Although employment numbers might be a good indication of the overall economy and in particular the labor market, employment stability is also important.
One should think of the variation in employment as a measure of labor market volatility. That is, the higher the variation, the more volatile or unstable the labor market.
Volatility in the labor market can be harmful for local economies. Think of the uncertainty among households that make up the labor market. This is also problematic for local businesses in Augusta projecting future labor market conditions and workforce availability. What about new businesses thinking of locating to Augusta? We are all interested in a stable labor market.
Economists will tell you that there are trade-offs with any choice, decision and measure used in local economic development. Although an economy might be stable, the cost of such stability could be the lack of growth. This is similar to the risk/return trade-off in finance. Investors require a higher return to accept higher risk. That is, employment growth might be slowed at the cost of stability.
Local policy-makers might make decisions to increase employment growth (a measure by which they can be judged ) at the sacrifice of stability. In some cases, this pursuit of high- risk employment might be needed for the local economy to grow or yield higher employment growth.
As for Augusta, this concept is not new to its constituents. Several key policy-makers have discussed this topic and the implications on the local economy with me.
The basis of this argument is that Augusta has a substantial number of government workers, thus our economy is more stable than most metro areas. The idea that most people have about government positions is that they are long- term, stable positions. As such, employment in this sector would tend to be more stable than in other industries such as construction, manufacturing or retail trade. If Augusta has a higher portion of the labor market in government positions, then our overall labor market will be more stable.
By my calculations, Augusta's average year-to-year employment growth since the 2001 recession is 0.77 percent, compared to 0.71 percent for the U.S. What's even better is that the standard deviation, a measure of the variability in employment growth, over this time period is less in Augusta than in the U.S. That is, Augusta's labor market is growing on average slightly faster than the U.S. and is less volatile.
One question that still remains is whether Augusta's better labor market (relative to the national labor market) is because of its government sector. Although this sector employment includes public schools and hospitals, it does not include military personnel (only civilian employees). This sector still accounts for about 20 percent of total employment in Augusta, whereas the U.S. government sector accounts for about 15 percent of total employment.
With that said, the employment growth in Augusta's government sector exceeds total employment growth, but at the cost of higher volatility. Yes, the government sector is more volatile than overall employment in Augusta.
There are many measures of how our economy is doing. In particular, employment growth and volatility are two such measures on the state of Augusta's labor market.
Is the government sector the reason behind these "good" findings? Yes , in terms of its contribution to higher employment growth and no in terms of greater stability. As such, Augusta could possibly gain economically by diversifying some of its risk in the labor market via increased growth in other industries.
Augusta's labor market seems to be in a good position in employment growth and stability.
Mark A. Thompson is an economics professor and the Cree-Walker chairman of business administration at Augusta State University. He can be reached at email@example.com.