Tuesday, September 30, 2008

Unemployment's Up, So Things Must Be Bad, Right? Well, Actually, No...

If you read the newspapers today, you'd certainly think the Pittsburgh economy was headed downhill fast. "Region's jobless rate jumps to 5.6%" and "Local jobless rate spikes in August," the headlines shouted. And indeed, the unemployment rate increased a whopping 1.2 percentage points over a year ago (it was 4.4% in August 2007, and it was 5.6% in August 2008), and there are reportedly over 16,000 more unemployed people in the Pittsburgh Region than there were a year ago.

This has to be bad, right? Thousands of Pittsburghers are losing their jobs!

Not so fast. You might be surprised to know that an increase in the unemployment rate does NOT necessarily mean that anybody lost a job or that the economy is doing badly. Sometimes it actually means we're doing well.

Huh?

To understand this better, let's compare ourselves to some other regions. Which region's economy do you think is doing better -- Charlotte, Silicon Valley, Milwaukee, or Pittsburgh?

If you look at the unemployment rate, Milwaukee is the winner. In August 2008, it had the lowest unemployment rate of any of the four regions. Pittsburgh, though, is in second place -- our unemployment rate, despite the big "jump" in August, is still a full percentage point lower than either Charlotte or Silicon Valley.

If you look at the change in the unemployment rate, Milwaukee looks even stronger. Its unemployment rate has been almost flat. But even Pittsburgh's big increase is still lower than Charlotte and Silicon Valley.

But if you look at employment, i.e., the number of people who are working, the picture almost completely reverses. The number of people in Milwaukee who are working has dropped by 1% in the past year, while employment in Pittsburgh has grown by 0.4%. (Although the new statistics suggest that employment dropped in Charlotte, too, that may be just a temporary anomaly, since employment was significatly higher there in July than a year ago, and separate data on the number of jobs indicate the Charlotte economy is still growing rapidly.)

How can both employment and unemployment go up in a region at the same time? It happens when the labor force is increasing. Pittsburgh has over 20,000 more workers than it did a year ago, a 1.7% increase, while Milwaukee has lost workers.

As noted in previous posts, the Pittsburgh Region has been creating jobs while many others have been losing jobs. So it's really not surprising that people may be coming here looking for work, or that students may be staying here after graduation rather than going to other regions in search of work.

It's hard for Pittsburghers to think of their region as a "hot" place for jobs, but in this weak national economy, that's exactly what our region is.

When people come to a region looking for work, or when students graduate and go looking for a job, they are temporarily unemployed. (At least we hope it is only temporary!) Employment in the Pittsburgh Region has been growing, but the Labor Force has been growing even faster, which means that the number of people looking for work (i.e., the Unemployed) is increasing. The increase in unemployment may have nothing to do with people losing their jobs; although some people may be losing jobs, more are getting jobs, which is why the total employment and the total number of jobs in the Pittsburgh Region has been increasing. Charlotte and Silicon Valley have been having similar experiences; people are still going there in search of jobs or entrepreneurial opportunities, boosting their labor force, and also temporarily boosting their unemployment.

The converse of this is that just because a region's unemployment rate decreases, it might not be good news. As in Milwaukee, it could mean that jobs are declining and that workers are leaving the region even faster.

Although newspaper headlines continue to focus on changes in the unemployment rate, it's important to understand all of the underlying elements -- the size of the labor force and the level of employment as well as the unemployment rate. All of these factors are posted each month at the PittsburghToday website so you can see for yourself what's happening.

The most meaningful indicator of our economic strength, however, is not the change in the unemployment rate but the change in the number of jobs. And on that score, we're doing pretty well, as described in more detail in the previous post.

1 Comments:

Blogger Ray said...

Despite the stats/economy, I see many high paying pittsburgh jobs posted on employment sites -

www.linkedin.com (professional networking)
www.indeed.com (aggregated listings)
www.realmatch.com (matches you to jobs)

I see 75K, 100K and 125K jobs

7:27 PM  

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