Tuesday, September 27, 2011

There's up and there is up

So you might think things are trending down for the regional economy if you take verbatim any of the stories today on the unemployment rate ticking up (PG, Trib, PBT). True the unemployment rate ticked up a huge bit, 0.4 % points, between July and August. A big jump for sure, but not all unemployment rate increases are the same.   You really won't catch this if you read the news, but consider at least these two things on the state of the region's labor market.

With data for August it has now been 59 months since the unemployment rate for the nation was lower than that for the Pittsburgh MSA.  The national unemployment rate for September will be relatively stable and it is an awfully safe bet that there has not been a huge convergence of the two time series  in the last few weeks. If true then September 2011 will mark 60 months, or 5 complete years since the local unemployment rate has been better than the nation's. You will not find any other comparable period of time in the past that has ever been true.

The bigger news story is something else. The Trib almost gets there and kind of mentions the fact that the labor force is indeed trending up. They say the August numbers just out are the largest labor force numbers for the region since December 2008. There is seasonal hiring that often kicks in for December which obscures the point a bit. To skip the seasonality, here are the August labor force totals for the Pittsburgh MSA (current 7 county definition) going back to the late 1970's.



So yes, the labor force count for August is exactly tied with August 2008 for the largest labor force total for an August in the region's history. History. All time. Ever. During a time when the national news is all about the lingering impacts on the labor market of the recession now ended, long term unemployment and declining labor force participation as folks become discouraged just about everywhere. 

When you consider the obvious fact that there is a recession some other things are worth thinking about. Recessions have a general impact of lowering labor force participation. No reason to think that isn't happening here as well. Relative strength or not, the absolute unemployment rate is higher than normal.  The long term unemployed are likely dropping out of the labor force as they are elsewhere. We also know school enrollments in the region are up. Students tend not to be in the labor force as much as others, so that tends to push down labor force participation a bit.

So a high labor force coupled with lower labor force participation equals something completely unmentioned in any of the news coverage as best I can tell. The number of people jumping in and out of the labor force is not anywhere near as variable as you might think reading the generic explanations of why the labor force data changes month after month. That movement in and  out of the labor force exists of course, but long term there is this much bigger factor across the nation called migration that is what really changes the size of regional labor forces.

So what does it mean for Pittsburgh today?  At some point in the 1980's the unemployment rate was exactly the same as it is here today. Does it mean the economic conditions back then have anything in comparison with today's? In the 1980's the metrics of unemployment would have been far far worse than they were for the entire decade if so many unemployed workers did not leave the region. Today, is the regional unemployment rate trending up because of deteriorating economic conditions? Or is it because we are pulling folks into the region by the relatively stronger economy compared to a lot of other places?

11 Comments:

Blogger Jim Russell said...

What was going on from 1989-1993? The labor force grew by almost 100,000.

Tuesday, September 27, 2011 7:58:00 PM  
Anonymous MH said...

All condoms made from 1971 to 1975 had a hole at the tip.

Tuesday, September 27, 2011 8:26:00 PM  
Blogger C. Briem said...

I'm so close to starting a censoring policy here....

Tuesday, September 27, 2011 9:37:00 PM  
Blogger C. Briem said...

but to address the question. I hate suggesting there is any one answer to that, but the short answer is the changing role of women in the Pittsburgh labor force. Between 89-93 in particular you saw a big jump in the % of the local labor force made up of women and a convergence of local and national female labor force participation rates.

The root cause of that is hypothesis on my part to a degree.. but by late 80s I suspect many local households were facing ever desperate times as the reality of job loss earlier in the decade would hit home. One result being women really coming into the labor force to make up for the lack of earnings among the men.

Tuesday, September 27, 2011 9:43:00 PM  
Anonymous MH said...

Sorry.

Tuesday, September 27, 2011 9:58:00 PM  
Anonymous Anonymous said...

Don't you mean that the unemployment rate for the Pittsburgh MSA is lower than that of the Nation?

Wednesday, September 28, 2011 9:07:00 AM  
Anonymous Censor said...

"...women really coming into the labor force ..."?!?! I'm shocked, Chris, shocked!

Wednesday, September 28, 2011 9:08:00 AM  
Blogger C. Briem said...

corrected verbiage. thx.

Wednesday, September 28, 2011 12:10:00 PM  
Anonymous BrianTH said...

I had noticed the 2008-09 explosion in the labor force with great interest, then wondered why it seemed to be going away, and now it appears to be back again.

I'd say that is indeed most consistent with a migration story, but I wonder when. For example, a story could be jobseekers come in 2008-09, many don't find work and drop out of the labor (or crowd out others who do the same), and now as hiring improves they are coming back into the labor force. But does that mean more jobseekers are still coming?

I don't know--yet. But if we start exceeding the 2008-09 spike in upcoming months, then probably they are in fact still coming. In fact, maybe they will keep coming as long as that five-years-and-counting thing continues, which means we could be in for an interesting period.

Wednesday, September 28, 2011 12:24:00 PM  
Blogger C. Briem said...

In the earlier years of the recession lots of regions were really doing badly compared to Pittsburgh, which likely sparked an early surge in migration. Things stabilized a bit for some regions which likely slowed things down. The persistence of the disparity for Pittsburgh likely is building more pressure for more migration here which might be what we are seeing more of now..

but basically as long as you see a significantly lower unemployment rate here than the nation, or competing metros more importantly, you will see net migration. Labor market, like all markets, seeks equilibrium.

Wednesday, September 28, 2011 8:15:00 PM  
Anonymous Anonymous said...

Just came across this post while looking for MSA unemployment levels. Where did you pull your data from for the labor force graph?

Thank.

Tuesday, March 13, 2012 5:16:00 PM  

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