Job hunters waited in line to meet with recruiters at a job fair in Philadelphia earlier this month.
(Matt Slocum/AP)Photos (1 of 1)
How can the unemployment rate fall when job losses go up?
By Laurent Belsie | 09.18.09
In some states, the labor market is stabilizing, the Department of Labor reported Friday. Eight states have seen their unemployment rate drop by at least 0.2 percentage points over the past two months. North Carolina and Vermont are on a three-month streak.
Time to party in Raleigh and Montpelier? Music? Noisemakers?
Not yet. Not in Raleigh, anyway. North Carolina’s falling unemployment rate disguises job losses still afoot in the state. But the Tarheel State tells a good story about how misleading unemployment rates can be in times of economic distress.
Ever wonder why more workers can lose their jobs but the unemployment rate goes down? Or the number of jobs rises but journalists like me report – with a straight face – that the unemployment rate went up?
Let North Carolina and Vermont explain.
Tarheel blues
On the face of things, the Tarheel State is heading in the right direction. After reaching record 11.1 percent unemployment in May, its jobless rate fell to 10.8 percent by August. But 47,000 people left its labor force during that time, many of them because they quit or were laid off and they either moved away or stopped looking actively for a job.
Drop thousands of people from your unemployment rolls – North Carolina lost 18,000 during that period – and suddenly your unemployment rate improves, even if you add no new jobs. North Carolina actually lost 28,500 jobs between May and August and its unemployment rate still went down. (To further confuse things, state unemployment rates and job-loss data come from separate Labor Department surveys that don’t always agree.)
The view from green mountains
Contrast that messy picture with Vermont. Its labor force lost a scant 2,000 people from May to August. It managed to add 100 jobs during that period. That’s not great growth, but it makes the fall in Vermont’s unemployment rate from 7.4 percent to 6.8 percent look more solid.
Even in the Green Mountain State, the outlook isn’t as sunny as it seems, says Andy Condon, director of labor market information at the Vermont Department of Labor. Federal stimulus money funded a summer employment program for 1,000 to 1,500 youths. Even though the data are seasonally adjusted, that’s a huge jump in a small state like Vermont.
So come next month when all those youths go back to school, the state’s unemployment rate could bump back up, he warns. Still, “anecdotally, we’re hearing equal amounts of good news as well as bad.” IBM is adding 240 jobs to its Essex Junction plant, for example. “Things are stabilizing,” he says.
So next time someone touts a falling unemployment rate in the shadow of a recession, ask about the number of jobs gained. That will give a truer picture of what’s really going on.
____________
– OK, you can break out one noisemaker – one! – to celebrate with Montpelier. Or Twitter us instead.
Comments
2. Li | 09.19.09
The reason that unployment rate drop is because some people don’t collect unemployment benefit anymore. The unemployment
rate does not reflect real numbers of unemployeed people, but the numbers of people who are collecting unployment benefit.
3. hsr0601 | 09.20.09
Nowadays, the world-wide overpopulation growing consistently is using up tremendous fossil fuel at an alarming pace as the own conventional resources in some dense countries is facing drastic dent.
For that reason, it is widely accepted that the price of fossil fuel is expected to go up and up simply, which is behind major states taking a bold and speedy action in a bid to put the global economy on a solid ground.
Relying on worthless, painful and wasteful oil wars, namely, the original source of this great recession, to waste time bickering on meaningless things and drag feet on a defining energy bill are sure to shake the embryonic effect of stimulus package that is an interim measure for build-out of a new foundation.
As with “Inaction” cost, $9trillion over the next decade in health care and social security, supposedly the same is of inaction on the most-needed energy bill. The health care and contemporary energy bill alike share common things : Future, Moral imperative, measurable creation of employments.
4. Pete Murphy | 09.20.09
Unemployment, both in the U.S. and the world as a whole, marches ever higher because the field of economics doesn’t account for the relationship between population density and per capita consumption.
Following the beating the field of economics took over the seeming failure of Malthus’ theory, economists adamantly refuse to ever again consider the effects of population growth. If they did, they might come to understand that once an optimum population density is breached, further over-crowding begins to erode per capita consumption and, consequently, per capita employment.
And these effects of an excessive population density are actually imported when a nation like the U.S. attempts to trade freely with other nations much more densely populated - nations like China, Japan, Germany, Korea and a host of others. The result is an automatic trade deficit and loss of jobs - tantamount to economic suicide.
Using 2006 data, an in-depth analysis reveals that, of our top twenty per capita trade deficits in manufactured goods (the trade deficit divided by the population of the country in question), eighteen are with nations much more densely populated than our own. Even more revealing, if the nations of the world are divided equally around the median population density, the U.S. had a trade surplus in manufactured goods of $17 billion with the half of nations below the median population density. With the half above the median, we had a $480 billion deficit!
If you‘re interested in learning more about this important new economic theory, then I invite you to visit either of my web sites at OpenWindowPublishingCo.com or PeteMurphy.wordpress.com where you can read the preface, join in the blog discussion and, of course, buy the book if you like. (It’s also available at Amazon.com.)
Pete Murphy
Author, “Five Short Blasts”
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1. JimC | 09.18.09
Back in the 1980’s, during a downturn in the economy, they changed how they counted unemployment to make it sound better than it was. A “bean counter” can juggle figures to say anything they want them to.
It was a bad idea then, it’s a bad idea now.