July 28, 2014
Over time, I have focused on employment data beyond the unemployment rate and have suggested our readers do the same to get a better sense of the employment picture. Seems more folks recognize that the rate alone can be misleading as can the number of employed people. This week we offer an excerpt from the Fed, some data insights around recently released State level employment data (encouraging our readers to look at the States and municipalities they care about v. US-level data) and include a note from the Illinois Policy Institute entitled “Jobs and Growth.” I also encourage our readers to keep an eye on wage data and Labor Underutilization Rates.
In this FEDS Note we take a deeper look at the sizeable decline in long-term unemployment seen over the first half of 2014 and find a number of reasons to be optimistic about this development: (1) the drop in the rate of long-term joblessness since December has coincided with a stable labor force participation rate and a rising employment/population ratio, (2) job-finding rates of the long-term unemployed have edged up recently, (3) their ability to find stable employment appears to be improving along with the short-term unemployed, and (4) their attachment to the labor force does not appear to differ substantially from that of the short-term unemployed.
As frequently noted by economic analysts, one of the worrisome features of the Great Recession was the unprecedented increase in the share of individuals unemployed for more than six months (henceforth, long-term unemployed). During the depths of the recent cyclical downturn, the long-term share of unemployment peaked at 45 percent; it remained elevated at 33 percent through June. For comparison, the previous peak reached by this share in the aftermath of the 1982 recession was just 26 percent. As Figure 1 illustrates, in many ways the fight against unemployment during the recent recovery has been mainly one of bringing down the long-term unemployment rate. By the end of 2010, short-term unemployment rates (the blue and green lines) were only 1/2 percentage point above their pre-recession levels, while the long-term unemployment rate (in red) was markedly elevated.2 Since then, about two-thirds of the decline in the aggregate unemployment rate can be accounted for by a retracing of the long-term unemployment rate.
| Figure 1: Change in Unemployment Rate by Duration since December 2007 |
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What the Fed has to Say: July 21, 2014, The Recent Decline in Long-Term Unemployment, Tomaz Cajner and David Ratner. Click Here for a link to the full FEDS Notes. \
As the Fed points out, the employment data is indicating that things are getting better. Employment conditions are critical to income tax receipts, spending on unemployment benefits, and broader spending by consumers for the obvious reasons.
But as I frequently highlight, employment conditions can vary widely across the country. This week the BLS released State level Labor Underutilization statistics for the end of the second quarter. As can be seen in the chart below, there is significant dispersion in both the current conditions and rate of improvement in Labor Underutilization across the country.
Source: DIVER Data Services, BLS
While Labor Underutilization remains high in California and Nevada, both have demonstrated significant improvement during the last year. Arizona is an interesting case. Its Labor Underutilization rate had been improving much faster than the US average from Q1 2012 to Q1 2013. Since then, it has lagged the national rate of improvement.
Source: DIVER Data Services, BLS
The table below is updated from our May 5 commentary – the results are clearly better than what we saw just over two months ago. The table summarizes changes in State level (including DC, PR) employment data from the end of 2008 to June 2014 (except for population which is as of the end of 2013).
The number of employed people has gone up in 45 States and down in seven States. The Labor Force is up in 39 States and down in 13. Importantly and not surprisingly, the US population is growing; only four States have been experiencing population declines over the last six years (ME, MI, PR, SC). DIVER clients will receive the complete table under separate cover.
|
# of States Up |
% of Total |
# of States Down |
% of Total |
| Employed |
45 |
87% |
7 |
13% |
| Labor Force |
39 |
75% |
13 |
25% |
| Population Growth |
48 |
92% |
4 |
8% |
| Employed As % of Population |
18 |
35% |
34 |
65% |
DIVER Data Services; USCB, BLS.
Despite these positive indicators, the Employed as a % of Population line, while trending better, shows only 18 States with an increase while 34 show a decline. While the Labor Underutilization rate seems to be pointing in the right direction, I would add that I continue to be concerned about the mix between part vs. full-time employment. Now we need wages to start moving in the right direction.
The dispersion between the States in the table above is a stark reminder of the need to assess which municipalities are prospering vs. those that are struggling. Illinois is a State that has been struggling (both economically and fiscally). Michael Lucci, Director of Jobs and Growth for the Illinois Policy Institute recently published a note highlighting the employment issues faced by Illinois (reprinted below). Focus on the data (and not the political statements) as further evidence of the need to look closely the underlying data.
| In June, Illinois suffered the largest monthly workforce loss in recorded state history.June’s workforce loss was worse than the worst month of the Great Recession. Overall, 21,700 Illinoisans gave up and left the workforce in June; in September 2008, 17,500 Illinoisans quit the workforce. (Bureau of Labor Statistics data go back to 1976.)
This hefty workforce loss has driven state’s unemployment rate down to 7.1% from 7.5%, creating a superficial appearance of improvement. And Gov. Pat Quinn says Illinois needs to “keep the momentum.”
Keeping up this sort of “momentum” would be disastrous.
An astonishing 46,000 Illinoisans have quit looking for a job and dropped out of the workforce over the last three months. That three-month loss of workers from the workforce is the second-worst decline in the history of Illinois.
The working-age population in Illinois grew by 12,000 people over that same three-month period, which leaves nearly 58,000 working-age Illinoisans unaccounted for and out of the workforce in just three months. |
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| The state’s jobless rate has plummeted from 8.4% to 7.1% in the same time frame. But its workers giving up and dropping out of the workforce, not the creation of new jobs that has been the determining factor in this decline.Illinois private-sector businesses reported 5,200 net new jobs in June. However, Illinois still has the worst jobs record in the U.S. in 2014, with the state down 18,100 private-sector jobs on the year. Illinois is the only state in the Midwest to have a net loss of jobs in 2014. |
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A busy week for the Lumesis team. Mike Craft will be participating in a webinar on Wednesday … Pete will be in NYC Monday and Tuesday. Mike Craft and Mark will be in New Hampshire and Boston on Tuesday and Wednesday and at the Brandeis/BB Conference Thursday and Friday.
Have a great week,
Gregg L. Bienstock, Esq. & Michael Craft, CFA
CLICK HERE to Subscribe to the Weekly Commentary
Employment Data – Things are Looking Up (at least for some)
July 28, 2014
Over time, I have focused on employment data beyond the unemployment rate and have suggested our readers do the same to get a better sense of the employment picture. Seems more folks recognize that the rate alone can be misleading as can the number of employed people. This week we offer an excerpt from the Fed, some data insights around recently released State level employment data (encouraging our readers to look at the States and municipalities they care about v. US-level data) and include a note from the Illinois Policy Institute entitled “Jobs and Growth.” I also encourage our readers to keep an eye on wage data and Labor Underutilization Rates.
In this FEDS Note we take a deeper look at the sizeable decline in long-term unemployment seen over the first half of 2014 and find a number of reasons to be optimistic about this development: (1) the drop in the rate of long-term joblessness since December has coincided with a stable labor force participation rate and a rising employment/population ratio, (2) job-finding rates of the long-term unemployed have edged up recently, (3) their ability to find stable employment appears to be improving along with the short-term unemployed, and (4) their attachment to the labor force does not appear to differ substantially from that of the short-term unemployed.
As frequently noted by economic analysts, one of the worrisome features of the Great Recession was the unprecedented increase in the share of individuals unemployed for more than six months (henceforth, long-term unemployed). During the depths of the recent cyclical downturn, the long-term share of unemployment peaked at 45 percent; it remained elevated at 33 percent through June. For comparison, the previous peak reached by this share in the aftermath of the 1982 recession was just 26 percent. As Figure 1 illustrates, in many ways the fight against unemployment during the recent recovery has been mainly one of bringing down the long-term unemployment rate. By the end of 2010, short-term unemployment rates (the blue and green lines) were only 1/2 percentage point above their pre-recession levels, while the long-term unemployment rate (in red) was markedly elevated.2 Since then, about two-thirds of the decline in the aggregate unemployment rate can be accounted for by a retracing of the long-term unemployment rate.
What the Fed has to Say: July 21, 2014, The Recent Decline in Long-Term Unemployment, Tomaz Cajner and David Ratner. Click Here for a link to the full FEDS Notes. \
As the Fed points out, the employment data is indicating that things are getting better. Employment conditions are critical to income tax receipts, spending on unemployment benefits, and broader spending by consumers for the obvious reasons.
But as I frequently highlight, employment conditions can vary widely across the country. This week the BLS released State level Labor Underutilization statistics for the end of the second quarter. As can be seen in the chart below, there is significant dispersion in both the current conditions and rate of improvement in Labor Underutilization across the country.
Source: DIVER Data Services, BLS
While Labor Underutilization remains high in California and Nevada, both have demonstrated significant improvement during the last year. Arizona is an interesting case. Its Labor Underutilization rate had been improving much faster than the US average from Q1 2012 to Q1 2013. Since then, it has lagged the national rate of improvement.
Source: DIVER Data Services, BLS
The table below is updated from our May 5 commentary – the results are clearly better than what we saw just over two months ago. The table summarizes changes in State level (including DC, PR) employment data from the end of 2008 to June 2014 (except for population which is as of the end of 2013).
The number of employed people has gone up in 45 States and down in seven States. The Labor Force is up in 39 States and down in 13. Importantly and not surprisingly, the US population is growing; only four States have been experiencing population declines over the last six years (ME, MI, PR, SC). DIVER clients will receive the complete table under separate cover.
DIVER Data Services; USCB, BLS.
Despite these positive indicators, the Employed as a % of Population line, while trending better, shows only 18 States with an increase while 34 show a decline. While the Labor Underutilization rate seems to be pointing in the right direction, I would add that I continue to be concerned about the mix between part vs. full-time employment. Now we need wages to start moving in the right direction.
The dispersion between the States in the table above is a stark reminder of the need to assess which municipalities are prospering vs. those that are struggling. Illinois is a State that has been struggling (both economically and fiscally). Michael Lucci, Director of Jobs and Growth for the Illinois Policy Institute recently published a note highlighting the employment issues faced by Illinois (reprinted below). Focus on the data (and not the political statements) as further evidence of the need to look closely the underlying data.
This hefty workforce loss has driven state’s unemployment rate down to 7.1% from 7.5%, creating a superficial appearance of improvement. And Gov. Pat Quinn says Illinois needs to “keep the momentum.”
Keeping up this sort of “momentum” would be disastrous.
An astonishing 46,000 Illinoisans have quit looking for a job and dropped out of the workforce over the last three months. That three-month loss of workers from the workforce is the second-worst decline in the history of Illinois.
The working-age population in Illinois grew by 12,000 people over that same three-month period, which leaves nearly 58,000 working-age Illinoisans unaccounted for and out of the workforce in just three months.
A busy week for the Lumesis team. Mike Craft will be participating in a webinar on Wednesday … Pete will be in NYC Monday and Tuesday. Mike Craft and Mark will be in New Hampshire and Boston on Tuesday and Wednesday and at the Brandeis/BB Conference Thursday and Friday.
Have a great week,
Gregg L. Bienstock, Esq. & Michael Craft, CFA
CLICK HERE to Subscribe to the Weekly Commentary