mean decreasing employment, and likewise an increasing LQ does not necessarily imply increasing employment. driver of the region s competitive advantage in Transportation & Warehousing; both other regions are at or below 1.0. Administrative & Support & Waste Management & Remediation Services and Wholesale Trade are each bolstered by above average LQs in both the Memphis MSA and the Jackson MSA. Other Services, Except Public Administration is driven by both the Memphis MSA and the Jackson MSA. Interestingly, Manufacturing is relatively low in the Memphis MSA (0.86) but is high in both the Jackson MSA and All Other Rural Counties (1.72 and 1.93, respectively). Manufacturing and Transportation & Distribution tend to co-locate within metropolitan areas because production industries require transportation industries to store and ship their products to wholesalers and retailers. The presence of FedEx within Memphis is likely the reason for the break with this trend because FedEx serves primarily an international market rather than a local market and focuses on both consumer and industrial shipping. 12 JUNE 2015 ECONOMIC ANALYSIS OF WEST TENNESSEE

FIGURE 1.4: Location Quotient Comparisons in West Tennessee West TN LQ Memphis MSA LQ Jackson MSA LQ Rural Counties LQ 3.00 2.50 2.00 1.50 1.00 0.50 0.00 756= 914= 294= 361= 504= 571= 420= 294= 476= 501= 354= 431= 410= 438= 413= 308= 399= 301= 602= 676= Transportation and Warehousing Admin. and Support and Waste Mgmt. and Remediation Services Other Services (except Public Admin.) Wholesale Trade Manufacturing Source: EMSI Complete Data 2014.4 TABLE 1.3: Location Quotient Comparisons in West Tennessee NAICS DESCRIPTION WEST TN LQ MEMPHIS MSA LQ JACKSON MSA LQ RURAL COUNTIES LQ 48 Transportation and Warehousing 2.16 2.61 0.84 1.03 56 Administrative and Support and Waste Management and Remediation Services 1.44 1.63 1.20 0.84 81 Other Services (except Public Administration) 1.36 1.43 1.01 1.23 42 Wholesale Trade 1.17 1.25 1.18 0.88 31 Manufacturing 1.14 0.86 1.72 1.93 62 Health Care and Social Assistance 1.04 1.09 0.99 0.90 44 Retail Trade 1.00 0.95 1.10 1.15 72 Accommodation and Food Services 0.96 1.00 1.00 0.80 90 Government 0.93 0.83 1.21 1.18 11 Crop and Animal Production 0.91 0.21 1.18 3.48 23 Construction 0.88 0.83 1.01 1.04 53 Real Estate and Rental and Leasing 0.82 0.86 0.74 0.71 52 Finance and Insurance 0.78 0.79 0.59 0.80 61 Educational Services 0.74 0.74 1.48 0.37 71 Arts, Entertainment, and Recreation 0.69 0.78 0.55 0.43 55 Management of Companies and Enterprises 0.67 0.85 0.21 0.17 54 Professional, Scientific, and Technical Services 0.57 0.65 0.41 0.35 51 Information 0.53 0.56 0.48 0.45 22 Utilities 0.19 0.07 0.22 0.63 21 Mining, Quarrying, and Oil and Gas Extraction 0.10 0.04 0.05 0.33 Source: EMSI Complete Data 2014.4 SOUTHWEST HUMAN RESOURCE AGENCY & LOCAL WORKFORCE INVESTMENT AREA 11 13

Judging by the data in Table 1.3 it is notable that several very important industries have very low location quotients. As the United States becomes more a service-based economy, regions will find themselves with either the high end of those services- with the likes of Professional, Scientific & Technical Services, Information, and Finance & Insurance- or on the low end of the spectrum- with industries such as Administrative & Support & Waste Management & Remediation Services, Accommodation & Food Service and Other Services. The former group is composed of mostly mid- to high-paying jobs in fields such as sales, software development, and analysis; whereas, the latter group is composed largely of low-paying jobs such as clerks, landscaping workers, and hair dressers. All industries listed from the high-end services have very low location quotients within the region. For example, Professional, Scientific & Technical Services has an LQ of 0.57 within the region and spans from 0.35 to 0.65 within the various sub-regions. Promoting a better and more stable economy will require diversifying the industrial base into fields such as these. Jobs by Occupation Researchers often refer to industry data to get a sense of regional economic trends, but in order to better understand the quality of the jobs contained within that region, some knowledge of occupations is needed. These data are also more applicable to the WIB audience as occupations are easier to relate to educational and curricular requirements than are industries. For example, the Manufacturing TABLE 1.4: Current and Projected Jobs, Job Change, and Median Hourly Earnings by Major Occupation Group in West Tennessee, 2014 to 2024 SOC CODE DESCRIPTION 2014 JOBS 2024 JOBS CHANGE % CHANGE MEDIAN HOURLY EARNINGS AVERAGE ANNUAL OPENINGS 11-0000 Management 68,038 74,287 6,249 9% $26.09 2,422 13-0000 Business and Financial Operations 38,845 46,401 7,556 19% $25.26 1,664 15-0000 Computer and Mathematical 12,362 14,077 1,715 14% $30.75 409 17-0000 Architecture and Engineering 10,307 11,051 744 7% $31.48 364 19-0000 Life, Physical, and Social Science 4,797 5,380 583 12% $27.82 217 21-0000 Community and Social Service 11,499 13,658 2,159 19% $18.71 522 23-0000 Legal 5,220 5,881 661 13% $33.95 191 25-0000 Education, Training, and Library 43,446 45,782 2,336 5% $19.68 1,269 27-0000 Arts, Design, Entertainment, Sports, and Media 20,579 24,206 3,627 18% $15.04 918 29-0000 Healthcare Practitioners and Technical 50,659 59,651 8,992 18% $33.38 2,093 31-0000 Healthcare Support 24,665 31,050 6,385 26% $11.41 1,190 33-0000 Protective Service 21,267 25,044 3,777 18% $15.67 953 35-0000 Food Preparation and Serving Related 57,369 63,598 6,229 11% $8.84 2,838 37-0000 Building and Grounds Cleaning and Maintenance 40,882 47,988 7,106 17% $9.54 1,727 39-0000 Personal Care and Service 55,629 72,934 17,305 31% $8.59 3,290 41-0000 Sales and Related 109,938 122,082 12,144 11% $14.44 4,471 43-0000 Office and Administrative Support 120,319 128,990 8,671 7% $14.81 3,829 45-0000 Farming, Fishing, and Forestry 3,436 3,335 (101) (3%) $12.65 115 47-0000 Construction and Extraction 33,722 36,200 2,478 7% $15.14 1,157 49-0000 Installation, Maintenance, and Repair 35,554 38,794 3,240 9% $17.76 1,306 51-0000 Production 60,841 61,725 884 1% $14.47 1,915 53-0000 Transportation and Material Moving 92,941 100,419 7,478 8% $14.60 3,332 55-0000 Military occupations 6,379 6,464 85 1% $17.71 160 Source: EMSI Complete Data 2014.4 14 JUNE 2015 ECONOMIC ANALYSIS OF WEST TENNESSEE

industry while employing a number of assemblers and machine operators also employs people in management occupations and in professional occupations such as engineering. All of these occupations have different pay scales and require varying levels of education and training. Federal agencies use the Standard Occupational Classification (SOC) system to classify workers into occupational categories based on work performed. The 2010 SOC system contains more than 800 detailed occupations organized according to a five-digit hierarchical coding structure. Detailed occupations with similar job duties are further combined to form 23 major groups. Table 1.4 on the previous page shows the breakdown of employment in West Tennessee by major group, with information on current and projected jobs, job change, average annual openings, and wage rates. Office & administrative support occupations comprise the largest occupation group in West Tennessee at 120,319 jobs, followed by sales & related occupations at 109,938 jobs. Given the industrial presence of Transportation & Warehousing it is not surprising that transportation & material moving ranks third with 92,941 jobs. None of these industries are among the highest paying, however. To give another perspective on these data, the highest paying industries that offer 500 or more annual openings include healthcare practitioners & technical workers, management, and business & financial operations. When comparing across the three geographic subregions there are several notable trends indicating each region s strongest occupational groups. The Memphis MSA hosts 73% of all jobs in the region across all sectors, but there are several fields where that concentration is higher transportation & material moving, and computers & mathematical. The Jackson MSA hosts 9% of all regional jobs but is more concentrated in healthcare & technical occupations, and production occupations. The remaining rural regions host 18% of all jobs but are heavily concentrated in manufacturing at 25% of all regional employment. Educational Attainment This section describes the educational attainment of the population in West Tennessee for adults aged 25 years and older. This information is useful for educators and workforce investment boards targeting specific population groups that have low education levels. Educational attainment data in this section are presented by gender and by ethnicity and are broken out according to the following categories: 1) less than a high school degree, 2) high school degree, 3) some college, 4 4) associate s degree, 5) bachelor s degree, and 6) graduate degree and higher. Overall Educational Attainment Table 1.5 on the next page and Figure 1.5 display the educational attainment of the overall adult population in West Tennessee, without reference to gender and ethnicity. In West Tennessee, the percentage of the adult population with a high school diploma or less is 48%, higher than the national average by 4 percentage points. These data suggest there is an opportunity for educators FIGURE 1.5: Educational Attainment of Adult Population in West Tennessee Less than HS diploma or equivalent High School Diploma Some College Associate s Degree Bachelor s Degree 16+31+23+6+15+9+H 16+28+21+7+18+10+H Graduate Degree or Higher 15% 6% 18% 7% 23% 9% 10% W TN NATION 21% 16% 16% 32% 28% 4 The Some college category includes individuals who attended college but did not successfully obtain a degree and individuals who have received a postsecondary vocational award or professional certification but did not receive an associate s or bachelor s degree. SOUTHWEST HUMAN RESOURCE AGENCY & LOCAL WORKFORCE INVESTMENT AREA 11 15

TABLE 1.5: Breakdown of Adult Population in West Tennessee by Educational Attainment, 2009 and 2014 EDUCATION LEVEL 2009 POPULATION 2009 % DISTRIBUTION 2014 POPULATION 2014 % DISTRIBUTION POPULATION CHANGE % DISTRIBUTION CHANGE Less than HS diploma or equivalent 173,655 17% 167,627 16% (6,028) (1.1%) High school diploma or equivalent 331,110 33% 334,168 32% 3,058 (0.7%) Some college 223,823 22% 235,458 23% 11,635 0.5% Associate s degree 54,078 5% 58,957 6% 4,879 0.3% Bachelor s degree 145,153 14% 155,672 15% 10,519 0.6% Graduate degree or higher 82,019 8% 88,577 9% 6,558 0.4% Source: EMSI Complete Data 2014.4 FIGURE 1.6: Educational Attainment of Adult Population in West Tennessee by Ethnicity < HS HS Diploma Some College Associate Bachelor Graduate Hispanic, All Types Two or More Races, Non-Hispanic Native Hawaiian/Pacific Islander, Non-Hispanic Asian, Non-Hispanic American Indian or Alaskan Native, Non-Hispanic Black, Non-Hispanic White, Non-Hispanic 0% 20% 40% 60% 80% 100% 440+270+130+40+80+40= 170+270+270+70+150+70= 140+280+360+100+60+60= 140+160+110+50+260+280= 242+232+262+62+122+80= 200+350+240+60+100+50= 130+320+220+50+180+100= in West Tennessee to boost the percentage of adults with an associate s degree or higher (currently this percentage sits at 35% for the region overall). Out of all the education categories in Table 1.5, there are several groups that are most likely to seek assistance from regional workforce boards including those in the Less than high school diploma, High school diploma, and Some college categories. Together these categories total 737,253 people, or 71% of the entire adult population in the region. The educational attainment rates of West Tennessee are trending in the right direction. Between 2009 and 2014, the proportion of the overall adult population with Less than a high school diploma decreased by 1.1 percentage points, and the proportion of adults with between an associate s degree and a master s degree increased by 1.3 percentage points. 5 5 The column labeled % Change in Table 1.5 refers to the proportional change, not to the percent change between 2009 and 2014. For example, Educational Attainment by Ethnicity Figure 1.6 and Table 1.6 on the next page display the educational attainment of the adult population by ethnicity. The Asian, Non-Hispanics ethnicity category has the highest percentage of adults with post-secondary degrees (58%). White, Non-Hispanic category follows with 33%. The Black, Non-Hispanic group is the largest populationwise, following White, Non-Hispanic. For this group, only 21% of the adult population has a post-secondary degree and 55% has a high school diploma or less. While White, Non-Hispanic is the majority race/ethnicity group in the region, Black, Non-Hispanic and Hispanic, All Types are notable minorities. There are opportunities to assist both of these minority groups which lag Whites, Non-Hispanics in educational attainment. if a category comprised 20% of the total adult population in 2009 and 25% of the total adult population in 2014, the proportional change is equal to the difference between the two values (in this example, 5%). 16 JUNE 2015 ECONOMIC ANALYSIS OF WEST TENNESSEE

TABLE 1.6: Breakdown of Adult Population in West Tennessee by Educational Attainment and Ethnicity < HS DIPLOMA HS DIPLOMA SOME COLLEGE ASSOCIATE S DEGREE BACHELOR S DEGREE GRADUATE DEGREE AND HIGHER White, Non-Hispanic Black, Non-Hispanic American Indian or Alaskan Native, Non-Hispanic Asian, Non-Hispanic Native Hawaiian or Pacific Islander, Non-Hispanic Two or More Races, Non- Hispanic Hispanic, All Types Count 154,486 377,333 264,137 63,272 208,433 121,573 Percent 13% 32% 22% 5% 18% 10% Count 146,753 257,722 176,936 44,158 75,333 34,892 Percent 20% 35% 24% 6% 10% 5% Count 1,147 1,099 1,246 303 546 397 Percent 24% 23% 26% 6% 12% 8% Count 4,826 5,603 3,888 1,624 8,895 9,560 Percent 14% 16% 11% 5% 26% 28% Count 84 172 224 63 37 39 Percent 14% 28% 36% 10% 6% 6% Count 2,418 3,751 3,713 934 2,023 1,037 Percent 17% 27% 27% 7% 15% 7% Count 31,568 19,598 9,137 2,682 5,557 3,099 Percent 44% 27% 13% 4% 8% 4% Source: EMSI Complete Data 2014.4 TABLE 1.7: Basic Statistics of Grand Divisions, 2014 REGION 2014 POPULATION 2014 TOTAL EMPLOYMENT TOTAL GRP ($ BILLIONS) West Tennessee 1,585,538 934,735 $72.49 Middle Tennessee 2,577,342 1,515,878 $116.57 East Tennessee 2,404,570 1,296,618 $89.81 Source: EMSI Complete Employment, 2014.4 and EMSI Social Accounting Matrix model 2014.4 TABLE 1.8: Comparison of Employment Growth across Tennessee Grand Divisions, 2014-2024 REGION AVERAGE ANNUAL GROWTH IN ALL EMPLOYMENT, 04-14 AVERAGE ANNUAL GROWTH IN ALL EMPLOYMENT, 14-24 West Tennessee 0.42% 1.13% Middle Tennessee 1.36% 1.22% East Tennessee 0.54% 0.96% COMPARISON OF WEST TENNESSEE WITH OTHER GRAND DIVISIONS West Tennessee has not had the same fortune as Middle and East Tennessee in recent years, which has led to a notably higher unemployment rate in the West Tennessee region. The comparative statistics that follow intend to explain some of the observable and quantifiable differences between West Tennessee and the other two Grand Divisions. Our hope is that these comparisons can provide some explanations for the reasons behind this difference and point to recommendations for improving the situation. It is critical to begin with high level statistics on the regions in order to provide a baseline for comparison and the magnitude of each region s workforce. Table 1.7 displays the population, total employment and total gross regional product (GRP) of each region in 2014. The data indicate that Middle Tennessee is the largest region in terms of population, employment and economic output, and West Tennessee is smallest in all three categories. This seemingly small fact is quite important as it indicates that any numerical metric needs to be compared in terms of a relative measurement (such as per capita ) in order to be appropriately compared. Digging a little deeper into past and projected employment data, we can compare how West Tennessee has performed against the other Grand Divisions in terms of total job creation, and total and forecasted job growth over the next ten years. West Tennessee has trailed Middle and East Tennessee in total job creation over the past ten SOUTHWEST HUMAN RESOURCE AGENCY & LOCAL WORKFORCE INVESTMENT AREA 11 17

years. Though the difference may not appear significant when viewed in average annual growth terms, if West Tennessee had seen the marginally higher job growth of East Tennessee it would have gained 11,000 more jobs over this period of time. Looking forward over the next ten years, West Tennessee is expected to outperform East Tennessee and under-perform compared to Middle Tennessee. One obvious reason for West Tennessee s economic under-performance is the region s high unemployment rate in recent years. Figures 1.7 and 1.8 display unemployment across the three Grand Divisions, first in annual averages between 2004 and 2013, and then in terms of monthly averages over the past six months of available data (August 2014 to January 2015). Every year over the past ten years, West Tennessee has experienced a higher unemployment rate than Middle Tennessee, East Tennessee, and the United States. The most concerning trend is that the gap between West Tennessee and these benchmark regions has increased since the end of the recession in 2009. During and prior to the recession, West Tennessee lagged the state by 0.9 percentage points, and the nation by 1.4 percentage points. Following the recession, that gap jumped to 1.4 for the state and 1.8 for the nation. This signals that other parts of Tennessee, and the United States in general, have adapted to new economic realities, but West Tennessee is still struggling up-hill to compensate for jobs lost during the recession. The situation did not improve in 2014 and 2015, as the unemployment rate in West Tennessee remains notably higher than the state and nation. Certain types of jobs carry the potential to generate more economic impact than others. Jobs that are highly skilled tend to pay more and generate higher multiplier effects because other products and services are required to support the contributions of such workers. One way to focus on the higher-skilled and higher-paid workers within a workforce is to look at Science, Technology, Engineering & Mathematics (STEM) jobs (see Table 1.9 on the following page). Using this metric as a comparison, West Tennessee lags its peers in terms concentration of workers (i.e.: location quotient). There are some encouraging signs here, however, as West Tennessee beats out East Tennessee in terms of past and project growth and median earnings. Following the trend among these comparisons, in other respects West Tennessee considerably lags Middle Tennessee in STEM employment. Another helpful way to slice employment data is to remove the traditionally blue-collar industries of agricul- FIGURE 1.7: Comparison of Annual Unemployment Rates across Tennessee Grand Divisions, 2004 2013 12% 10% 8% 6% 4% 2% 0% 6.5% FIGURE 1.8: Comparison of Monthly Unemployment Rates across Tennessee Grand Divisions, August 2014 January 2015 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% West Tennessee Tennessee East Tennessee 2004 West Tennessee Tennessee East Tennessee 9.1% 6.5% 6.0% 5.6% 8.3% Middle Tennessee United States 7.6% 7.9% 11.3% 10.9% 10.5% 8.1% 7.5% 9.7% 10.1% 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: Bureau of Labor Statistics, EMSI Middle Tennessee United States 8.5% Aug 18 Sep 18 Oct 18 Nov 18 Dec 18 Jan 18 Source: Bureau of Labor Statistics, Current Population Statistics & EMSI (Not Seasonally Adjusted) 18 JUNE 2015 ECONOMIC ANALYSIS OF WEST TENNESSEE