February 15 2016

Unmanned Aircraft Systems (UAS) industry in Oregon.

I am the master of my fate,.

I am the captain of my soul.

Invictus by William Ernest Henley

February 15, 2016 1

In This Issue 1. Unemployment Rate

2. Oregon Economy 3. State agency response to business issues 4. out & ebout—Electric Bicycles 5. How to: Entrepreneurial Ecosystem 6. Facts About Manufacturing 7. Drones & UAS/UAV Industry in Oregon 8. The Oregon Promise 9. Helping the Working Class 10. SOREDI and SoBig

11. Grasping Reality of China’s Rise

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What is the “Real” Unemployment Rate?

Labor Force Participation Rate THE BASICS: Understanding the Relationship between LFPR and the Unemployment Rate Each month, the U.S. Bureau of Labor Statistics reports the unemployment rate and the labor force participation rate, among many other economic measures.

But the rates aren’t always as straightforward as they seem.

The percentage of “unemployed” Americans isn’t actually the percentage of Americans without a job. It’s more complicated—and in some cases misleading.

Here’s an easy way to think about it: Imagine a country of 10 people Bob, Bill, Betty, Bonnie and Ben have full-time jobs. Chuck and Celia are looking for work after losing their jobs. David, Dee and Darla are retired.

The labor force participation rate is 70 percent. Seven in 10 have a job or are looking for work. Three in 10 are retired and out of the labor force. The unemployment rate would be 28.6 percent. Two of the seven in the workforce don’t have a job.

Now imagine that Chuck, despite wanting a job, has lost hope. He gives up looking. That means he leaves the labor force, so the labor force participation rate decreases to 60 percent.

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But even though Chuck is not working, the unemployment rate actually goes down. No one new found work, but the unemployment rate would now be 16.7 percent.

Of the six people left in the labor force, only one isn’t employed.

Sometimes the good news of a falling unemployment rate hides the bad news of dispirited workers leaving the labor force.

Does that clear things up for you? Publisher 1495 NW Garden Valley Blvd Roseburg, OR 97471

Unemployment Rate: January 2016 U.S. : 4.9% Oregon 5.4%

541-672-6651

By Bankrate.com

What it means: Posted monthly based on a survey of households by the Census Bureau for the Bureau of Labor Statistics, this measures the percentage of the labor force that is currently without work, but seeking employment.

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Oregon Economy The pace of improvement in Oregon’s labor market continues to be full throttle. In fact, the gains in 2015 were the best in the past two decades. The state added more than 57,000 jobs, which translates into 3.3 percent growth over the year. In recent history, only the mid-1990s boom saw comparable gains. At that time, employment gains were similar, north of 50,000 per year, however growth rates were higher due to the smaller population and employment base. Given demographic trends, job growth north of 3 percent is as strong as can be expected.

Oregon has regained its traditional advantage relative to the nation, with job growth outpacing the typical state by more than one percentage point. This growth differential largely comes from the state’s underlying fundamentals like its industrial structure and strong in-migration flows. Both of these trends have long-lasting impacts on the Oregon economy and help drive the state’s more volatile swings over the business cycle.

More importantly, these improvements are now translating into stronger wage gains for the average Oregon worker. While Oregonian income and wages are below the typical state, average wages today in Oregon are at their highest relative point since the severe early 1980s recession when the timber industry restructured. Much of this improvement has come in the past 2-3 years when Oregon wage growth, much like job growth, has outstripped the average state.

Oregon's governor has proposed wage hikes that would set hourly pay at a minimum of $13.50 by 2022.

Gov. Kate Brown is pushing a new, two-tiered system that would increases wages in Portland to $15.52 over the next six years, while other areas would have a minimum of $13.50.

The state's current minimum wage is $9.25.

If approved by state legislators, Oregon would join a growing list of states that are boosting minimum-wage paychecks. Thirteen states, including California, Nebraska and Vermont, are set to bolster their minimum wages in 2016.

The wage gains are due to broad-based increases across all major industries and all regions of the state. Wage growth is not due to compositional effects, such as the strong growth in high-wage technology jobs or that the Portland MSA has added the most jobs, where wages are higher than in rural Oregon. While both of those trends are happening, they have surprisingly little impact on statewide average wages. This is certainly good news that the wage increases are broad-based and not isolated to certain industries or regions.

Overall, while there remains much room for improvement in average income levels in Oregon, it is important to remember that wages have not been this high, relatively, for more than a generation. http://oregoneconomicanalysis.com/2016/01/28/ report-stem-trends-in-oregon/

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DOWN TO BUSINESS Arlene Soto

I’m having trouble getting a state agency to respond to my business issue, what should I do?

Business owners in Oregon are fortunate to have an advocate at the state level to assist them with resolving issues. According to the Oregon Secretary of State’s website: “Oregon’s Office of Small Business Assistance is an independent voice for entrepreneurs within state government. Small businesses account for 98 percent of Oregon firms, employ over half the state’s workforce and play a vital role in Oregon’s economy. The Small Business Advocate's core mission is to assist entrepreneurs who believe they've been subject to unreasonable or unfair state regulatory actions. This includes: •Investigations.

•Excessive fines.

•Penalties.

•Threats.

•Other enforcement by a state agency.

The advocate investigates complaints and works toward a mutual resolution.

When problems arise, the Small Business Advocate works collaboratively with businesses and state agencies to resolve issues. Like an ombudsman, the Advocate looks for systems that cause repeated problems for small business and makes recommendations for change.

tively with entrepreneurs and state agencies to help streamline and improve Oregon’s business climate. She brings a unique combination of public and private sector experience to her work in the Secretary’s Office of Small Business Assistance. With 18 years of experience running small businesses, Ruth understands first-hand the challenges that entrepreneurs face. An avid kayaker, she comes to the Secretary of State after nine years in the legislative branch, where she helped constituents navigate the shifting waters and complexities of state government.”

If your small business is experiencing problems with state government offices, contact the Small Business Advocate at business.sos@state.or.us or via the toll-free number, 1-844-469-5512. You can find more resources and information about the services provided by the state online at http:// sos.oregon.gov/BusinessSOS. The SBDC is a partnership of the U.S. Small Business Administration, the Oregon Small Business Development Center Network, the Oregon Business Development Department and Southwestern Oregon Community College.

Arlene M. Soto has been the Director of the Southwestern Small Business Development Center since July 2007. To ask a question call 541-756-6445, e-mail asoto@socc.edu, or write 2455 Maple Leaf, North Bend, OR 97459. Additional help is available at the OSBDCN Web page www.bizcenter.org.

Created by the Oregon Legislature in 2013, the Office of Small Business Assistance operates under ORS 56.200-209, and is housed in the Office of the Secretary of State. Appointed by the Secretary, the Small Business Advocate works outside of both the executive branch and the legislative branch to serve as an objective voice for entrepreneurs within the halls of government.”

Ruth Miles

Currently, the Small Business Advocate for Oregon is Ruth Miles. “Ruth works collabora5

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HOW TO COOK UP A VIBRANT ENTREPRENEURIAL ECOSYSTEM The recovery from the Great Recession has not been felt evenly across the country. While some localities bounced back quickly, others have been slow to find their footing. In the midst of this uneven recovery, cities are grappling with widening income inequality, slow economic growth, and a capital restricted environment. To address these challenges, local policymakers are increasingly turning to entrepreneurship—a proven driver of economic growth and a catalyst of upward economic mobility. Yet, boosting economic growth and opportunity through entrepreneurship is not as simple as importing more entrepreneurs. At the local level, the connections among entrepreneurs, support organizations, and other related actors create an ecosystem that either enables entrepreneurial success or makes the process of building

MYTH: Without Venture Capital Financing, an Ecosystem Cannot Flourish

a new business more challenging. Entrepreneurial ecosystems come in myriad forms. To better understand what contributes to vibrant entrepreneurial ecosystems, Kauffman researchers examined 355 U.S. metropolitan areas and found that some factors have a positive relationship to a strong ecosystem, while other factors remain unproven. Though some variables certainly help enhance startup growth, most so-called necessary ingredients often are not statistically significant. Nor do all cities have identical resources and assets. Not all communities are bustling with entrepreneurial activity, yet as one prominent entrepreneur has said, all cities are capable of a vibrant startup scene. Each community must craft its own unique and vibrant startup community; its own entrepreneurial ecosystem. Entrepreneurial Ecosystem Myths and Facts Kauffman Foun

FACT: Among high-growth Inc. 500|5000 firms, most entrepreneurs have not relied on venture capital.  Most entrepreneurs started with personal savings (67 percent) or bootstrapping (13 percent).  Only 8 percent received funding from angel investors, and 7 percent received venture capital.

MYTH: Incubators and FACT: Businesses affiliated with incubators do not perAccelerators Spur Entre- form better than those businesses not affiliated with inpreneurial Growth cubators.

Incubators can be reconceived to connect entrepreneurs and emphasize peer learning.  Not enough is known about the effect of accelerators in supporting entrepreneurial ecosystems. It is clear, however, that the quality of accelerators varies substantially.  MYTH: Entrepreneurs Need University Research Funding

FACT: College graduation rates are correlated with startup rates. Yet, more scientific research fundingdoes not necessarily lead to more new business creation.

In 2014, universities were among institutions that received over $140 billion in federal research and development funding.

Annually, only several hundred spin-offs, on average, emerge from research-intensive universities.

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Facts About Manufacturing 1. In the most recent data, manufacturers contributed $2.17 trillion to the U.S. economy. This figure has risen since the second quarter of 2009, when manufacturers contributed $1.70 trillion. Over that same time frame, value-added output from durable goods manufacturing grew from $0.86 trillion to $1.17 trillion, with nondurable goods output up from $0.84 trillion to $0.99 trillion.

2. For every $1.00 spent in manufacturing, another $1.40 is added to the economy. That is the highest multiplier effect of any economic sector.

3. The vast majority of manufacturing firms in the United States are quite small. In the most recent data, there were 256,363 firms in the manufacturing sector, with all but 3,626 firms considered to be small (e.g., having fewer than 500 employees). In fact, three-quarters of these firms have fewer than 20 employees.

4. There are 12.33 million manufacturing workers in the United States, accounting for 9 percent of the workforce. In addition, manufacturing supports an estimated 18.5 million jobs in the United States— about one in six private-sector jobs.

5. In 2014, the average manufacturing worker in the United States earned $79,553 annually, including pay and benefits. The average worker in all industries earned $64,204. Looking specifically at wages, the average manufacturing worker earned $25.19 per hour, according to the latest figures, not including benefits.

6. Manufacturers have experienced tremendous growth over the past few decades, making them more “lean” and helping them become more competitive globally. Output per hour for all workers in the manufacturing sector has increased by more than 2.5 times since 1987. In contrast, productivity is roughly 1.7 times greater for all nonfarm businesses. Note that durable goods manufacturers have seen even greater growth, almost tripling their labor productivity over that time frame. To help illustrate the impact to the bottom line of this growth, unit labor costs in the manufacturing sector have fallen 12.3 percent since the end of the Great Recession, with even larger declines for durable goods firms.

7. Over the next decade, nearly 3.5 million manufacturing jobs will likely be needed, and 2 million are expected to go unfilled due to the skills

gap. Moreover, according to a recent report, 80 percent of manufacturers report a moderate or serious shortage of qualified applicants for skilled and highly skilled production positions.

8. Exports support higher-paying jobs for an increasingly educated and diverse workforce. Jobs supported by exports pay, on average, 18 percent more than other jobs. Employees in the most tradeintensive industries earn an average compensation of nearly $94,000, or more than 56 percent more than those in manufacturing companies that were less engaged in trade.

9. Over the past 25 years, U.S.-manufactured goods exports more than quadrupled. In 1990, for example, manufacturers in the United States exported $329.5 billion in goods. By 2000, that number had more than doubled to $708.0 billion. In 2014, it reached an all-time high, for the fifth consecutive year, of $1.403 trillion, despite slowing global growth. However, a number of economic headwinds have dampened export demand so far in 2015, with manufactured goods exports down 4.2 percent year-to -date through the first two quarters of the year.

10. World trade in manufactured goods has more than doubled between 2000 and 2013—from $4.8 trillion to $12.2 trillion. World trade in manufactured goods greatly exceeds that of the U.S. market for those same goods. U.S. consumption of manufactured goods (domestic shipments and imports) equaled $4.1 trillion in 2014, equaling about 34 percent of global trade in manufactured goods.

11. Taken alone, manufacturing in the United States would be the ninth-largest economy in the world. With $2.1 trillion in value added from manufacturing in 2014, only eight other nations (including the United States) would rank higher in terms of their GDP. 12. Foreign direct investment in manufacturing exceeded $1 trillion for the first time ever in 2014. Across the past decade, foreign direct investment has more than doubled, up from $499.9 billion in 2005 to $1,045.5 billion in 2014. Moreover, that figure is likely to continue growing, especially considering the number of announced ventures that have yet to come online.

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Business Oregon and Northwest UAV Partnership Has Created 60 Jobs in McMinnville

McMinnville-based Northwest UAV Propulsion Systems is the largest unmanned aerial vehicle engine manufacturer in the country. NW UAV has grown from seven employees in 2008 to 60 in 2011. The company has produced thousands of engines for UAVs for customers such as Boeing, the U.S. military and the U.S. Border Patrol.

companies.

As a result of its partnership with ONAMI, NW UAV initiated a program to develop a unique fuel injection engine that runs on heavier jet fuels. The new system increases fuel efficiency and flight times while reducing emissions.

In September 2011, the company announced plans for a major expansion and relocation to a 28,000square-foot facility in McMinnville. In addition to the company's design and manufacture of cutting-edge UAV engines, control systems and support products for Unmanned Aerial Vehicles, two other divisions may be housed at the new location. The other divisions are: RP Advanced Mobile Systems which has developed the Strike Razor Tactical LT ATV and NW Rapid Manufacturing which specializes in rapid production of parts using the Selective Laser Sintering.

"This new facility will give us room to spread our wings and take advantage of strategic growth opportunities," said Chris Harris who is the President and owner of the company.

In 2009, Business Oregon's finance team provided a Business Oregon staff connected NW UAV with re- $450,000 guaranty on a $900,000 loan to the comsearch and development facilities at the Oregon Na- pany from West Coast Bank through Business Orenoscience and Microtechnologies Institute (ONAMI) gon's Credit Enhancement Fund. NW UAV used the financing to expand its portion of the engine assemto design and prototype the new fuel injector. Busibly process and to fund the purchase of additional ness Oregon invested significantly to build out the capabilities of ONAMI for just such partnerships that inventory. could help drive development of products for Oregon

Skycatch uses small drones to capture data that property owners can use to keep track of large geographic areas.

Titan Aerospace, a small company based in New Mexico with 20 employees. Titan makes drones that can fly nonstop for years.

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The Oregon Promise The state’s ” Oregon Promise” program entails granting free community college tuition to graduates of Oregon high schools with a grade point average of at least 2.5. It will cost almost nothing to the state, or students thanks to free federal student aid that is already available to most Oregon high school graduates who enroll in community college.

Officials expect that some 7,000 students, or nearly 20% of all public and private high school graduates in the class of 2016, will take up the state’s offer.

If that happens, the influx would represent almost a 25% increase in new high school graduates enrolling in community college.

https://app.oregonstudentaid.gov/ According to the Oregon Higher Education Coordinating Commission, the new funds will help between 4,000 and 6,000 students in the first year of the program, the 2016-2017 academic year.

The bill will fund grants of $1,000 or more per year for individual students, even if their tuition costs are already covered by other state or federal grants.

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inflation rate – plus the growth in productivity.

Thus, when workers become more productive and become more valuable to the firm, their wages ought to rise accordingly.

3 Ways to Help the Working Class

By Mark Thoma January 12, 2016

According to the most recent employment report, the economy created 292,000 jobs in December, and the employment to population ratio, a key measure of the health of the labor market, increased to a post recession high of 59.5 percent. The unemployment rate was unchanged at 5 percent, but that’s because workers returned to the labor force as jobs became more plentiful--not job stagnation. The report was encouraging.

But what about wages? Will this time be different? Will wages finally start rising, and if so, will it be enough to stop, if not reverse increasing income inequality?

There has been some progress. The growth in wages over the last year has been 2.5 percent, but that is hardly enough to make up for the stagnant wage growth over the last few decades.

What will it take for workers to finally realize robust growth in their take home pay?

Create better jobs In graduate school, I was once told that “people don’t have marginal products, jobs do.” What does this mean?

According to economic theory, the growth in wages should equal the growth in prices – the

But there is a limit to how productive a worker can be in a particular job. Take a clerk at a grocery store as an example. It doesn’t matter how well educated or how potentially productive that worker might be. The job itself limits the value of the worker to the firm. It’s possible for the worker to do less than the maximum possible, but the best checker in the world can only be paid so much, and it doesn’t matter at all if the worker has potential that far exceeds what the job calls for.

A mismatch between a worker’s potential and the job he or she has is partly a matter of how jobs are allocated. Ideally, we want to match workers with jobs in a way that allows each worker to realize their potential. But if there aren’t enough jobs to allow everyone to reach their potential, if some workers must accept jobs for which they are overqualified, how can this happen?

We need to do much more to attract businesses that provide good jobs. I have mostly been opposed to cutting the corporate income tax, but I am coming around. Proposals to broaden the tax base while cutting the tax rate are worthy of attention, as are other means of making the US an attractive place for businesses to locate (or remain), especially those that attract firms with high paying jobs.

We also need to do all we can to support the formation of businesses within the US that offer high wage opportunities. Government support of alternative energy technology is one area we can focus on, and supporting small business startups – a traditional source of job creation and innovation that has fallen off lately – is another.

Build an educated workforce and they will come We also need to do a better job of providing the educational resources people need to reach their full potential. A recent report in The Fiscal Times noted that there has been a large 11

decline in public support for universities and a corresponding increase in tuition. Student debt is soaring, and equal access to the best educational resources is threatened. We can and must do better.

One difficult problem is predicting what jobs will be available in the future. When I was in college, I could have never imagined I would someday become a blogger, at that time computers were still in their infancy. I don’t get paid to blog, but others do, and it illustrates how hard it is to foresee what opportunities will be available years from now.

Students need a broad-based education that can serve as a basis for whatever might come.

The more versatility we can give them, and the more we can teach them to teach themselves, the better. If we do that, if firms with high quality jobs know that well-trained, versatile workers are available, they will be much more likely to locate within the US. It has to start with the understanding that it is in our collective interest to provide the funding that will be needed to give every single person the chance to succeed, from pre-school through college. Too much potential is being wasted.

Do more to help workers be rewarded for their productivity Finally, and importantly, workers need to be able to capture the gains from increases in their productivity. Over the last several decades wages have managed to rise with the inflation rate, but they have not risen with productivity.

This is a difficult problem to solve in a world where, when workers demand higher wages, firms can threaten to move to areas in the world where labor is very cheap. But we can certainly do more than we have done to support workers’ efforts to bargain on equal footing.

When forced to choose between worker and business interests, politicians have largely favored businesses.

Perhaps the populist trends in the current election cycle are a sign that this will have to change. Let’s hope so. So long as business interests dominate the political process, it will be hard to reverse the trend toward increasing inequality.

MARK THOMA is a macroeconomist and time-series

econometrician at the University of Oregon. His research focuses on how monetary policy affects the economy, and he has also worked on political business cycle models and models of transportation dynamics.

Manufacturing is Key to SW Oregon Growth

SW Oregon continues to recruit manufacturers from across the country and around the world.

These facts by the National Association of Manufacturers helps to explain the reason for such interest. The concentration of effort to improve the individual skills of job candidates in the region is easily explained when these items are considered. - Publisher

I believe this is mainly due to differences in bargaining power. When there is an increase in productivity, the gains are up for grabs. Will they go to the owners or the workers? When unions were strong, workers were able to bargain effectively to claim a large fraction of these gains for themselves. But as unions have faded, bargaining power has become increasingly one-sided, and those gains have gone mostly to those at the top of the income distribution.

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Join a dynamic group of innovative companies in Southern Oregon who are interested in continuous improvement principles, an improved business climate, and community prosperity. Your annual membership provides highly valuable training each quarter for you and your employees, opportunities to learn from experts at executive breakfasts, and one-on-one networking, coaching, and mentoring from your peers.

SOBIG is poised to bring key issues to the forefront that affect your bottom line and inform economic development practitioners and educators, resulting in an improved business climate where you can prosper. Learn more and become a member today!

“We are bringing together Southern Oregon companies from all sectors and types to make our businesses better, to make our people better and ultimately to make Southern Oregon a better place to work and live. We collectively want to make something bigger than ourselves happen in Southern Oregon. We are on our way to doing just that with SOBIG.” Norm Kester, Quantum Innovations and SOBIG Chair Learn more or become a member of SOBIG today at sobigoregon.org About SOBIG: The SOBIG Mission is: To help business prosper in Southern Oregon through mentorship and collaboration, continuous improvement principles, an improved business climate, and community prosperity as a whole.

You’ll find us at 100 E. Main Street, Suite A, Medford, OR 97501 Call: (541) 773-8946, Fax: (541) 779-0953 13

'Grasp the Reality of China’s Rise' Larry Summers: Grasp the reality of China’s rise: ...In the years ahead, China is likely to account for between one-third and one-half of growth in global incomes, trade and commodi-

global demand ... and possibly more exchange

rate depreciation than we would prefer. ...

Finally,... the United States’ failure to provide the necessary congressional approval to allow China’s voting power in the International Monetary Fund to rise above that of Belgium’s suggests a troubling indifference to global reality. ...

ty demand, and its significance will only in-

Today the perils of the future have much to do

crease... I returned last week from a trip to

with China’s rise and with the worlds of com-

China with the dispiriting conclusion that the

merce and economics. Let us hope that we find

world lacks shared understandings regarding

the wisdom to manage them well.

goals for the evolution of the Chinese econo-

Posted by Mark Thoma on Sunday, November 8, 2015 at 07:23 PM in China, Economics, Politics

my...

The first issue ... is whether it is the objective of the United States and the global community to see China succeed economically..., or whether it is our objective to contain and weaken China economically so that it has less capacity to mount global threats. This is seen in Beijing as a live question... The world cannot expect economic cooperation from Beijing if its objective is to inhibit Chinese economic performance. ... None of this is to say the United States does not have valid concerns...

Second,... the ... reforms that are necessary if China is to grow sustainably and strongly over

the next decade ... will surely take a toll on growth in the short run. This ... will reduce demand for imports from the rest of the world and raise China’s trade surplus. ...

The world is likely to be well-served by recognizing that its deepest interests lie in China

Southern Oregon Business Journal 703 Divot Loop Sutherlin, Oregon 97479

pursuing ... reform, even at the expense of

www.southernoregonbusiness.com greg@southernoregonbusiness.com

modest reductions in China’s contribution to

541-315-6127

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