fedgazette

Shocked, only not: False positive cases of employment decline

Dan Mayberry - Shakopee High School

Published November 1, 2005  |  November 2005 issue

Funny stuff, those data. On paper, employment losses in some counties have all the makings of unbounded catastrophe.

Take, for example, Dickinson County in the Upper Peninsula of Michigan and Koochiching County, Minn. Both counties witnessed strong employment growth between 1988 and 1990, only to witness crashes in 1991, each involving about 1,500 workers. The employment bust in each county, it turns out, was the result of a large construction project, which brought in a lot of migrant labor that swelled each county's employment force. Then, upon the projects' completion, each county saw that temporary labor force disperse, thus creating something of an artificial employment decline.

Still, despite the false-positive nature of the employment declines in Dickinson and Koochiching, these two counties offer yet another view to the many paths counties take when rebounding after a major employment bust.

What happened?

Two large construction projects began in Dickinson and Koochiching counties in 1988, both involving new paper mills. Champion International built a large paper mill in Quinnesec, Mich., while Boise Cascade constructed a paper mill in International Falls, Minn. Both projects commanded a lot of construction labor, much of which was moved in from outside the county.

"It took about a full year for construction to reach full swing," said Bob Anderson, the Boise Paper public affairs official. He estimated that the project employed between 2,000 and 2,400 workers during peak months of building in 1990, "of which at least 1,000 or more were brought in from outside the local labor pool. ... People knew that it was going to be short-lived. College students returned home because they knew they could make a lot of money working for the year. Lifestyles definitely changed," Anderson said.

The story was the same in Dickinson County in the early 1990s, where Champion International "contributed to our growth without a doubt. We saw booms in many industries, most notably logging," according to Kay Pascoe, the Dickinson County controller.

But in both counties, when plant construction was complete, many workers left the area. Though employment losses involved mostly temporary workers, the economic effects were very real and tangible. In Dickinson County, for example, per capita income dropped nearly $1,000 the year of the shock (1991), after going up $3,000 over the course of construction, according to data from the Bureau of Economic Analysis (BEA).

In Koochiching County, the effects were immediate. "Oh, it was a rapid contraction. The housing camp disappeared rapidly, and probably 1,000 workers were gone in three to four months," noted Anderson. The county then witnessed nearly a decade-long economic lull following the mill's completion.

"There was a real economic lull, still kind of is. If Koochiching has ever had a rush hour, it was during that time," said Anderson. "There was a bunch of small layoffs by local retailers and businesses, and all of that starts to compound itself."

Koochiching's current employment stands slightly above its pre-boom levels of the late 1980s, but more than 1,000 jobs below its employment height in 1990. The economic news isn't all bad, however: personal income increased some 80 percent from 1991 to 2003, according to BEA figures.

Dickinson County has had a different, more upbeat aftermath, largely because a new county hospital was built and a new Louisiana Pacific fiberboard plant expanded and opened operations shortly after the Champion International plant was completed.

"We have had constant growth since International," said Pascoe. Since the bust in 1991, Dickinson's employment has grown by over 3,000 workers—some 20 percent—and income has increased by two-thirds to roughly $28,000, according to the BEA.

At least some of the difference between the two counties' performance can be attributed to the necessities of all economies-available resources and location.

"Koochiching is isolated from most of Minnesota, which makes it difficult to attract workers," said Paul Nevanen, director of the Koochiching County Economic Development Authority, which was created in 2000 to spark new employment, "We didn't have some fundamental (economic) resources following Boise, but now we are focusing on diversifying the economy to include more technology and support centers to attract new business."

While Koochiching is isolated, Dickinson County lies along the two major highways in the U.P. "I just think our central location in the Upper Peninsula of Michigan, our proximity to Green Bay and our large amounts of available timber attract businesses," Pascoe said. "Our climate is easier to handle, and our location along U.S. (Highways) 2 and 41 has helped a lot with attracting business. We've just seen constant growth."

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