How to Interpret Today’s Jobs Report

June 21, 2013 by

Today, the Maine Department of Labor released the monthly jobs report. It’s exciting, but as usual the overall picture of Maine’s labor market doesn’t change very much with the addition of one more month of data. Even a five-month string of jobs reports can buck the longer-term trend. With that in mind, let’s take a look at what’s in this month’s report.

The Unemployment Rate is No Different Than It Was A Year Ago

The estimates of the unemployment rate, size of the labor force, and the employment/population ratio are based on a survey sample of about 1,600 Maine households and some complex statistical calculations and modeling. The official unemployment rate for May 2013 was 6.8%, but the US Bureau of Labor Statistics (BLS) is only 90% confident that the actual unemployment rate is somewhere between 6.1% and 7.5%. In fact, the 6.8% unemployment rate in Maine in May 2013 is not statistically different from the 7.3% it was a year ago.

As discussed in the jobs report, the unemployment rate is sensitive to changes in labor force participation. That’s because the unemployment rate is the number of unemployed persons divided by the number of people in the labor force. Unemployed people who are discouraged and have stopped looking for work are no longer in the labor force, so a large number of these discouraged workers results in an unemployment rate that is lower than it would be if those discouraged workers had kept looking for work. That’s partly why the US unemployment rate has declined faster than the Maine rate over the past two years.

Luckily, the employment/population ratio is also derived from the household survey and is a useful complement to the unemployment rate because changes in labor force participation don’t affect it. Maine’s employment/population ratio was 60.9% in May, and increased in each of the past three months, but it’s not clear if this is part of a longer-term trend or simply an artifact of the BLS’ estimation methodology. What we do know is that Maine’s current employment/population ratio is well the below the pre-recession level of 63%, and the state has about 6,000 fewer employed persons than it did before the recession.

The Bureau of Labor Statistics separately publishes alternative measures of unemployment that account for discouraged workers who recently left the labor force. Currently, Maine has between 15 and 20 thousand workers who are unemployed and have looked for work sometime within the past 12 months. These workers are not counted as part of the labor force. Maine also has nearly 40,000 workers who are working part-time but want more work and can’t find it. Add these figures to the approximately 48,000 unemployed workers who are reflected in the official unemployment rate, and that means over 100,000 Mainers are struggling to find the employment they need.

Maine is Less than 25% of the Way to a Full Jobs Recovery

Estimates of the number of nonfarm payroll jobs are based on a survey sample of Maine businesses and government agencies. These estimates are unreliable until they are benchmarked to a complete count of jobs derived from unemployment insurance tax filings. The benchmarking happens annually, and the current end of the benchmarked payroll jobs data series is September, 2012.

The payroll jobs numbers through September, 2012 show that Maine has only regained about 24% of the jobs lost (peak-to-trough) as a result of the recession. Maine still needs to add about 20 thousand net jobs to get back to pre-recession levels.

Lack of Population Growth is No Excuse for Slow Economic and Job Growth

Data released earlier this month from the Bureau of Economic Analysis show that Maine’s inflation-adjusted per capita GDP in 2012 grew just 0.4% from 2011 (39th in the nation) and is at about the same level it was in the 2004-2007 period.

Last week, the US Census Bureau released population estimates that show Maine was one of just two states in the nation where births outnumbered deaths in 2012. Maine had 12,754 births and 12,857 deaths, but the state still managed to add 648 people as a result of international immigration.

Maine’s demographic situation (low population growth and an aging population) may partly explain why Maine lags the nation, New England, and most other states in growth of jobs, income, and the economy. But it certainly does not explain all of Maine’s economic and job growth problems.

For example, it doesn’t explain why Maine’s annual per capita growth in Gross Domestic Product ranked 39th in the nation in 2012.

Maine’s demographic situation also doesn’t explain why Maine’s still has a large jobs deficit in the wake of the recession. In September 2012, the latest month for which we have reliable payroll jobs data, Maine had a slightly larger population and about 20,000 fewer jobs than it did five years ago.

Some of this jobs deficit may due to other demographic factors, like the aging of the state’s population. But an aging population can’t explain all of it. The dominant baby boomer generation grew older between 2007 and 2012, but the vast majority of baby boomers were still younger than 65. This is shown in the population pyramids below.

The Bottom Line

Maine’s jobs recovery still has a long way to go. Over 100,000 Mainers are out of work or unable to find full-time work. We’ve only recovered a quarter of the payroll jobs we lost as a result of the recession. The share of the population that’s employed is still well below what it was before the recession.

Maine’s lack of population growth will limit economic growth after we return to pre-recession levels of employment and the economy is operating at full capacity. Until then, no one should be using it as an excuse for the fact that over 100,000 Mainers are still suffering in a weak job market and a lousy economy.

Leave a Comment