State Unemployment “Stabilizes,” Maybe


The state unemployment numbers came out today, and the papers are all agog that that the unemployment rate is down to 7.0%.  Now while that’s a lot better than the national rate of 9.8%, it’s also a little misleading.  Almost all of the improvement came from a reduction in the labor force – people ceasing to look for work.  While the number of people employed has stopped declining, the total labor force continues to fall:

The employment graph doesn’t start at 0 in order to better show the trends.  The red line is the unemployment rate, and it’s to the scale ont he right-hand side.  A couple of things stand out.  First off, the number of employed seems to have stabilized.  But it also seemed to have stabilized at least twice before: in mid-to-late ’08 and in Spring of this year.  We then got two large drop-offs.  There’s no guarantee that we’ve hit bottom yet, although we all hope to God we have.

The other interesting thing is the unemployment rate from Spring of ’07 to Spring of ’08.  It rose from about 3.5% to about 4.5%, even as the number of people employed was also rising, from about 2.56 million to almost 2.65 million.  Note that the number of people looking was rising even faster.  Which meant that at that point, even though we hadn’t felt the slowdown, new jobs weren’t being created fast enough to keep up with population growth.  Now, the unemployment rate is dropping, even though it’s almost entirely due to people dropping out of the market.  There’s considerably hidden labor inventory out there, and when it returns to the job hunt, the unemployment rate won’t be falling so quickly.

Note that these are all seasonally-adjusted numbers, too, so they already taking to account seasonal retail, summer jobs, and teachers’ summer vacations.

I’d also point out that here in Denver County, the seasonally-unadjusted were even worse, with the labor force dropping by over 3000, and the number of employed dropping by almost 2000.  Whatever the job market looks like elsewhere, we’re not creating jobs locally.

Here’s a graph I’ve updated since April:

It’s the state Unemployment Insurance Fund, and it’s a mess.  While we talk about PERA, and taxing Peter to pay for Paul’s rent-seeking appendectomy, the fund is in serious trouble.  It got almost no seasonal bump from the May solvency assessment, the numebr of claims paid has been skyrocketing (red), and the rolling 12-month payments by business (green) have been sloping downward because they’re not employing as many people.  The net result is a cliff-diving account balance (blue).  We were told that the account actuarily sound, but it should have been obvious at the time that we were facing not-normal circumstances.

And it’s even worse than it looks.  The feds kicked in an extra $127 million in exchange for SB 247 and more long-term commitments.  Some of us pointed out at the time that borrowing short to go long wasn’t really matching obligations to receipts, but like the true addict it is, the state government saw the federal dollar signs and just couldn’t say no.  Don’t hold your breath waiting for the Democrats in the legislature to admit they made a mistake.