May 23, 2012
“I just don’t understand these job numbers” the woman told me. “Are we losing jobs or are we getting more?”
It’s no surprise folks are confused. Every month there is a new number. Then the numbers are revised and revised again. It’s not easy to sort through what’s real and what’s not.
The unemployment rate and the number of jobs created are two often reported numbers. Sometimes these numbers seem to conflict. But these two different numbers measure something different.
Job numbers refer to the place of work. These numbers tell us how many jobs are being created or lost in Wisconsin.
The unemployment number is based on the place of residence. This number tells us how many people living in Wisconsin have a job, regardless of where the job is located.
In April, as often happens, the two numbers seem to conflict. Wisconsin lost 5,900 non-farm jobs. But the unemployment rate dropped to 6.7% from 6.8% in March.
How can fewer people be unemployed when Wisconsin created fewer jobs?
Several possible reasons exist. Those who began their own business, who took a job on a farm or who took a job outside of Wisconsin are not counted in the “5,900 non-farm jobs lost in Wisconsin” number. And people who may have stopped looking for employment are not counted in the unemployment number.
Is Wisconsin doing any better than our surrounding states or the nation as a whole?
Generally a state’s economy mirrors the national economy. As things decline, the unemployment rates go up about the same amount. As the economy improves, the rates go down about the same amount.
Wisconsin has improved following the recession, but not as fast as the nation as a whole. From December 2010 to April 2012, the national unemployment rate dropped 1.3 percentage points. The Wisconsin unemployment rate dropped only .8 of a percentage point.
Think of the third grader who says, “I grew an inch.” This sounds great, until you learn the average growth in third grade was two inches.
The Midwestern states have similar economies. Often unemployment rates are compared among Midwestern states.
Agency officials at the Department of Workforce Development (DWD) made comparisons among Midwestern states in the most recent job statistics. DWD staff compared Wisconsin’s April 2012 unemployment rate of 6.7% with the unemployment rates in Michigan (8.3%) and Ohio (7.4%). It is notable that DWD omitted unemployment data from Iowa (5.1%) and Minnesota (5.6%). Frequently politicians are accused of choosing one set of numbers over another.
To make accurate comparisons, we must use numbers that are measured the same way every month. Consistency in measurement is paramount in making accurate comparisons. For example, unemployment numbers are measured the same way every month. They are comparable across states and they are comparable over time.
The Governor recently took the unusual step of releasing 2011 job numbers before they were reviewed by the federal government. He claimed the state created 23,321 jobs. These numbers stand in contrast to the Current Employment Survey that showed Wisconsin lost 33,900 jobs in 2011. This number put Wisconsin dead last among fifty states in job creation.
Critics claimed the Governor was picking some numbers and ignoring others. State officials claimed they were releasing more accurate numbers that would be verified later by the federal government.
While the numbers seem to wildly deviate, some economists said the argument is over numbers that are all very close to zero. Even if we accept the Governor’s new numbers the recovery is anemic. And Wisconsin’s job growth lags the national average.
By my calculations, if Wisconsin had grown jobs at the same rate as the national economy we should have seen job growth almost double the Governor’s new numbers.
John Heywood, an economist at the UW Milwaukee was quoted in the Milwaukee Journal Sentinel. “It would certainly be nice if the particular year saw a 1% increase rather than a 1% decrease, but this remains a slow jobs recovery using anyone’s numbers,” said Heywood.