SC State Unemployment March 2011
Issue
I do not review these data every month because unemployment data is more useful when the analysis focuses on the labor trends. Unfortunately, the Post and Courier is more interested in reporting hype and misinformation than telling us what the data actually says. This is a shame since they are wasting people’s time, including economist Frank Hefner’s, who I am sure pointed out what I am about to say, based on his comments:
“College of Charleston economist Frank Hefner said the unemployment rate does not tell the whole story. The recovery in the past year has been slow, he said, and fewer people are in the workforce, such as those individuals who are discouraged and no longer looking for work.”
The bottom line, which Dr. Hefner eluded to, is there is no reason to be “elated” about in this jobs picture!
Incorrect Analysis: Again
Jezzz. I constantly feel that I need to correct the Post and Courier on this point! Mixing data sets to fit the story misleads the reader. Adjusted and unadjusted unemployment numbers are two completely different data processes – apples and oranges. State adjusted employment for the month of March increased by 3,746. A little different than the 15,700 noted in the article! (PDF)
Unemployment Analysis: Current Employment Statistics Benchmark
This analysis uses data from the Bureau of Labor Statistics. Stated above, South Carolina gained 3,746 jobs in March. The major sticking point, however, is the labor force dropped by 3,199 persons from February to March, and by almost 18,000 from March 2010. Three numbers come together to create the unemployment rate: labor force (LF), employment and unemployment. It is not possible to adjust one with out adjusting one of the others. If we assume a LF scenario that is neither growing or declining – very conservative considering South Carolina’s population is growing – we see the unemployment rate remained flat at 10 percent from February 2011 to March 2011. See PDF.
Regardless of the meager employment growth, some is better than none! However, employment changes by the minute in the state. So what does the final employment picture look like for March? The Current Employment Statistics program (adjusted) provides clues to the result of all those changes from month to month and year to year. These data explain why an accounting professional the Post and Courier interviewed may be challenged in finding employment. The business services industry, accountants included, actually declined in employment from the previous month. Even so, over the past year there has been an improvement of almost 20,000 jobs in this major sector. Unfortunately, 94 percent are not in the accounting field! Where was the growth? It turns out it is right where it has been and should be this time of year, in leisure and hospitality.
Conclusion
It appears that the current recovery, which is already lagging significantly behind other recoveries, is going to be slow at best. With an increase in commodities prices (essentially a excise tax on disposable income – i.e. fuel) and the loss of 10,500 jobs in government employment this past year, “elated” would not describe the way many people feel about the current state of economy.
Occupational Wage Data: Let’s Get it Right
Issue
Recently there has been a rash of articles in which someone is trying to make arguments for reducing salaries of some other class of workers’ salaries – but not their own! The Bureau of Labor Statistic (BLS) is the natural choice for those who wish to quote wage and salary information. Unfortunately, without exception, BLS salary databases have been mixed-up, misused or are simply the wrong data set to make the point.
NCS vs OES
The two most common databases for wage and salary information are the National Compensation Survey (NCS) and Occupational Employment Statistics (OES) programs. Both of these surveys (Technical Note on Survey Error) provide information on wages and salaries by occupation, but each has different strengths. Primarily, the OES is the larger survey and can provide a greater range of occupations and areas, while the NCS is conducted by personal visit and can provide greater depth by obtaining occupational work level.
The BLS states:
“the NCS occupational work level is based on the duties and responsibilities of the job. An architect, for example, who directs a major project would typically be more highly compensated than an architect preparing a small part of a project under direct supervision. To determine these ‘levels of work,’ each occupation is evaluated using four factors. This system also allows for pay comparisons to be made across occupations (for example, comparing architects to accountants with similar levels of responsibility).”
Two other primary differences stated by the BLS include:
“1) the OES provides information for more different occupations. The NCS, on the other hand, provides information on the wages for the occupations it covers at specific levels of work, rather than just an average for all workers in the occupation.
2) the OES provides information for the nation, for states, and for all metropolitan areas. The NCS provides information for the nation, for selected metropolitan and nonmetropolitan areas and for the 9 Census divisions.”
National vs. Local Data
As an analyst, I prefer to start with national data, which frames the question and provides a reasonable and defensible position when it comes to wages. Local wage data then provides specific detail within that framework. It is important to understand the difference in wages levels, median and mean wages, so as not to confuse the reader or end up comparing apples to oranges.
Conclusion
Unfortunately most of the “cut to greatness” articles are missing the real problem, which is productivity. See Productivity. It is easy to pontificate about wages, but for sustained growth, lower costs and increased value delivered, productivity, the education and tools that help people perform, needs to increase.
2010 October Unemployment
Forecasting Unemployment
The Bureau of Labor Statistics recently posted October unemployment statistics for South Carolina. The state’s unemployment actually dropped, which is a positive sign and was not expected. It tends to be difficult to forecast any trend from one set of data, especially when we hope for a better economy but have no way to know whether that hope is grounded.
History of September to October
I thought I would do a back of the envelope review of the employment change trend from September to October. As to be expected, it is all over the place, but there are some interesting relationships that become apparent and are typically glossed over in monthly reports. (PDF) What is revealed is the link between labor force, employment and unemployment.
From 2005 to 2007, employment and the labor force moved together. The result of the way these two variables interact is the third category, which is unemployment. In 2008 the bottom fell out of employment, with unemployment shooting to the moon and the labor force making a steady march south. In 2010, it seems that employment has overshot the capability of the labor market, so it is reasonable to expect that employment will moderate going forward.
Final Thoughts
What I do not like is the potential for the labor force to make a strong comeback and for employment to flatten. The result would be more unemployment. The best case is continued strong employment, which decreases unemployment while allowing the labor force to expand at a moderate pace.
Update 12.03.2010
Jobs Byte – Some times I get it right!
Jobs Necessary to Hold Unemployment Rate Constant
I like to share solid “dataexplained” when I find it. Here is a piece from Dean Baker’s Blog:
“This one should not be all that hard but the papers have numbers all over the place. Let’s turn to our old friend, arithmetic, to shed some light on the topic. The Congressional Budget Office tells us that the labor force is growing at the rate of 0.7 percent a year. The current size of the labor force is 153.9 million. This implies that we need about 1.1 million jobs a year to keep even with the growth of the labor force. (The number would be a bit less if the 6 percent share of self-employed in the labor force held constant.) That translates into a bit over 90,000 a month.
The 151,000 jobs reported for October is about 60,000 more than is needed to keep the unemployment rate from raising. At this pace it would reduce the pool of unemployed workers by 720,000 over the course of a year. With a gap of about 10 million jobs at present, this rate of job growth would fill the gap in around 14 years.
In order to fill this gap in a reasonable period of time, say 3 years, we would need job growth of 370,000 a month. This would bring the economy back to normal levels of unemployment by late 2013, six years after the onset of the recession.”
This article identifies key inputs needed to understand your local employment market. With these input identifiers, an analyst is able to compare a regional employment geography, to national employment as a whole.
South Carolina August 2010 Unemployment
The Recession is Over?
The Post and Courier decided to laugh-off the August monthly unemployment rate a missed opportunity to provide readers with information they could use to understand the unique employment issues in South Carolina. Recently the National Bureau of Economic Research (NBER) Business Cycle Dating Committee announced the recession was over in June 2009.
The key question is: How can that be so, when unemployment numbers continue to climb? The answer is that recession dating involves looking for a low point in time – not whether the presumed recovery is significant or even sustainable. It is therefore important not to confuse dating the end of a recession with the hope for a job tomorrow, especially with the employment hole we are in here in South Carolina.
This statement from the committee provides insight into how NBER analyzes business expansions or contractions:
“It places particular emphasis on measures that refer to the total economy rather than to particular sectors. These include a measure of monthly GDP that has been developed by the private forecasting firm Macroeconomic Advisers, measures of monthly GDP and GDI that have been developed by two members of the committee in independent research (James Stock and Mark Watson), real personal income excluding transfers, the payroll and household measures of total employment, and aggregate hours of work in the total economy.”
The Busted Recovery in South Carolina: By the Numbers
The Minneapolis Federal Reserve provides state level analysis of how the last recession compared to others (PDF - Table 1). South Carolina is not faring well and is lagging considerably in employment compared with historical patterns. That’s not good news for the job seeker.
In fact, if we look at unemployment rates for South Carolina compared with other recessions (PDF – Table 2), in June 2009 state unemployment was almost twice as high as in the past two recessions. The good news is the unemployment number could be significantly higher if it were not for a labor force that has declined by 36,000 people since June 2009. If the labor force had maintained its level from the date of the “end of the recession,” unemployment would now be more than 12.5 percent. Unfortunately, this does not bode well for unemployment as we move into the fall and winter months, since people are likely to drift back into the workforce searching for seasonal jobs.
Unemployment and Productivity
Productivity Enhances Job Growth
The Post and Courier recently published an article on unemployment and productivity. The article suggests that productivity is a cause of unemployment. In fact, it is the other way around! Being more productive (efficient), means gaining market share, which creates an opportunity for more employment. The alternative, low productivity and inflated cost structure, decreases employment.
Demand: The Lost link
The link between productivity and employment rests with demand. Decline in demand shrinks employment. The best example is the housing market. A productive builder may be able to capture a greater market share, but that share is in a declining market. The overall effect is that his employees work longer hours with the same technology (they do more with less). But the industry sheds workers due to limited demand, not because of increased productivity. Wages during this time stay flat or decline due to thin margins and little growth potential.
Show Me The Data
Two data tools that assist us in this discussion are Current Employment Statistics (CES) and Labor Productivity databases from the Bureau of Labor Statistics (BLS). CES tracks hours worked, while the labor productivity database tracks hours as well as output. A quick glance at these data indicate that – sure enough – hours have increased. Output per person is up while earnings have declined and employment has shrunk. The astute observer will, however, note that hours have been dropping since 2007 and likely rebounded recently only in response to the need to rebuild critical inventory levels. I would expect hours to continue their slide in the short term.
Easy to Cut, Hard to Invent
Looking forward, cutting cost is easy: Don’t sign the check, reduce the crew, punish vendors for late shipments – the list is endless. But what is needed now in part, is new products that create demand. In the long run, this is the only way employment will increase.
All of which means businesses have plenty of hard work cut out for them.
June 2010 South Carolina Unemployment
The Post and Courier wrote and excellent article on the June employment situation here in SC. By focusing on the labor force, the P and C is highlighting a major issue not only for our state but for the country. From the labor analyst perspective, one of the disturbing trends is the “discouraged worker”. The Bureau of Labor Statisics defines Discouraged workers (Current Population Survey) as:
“Persons not in the labor force who want and are available for a job and who have looked for work sometime in the past 12 months (or since the end of their last job if they held one within the past 12 months), but who are not currently looking because they believe there are no jobs available or there are none for which they would qualify.” The data suggests a worsening situation on the labor front.
Here is a table (PDF) with the BLS discouraged worker annual data. I would like to think these data are about to turn, especially with the number of temporary workers being hired. However, one issue which may prevent that, is the skills gap.
South Carolina May 2010 Unemployment Numbers
Problem- Not Really
I had some questions on the May unemployment numbers which did not seem to make sense to me. The article posts the state unemployment rate. Further down in the article however, a key piece of information reveals the rate quoted was an adjusted state rate.
Issue
In this case it makes a big difference, since the state rate is mentioned in conjunction with the regional unemployment rates. Once this point was brought to my attention, I realized the error of my thinking. Local unemployment rates are not adjusted! So when comparing local and state rates one needs to compare the state unadjusted data with the local data. This process yields similar results with both local and state rates moving in the same direction. In the case of the May data, adjusted state data was quoted (correctly) with unadjusted local data. The result is unemployment rates moving in opposite directions (in this case) since in reality we are comparing apples and oranges.
Conclusion
Even though the adjusted state rate is the most commonly reported rate in the media, I tend to use unadjusted just for this reason, I want to compare it to the local rate. Another reason, which is a little old fashioned, is because the state data will be adjusted again at the end of the year, smoothed in this case. Also as I describe in my Unemployment Definition, I am focused on the overall trend and do not get to hung up on an individual data point. Key point is to make sure we do not compare or imply the state adjusted rate is related to the local unemployment rates.
Unemployment South Carolina- April 2010
The Post and Courier missed the main point in the April unemployment numbers. The story here is the labor force, or in this case the decrease in labor force (moving in the wrong direction). Mary Graham from the Charleston Metro Chamber got it right by thinking about this from a seasonal perspective. The surprise is that there should have been an up tick, but instead the labor force dropped a whopping 18K from April 2009, a bad year in itself. In addition to these data, employment actually DROPPED 17K from 2009 (BLS). There is nothing in the data to be pleased with.
I would encourage the Post to speak with experts on these data or become more educated before writing an article. These are important data that need to be reported accurately since they affect so many.
The pdf link tells the real story of unemployment for the state of SC. Note the disturbing drop in labor force and the deep employment recession. (pdf)
Unemployment and Migration
One issue we note in unemployment levels is the relationship of employment and unemployment to migration and population change. I took the liberty to compare population change by county over the last eight years using the 2000 Decennial Census and the 2008 American Community Survey (ACS). Unfortunately, I have a data conflict since I am using two different sources. Early ACS data (2000 to 2003) provides data for a select group of counties in the state, while naturally the Decennial Census is done only once over a 10 year period. However, reviwing these data together revealed some startling results.
…
I analyzed population c
hange from 2000 through 2008 and compared that percentage change with December 2009 unemployment data. As one might imagine the numbers are all over the map (map to be included at a later date), literally, but there are general themes which float to the surface.
If you live in an expanding county, one that has added population from 2000, it is more likely that you have a job. Counties with a population change of over 10 percent, had the lowest median unemployment rate, 10.5 percent, while counties which expereinced a decrease in population had a median rate of 16.9 percent. Counties with insignificant change, had a median rate of 13.9 percent, while small counties experienced a 16.2 percent rate.
The December 2009 unemployment ranges between 8.8 to 21.4 percent. Population change ranges between minus 6.8 to plus 27.3 percent. This represents significant variation among counties and suggests a mismatch of population to available work. Can South Carolina match work to where workers live. This may be extremely difficult as a result competitiveness in transportation, technology and training. This is not to say that a rural workforce is less skilled, but instead has less access to opportunity.
Boeing is an excellent example of this phenomenon. Boeing is locating in a growing Metropolitan Statistical Area (MSA), supported by state of the art technology, a world class transportation infrastructure, and a primary education system which can adapt to the companies needs. In order to capture one of these opportunities, a rural workforce, in all probability, will need to move or commute.
The number of persons who make this tough decision, in some cases leaving family, property, and heritage, may hold in their hands the future of South Carolina’s unemployment rate.
