Economic Impact: The jobless rate doesn't tell the full story

The national unemployment rate continues to improve, but don’t tell that to people who are jobless and looking for work.

Many of today’s unemployed, particularly those who are younger, have a more negative view of the labor market.

Who’s right?

The official jobless rate in the nation peaked at 10 percent in October 2009, three months after the recovery began.

Over the past five years, it dropped considerably to 5.7 percent in January 2015.

Despite the large drop in the rate, there still is debate about the health of the U.S. labor market as some argue much of the decline is a result of people leaving the labor force rather than labor market improving.

The Labor Department publishes an alternative jobless rate - called the U6 unemployment rate - that includes people without work looking for full-time employment as well as those marginally attached to the labor force and those working part-time who would prefer to work full time.

The U6 unemployment rate remains high by historical standards. It stood at 11.3 percent in January 2015 — down from an all-time high of 17.1 percent in April 2010.

The Labor Department started collecting these statistics in 1994 and before the last national recession, the previous high of 11.8 percent was recorded in January 1994.

Based on an unemployment rate that includes the underemployed and discouraged workers, the labor market still has much room for improvement.

In addition to not including them, the official U.S. unemployment rate overstates the improvement in labor market conditions when the drop has been caused by those leaving the workforce.

The labor force participation rate, which represent the share of the civilian noninstitutional population that is in the labor force, stood at 66 percent in December 2007, the first month of the national recession.

As of January 2015, the labor force participation rate fell to 62.9 percent, hitting a 36-year low in the prior month.

While some have argued that the drop in labor force participation has been driven by demographic factors (such as baby boomers retiring), non-participation due to disability and increased school enrollment, among other factors, also have contributed to this decline.

Partly driving the decline are those in the 16-to-24-year age category whose labor force participation rate has decreased 7.3 percentage points from January 2003 to January 2015.

The labor force participation rate for those 55 years old and older has increased 4.5 percentage points over the same period, dispelling the argument that the drop is driven by retirees.

The bottom line is that five years into the current expansion, the labor market remains weaker than the official unemployment rate suggests.

Christine Chmura is CEO and Chief Economist at Chmura Economics & Analytics. She can be reached at (804) 649-3640 or receive e-mail at chris.chmura@chmuraecon.com.

 

Chmura Welcomes Laura Leigh Savage

Chmura is pleased to welcome Laura Leigh Savage as Director of Operations and Economic Development Specialist. Laura Leigh has worked with the Virginia Economic Development Partnership (VEDP) since 2004 in project management and business development roles for business attraction as well as business retention and expansion. In January 2015, she was recognized as one of North America’s top 50 economic developers by Consultant Connect. Prior to working with the VEDP, Laura Leigh spent 20 years in banking and commercial real estate financing followed by experience in a marketing consultant firm.

Laura Leigh brings a seasoned, real-world, and proven background as an economic development practitioner to Chmura’s seventeen years of experience working with economic developers through our consulting practice and technology solutions — JobsEQ and LaborEQ. You can contact Laura Leigh at LauraLeigh.Savage [at] chmuraecon.com.

With Laura Leigh’s addition to the firm, Leslie Peterson’s new role will be President, Chief Strategy Officer and Dr. Christine Chmura will be the Chief Executive Officer while remaining the firm’s Chief Economist. 

Leslie’s new position will allow her to more fully utilize her 16 years of strategic planning and sales skills from the chemical industry as Chmura Economics & Analytics takes on a more prominent role in commercial real estate and site selection markets.

As CEO, Dr. Chmura will continue to lead the company in its vision to be the nation’s preferred provider of economic research, software, and data solutions. To this end, she will focus on researching important economic issues surrounding labor and regional growth, forecasting, and Department of Defense economic modeling.

Upcoming Events: March 30, 2015 IEDS Presentation

Event Date: March 30, 2015

Event Time: 2:15pm - 3:45pm

Location: Renaissance Arlinton Capital View 2800 S Potomac Ave Arlington, VA 22202

 

-Breakout: Data and Information: Fueling Your Economy

Data provide the foundation for myriad decisions made by economic developers and elected officials. Available resources for data have increased over the past few years, from Census, Bureau of Economic Analysis, Bureau of Labor Statistics, and many private sources. This workshop will focus on a combination of hard skills associated with data research and utilization, discussion on effective uses of data, and what are that ‘data holes' that need to be filled. 

What you will learn: 

  • How can you leverage all of the options out there into useful information to better inform your next big decision? 
  • What information proves the most influential when communicating your needs to your local-elected officials? 
  • What data do you need that you're NOT getting and how can economic developers communicate that to data collectors? 

Moderator:

Speakers:

Conference Website: International Economic Development Council

Job growth in Virginia wasn't very stellar last year.

Job growth in Virginia wasn't very stellar last year.

Virginia gained only 12,900 jobs in 2014, or a 0.3 percent increase from the previous year.

That increase was the worst year-over-year performance the state has had since 2010, when it shrunk by 4,800 jobs in the aftermath of the Great Recession.

The meager employment growth in Virginia last year is in stark contrast to the 1.9 percent growth in the nation over the same period.

The Northern Virginia metro area, which typically undergirds economic growth in the state, grew 0.4 percent in 2014 as federal spending cuts continue to dampen growth.

Richmond, on the other hand, had a stellar performance of 1.9 percent employment growth in 2014, making it the fastest growing metro area in the state.

Employment in the state is expected to pick up to 0.6 percent growth in 2015, according to the forecast in the annual Thomas Jefferson Institute “Virginia Economic Forecast” produced by Chmura Economics & Analytics.

By comparison, national employment is forecast to expand 1.7 percent this year. Across-the-board cuts in federal spending are cited as the main factor contributing to the sub-par growth in the state.

Three months after our original forecast, we still expect national employment to grow 1.7 percent in 2015. However, based on the latest data, 0.9 percent seems more realistic for the state.

Why the upward revision?

Forecasting is always difficult, but regional forecasts are even more difficult during the final months of the year, particularly when the economy is shifting to a much faster or slower pace of growth.

The monthly employment numbers for Virginia and its metro areas are based on a sample of firms that represent about 30 percent of the employees in the state. It is called the current employment statistics data.

In March of every year, the Virginia Employment Commission revises previously released employment estimates with more reliable quarterly census of employment and wages data through an annual process known as benchmarking.

The data collected through the employment and wage program represent almost a complete count of employment.

More than 96 percent of civilian jobs are counted through this wage and salary program because employers are required by law to provide the employment commission with a quarterly count of the number of employees covered under unemployment insurance.

So, the further away from March, the greater the potential for error in the employment data. And if a forecast is created based on employment growth that is too high or too low, it will contribute to an incorrect forecast.

To minimize the potential error of the revised data, we used data with a 6 month to 9 month lag as well as other data such as retail sales and payroll withholding figures that are not subject to revisions to inform the forecast.

Based on those data, it’s looking like Virginia’s employment growth will be faster than our original forecast.

The potential of further sequestration in October would once again dampen Virginia’s growth. Newly benchmarked data to be released in March will provide a more accurate base for our forecast.

 

Christine Chmura is CEO and Chief Economist at Chmura Economics & Analytics. She can be reached at (804) 649-3640 or receive e-mail at chris.chmura@chmuraecon.com.

 

Have Population and Commuting Patterns Changed In Your Region?

Metropolitan Statistical Areas (MSAs) and Micropolitan Statistical Areas (µSAs) are collections of counties where there is so much interconnectivity between the counties that they should be measured as one economy rather than separate counties.  For example, in the Dallas-Fort Worth-Arlington, Texas MSA many individuals live in Tarrant County but work in Dallas County.

The Office of Management and Budget (OMB) periodically updates the definitions of MSAs and µSAs based on Census commuting and population data. MSAs “have at least one urbanized area of 50,000 or more population, plus adjacent territory that has a high degree of social and economic integration with the core as measured by commuting ties.” Similarly, µSAs “have at least one urban cluster of at least 10,000 but less than 50,000 population, plus adjacent territory that has a high degree of social and economic integration with the core as measured by commuting ties.”

Though the OMB provides historical delineations  and current definitions, it is difficult to find a comprehensive list of changes made to the statistical areas. The current definitions were released in February 2013, and the previous definitions were released in December 2009. The dashboard below allows users to view changes to MSAs and µSAs definitions between the 2009 and 2013.

Using Texas as an example, click through the tabs to see the filters that can be applied to your statistical area.

To summarize the changes in Texas:

  • Hudspeth County was added to the El Paso, TX MSA
  • Oldham County was added to the Amarillo, TX MSA
  • Lynn County was added to the Lubbock, TX MSA
  • Martin County was added to the Midland, TX MSA
  • Falls County was added to the Waco, TX MSA
  • Newton County was added to the Beaumont-Port Arthur, TX MSA
  • Little River County, AR was added to the Texarkana, TX-AR MSA
  • Glasscock County was added to the Big Spring, TX µSA
  • Trinity County was added to the Huntsville, TX µSA
  • Zapata County was added to the Zapata, TX µSA
  • Roberts County was removed from the Pampa, TX µSA
  • Fannin County was removed from the Bonham, TX µSA
  • Burnet County was removed from the Marble Falls, TX µSA
  • Delta County was removed from the Dallas-Fort Worth-Arlington, TX MSA
  • San Jacinto County was removed from the Houston-Sugar Land-Baytown, TX MSA
  • Hood County and Somerville County were removed from the Granbury, TX µSA and absorbed into the Dallas-Fort Worth-Arlington, TX MSA
  • Calhoun County was removed from the Victoria, TX MSA and added to the Port Lavaca, TX µSA
  • The Killeen-Temple-Fort Hood, TX MSA was renamed Killeen-Temple, TX MSA
  • The Austin-Round Rock-San Marcos, TX MSA was renamed Austin-Round Rock, TX MSA
  • The Houston-Sugar Land Baytown, TX MSA was renamed Houston-The Woodlands-Sugar Land, TX MSA