December 19, 2003
What the Employment Statistics Really Tell Us
Someone wise once said that we should be careful what we wish for, lest those wishes come true. For years, economists have longed for the day when the general population would look beyond unemployment rates to get a read on our economic performance. Now that that day has arrived, it has proven to be a decidedly mixed blessing.
If we have learned anything during the economic turbulence of the last several years in Indiana , it is this -- unemployment rates no longer give us the same kind of information on how the economy is doing that they used to. Indeed, it is only a slight exaggeration to say that, according toIndiana unemployment rates, the recession of 2001 never happened. That's because even though rates have risen statewide since 2000, they remain at levels that are not only low by historical standards, but lower than most other states in the nation.
Dissecting the reasons why unemployment rates have failed us as an indicator would take several weeks of columns like this one, and would still leave questions unanswered. Suffice it to say that many workers who have lost their jobs in Indiana in recent years have left the labor market altogether.
So we got our wish -- leaders and policymakers in all corners of the state began to weave information and statistics on things like employment growth and tax collections into discussions about economic performance. But economists' smiles of satisfaction soon gave way to frowns as we realized the ways these less familiar data could be manipulated to serve up stories that obscured or exaggerated the truth.
A low point was reached during the mayoral debates in a major Indianacity, where the challenger's employment growth data showed decline and malaise, whereas the incumbent's data ranked the city near the top of the heap. Both sides were using exactly the same figures -- indeed, both cited the Bureau of Business Research as their source -- but used different time spans and different growth concepts in their analysis.
Despite episodes like these, most who have looked at Indiana 's employment data have reported a general impression that is essentially accurate. That is, Indiana 's recession experience has been more painful than most states. Our dependence on manufacturing, the collapse in business spending nationwide, and the difficulties suffered by some prominent companies here all played a part in making this happen.
But what's the right way to look at the employment data? And, more importantly, what are the data saying now that the recession is over?
Opinions certainly vary on those questions, but my approach to analyzing the data is quite simple. I like to draw a picture. If you graph the monthly employment figures for the U.S., Indiana, and Indianapolis for the last three years, on a seasonally adjusted basis, with each expressed as a percent of their levels, say, three years ago, some truths begin to emerge.
By comparison to the U.S. , Indianasuffered earlier, more severe, and more prolonged employment declines over this period, as most of us know. But the Indianapolis economy, which like the U.S. outperformed the state economy until the mid-point of 2002, has slipped badly since then and is now indistinguishable from the rest of the state.
That same picture puts the state's modest employment gains since last July in perspective as well. AlthoughIndiana 's job gains of almost one percent since the year's mid-point are encouraging, we would need to gain another 80,000 jobs statewide just to catch up with the rest of the nation. Time will tell us if Indiana 's employers are up to that task.
About the Author
Educational Attainment, the 21st Century Fund and the Future of SchoolingIndiana ranks 42nd in educational attainment.
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