Is Unemployment Decreasing in New England? A Look at New England’s August Unemployment Rates

Posted by erik devaney

Despite the lack of nationwide job growth, recent data show that all six New England states have experienced some recent decreases in unemployment. Specifically, data published by the Associated Press indicate that – for the most part – unemployment rates dropped between August 2010 and August 2011, as well as between July 2011 and August 2011. Let’s take a look:

 

August 2011      July 2011      August 2010

Connecticut           9%                    9.2%                 9.2%

Maine                   6.5%                  7.2%                 6.9%

Massachusetts      7%                     7.8%                 8.2%

New Hampshire     5.2%                  5.3%                 5.8%

Rhode Island       10.2%                11.2%               11.7%

Vermont               5.4%                  5.6%                 5.5%

 

Looking at the above data, you might draw that conclusion that jobs are being created and employment is on the upswing in New England. Just look at the figures for Rhode Island. In a year, Rhode Island’s unemployment rate dropped by a total of 1.5%, while between July and August – just one month’s time – unemployment dropped by 1%.

However, as Joe McLaughlin (a senior research associate at Northeastern University’s Center for Labor Market Studies), told New England Post, the data that the AP put out do not paint an entirely accurate portrait of New England’s unemployment situation. This is because the data are not seasonally adjusted.

Seasonal adjustment is the process of estimating – and then removing – normal, seasonal occurrences that can impact trends. Such occurrences include major holidays, harvests, weather patterns and reduced or expanded production. Because these occurrences follow a more-or-less regular pattern each year, their influence on trends can be eliminated on a month-to-month basis. Eliminating this seasonal influence makes it easier to see the impacts of unusual events, like the closures of manufacturing plants.

McLaughlin sent me to the Bureau of Labor Statistics website so that I could see the seasonally adjusted data for August unemployment rates in New England.

 

August 2011      July 2011       August 2010

Connecticut           9%                   9.1%                  9.1%

Maine                   7.6%                  7.7%                 7.7%

Massachusetts     7.4%                  7.6%                  8.4%

New Hampshire    5.3%                   5.2%                 5.8%

Rhode Island       10.6%                10.8%                11.5%

Vermont               5.9%                  5.7%                    6%

 

With seasonally adjusted data, Rhode Island’s whopping one-month, 1% drop in unemployment is reduced to just a 0.2% drop. In addition, while the unadjusted data show unemployment rates dropping slightly between July and August for Vermont and New Hampshire, the adjusted data show unemployment rising slightly in these two states.

The adjusted data make it clear that only two New England states are showing significant trends in decreased unemployment rates: Rhode Island (down 0.9% in one year) and Massachusetts (down 1% in one year). Unfortunately, decreased unemployment is not synonymous with job growth.

“In Rhode Island, the falling unemployment rate is largely due to labor force withdrawals,” McLaughlin told New England Post. “The data show that the labor force declined over the year. This decline is a sign that the unemployed have stopped looking for work and dropped out of the labor force.

According to McLaughlin, “Civilian employment is up (a positive),” in Massachusetts. However, “the labor force has also declined, which indicates that some of the unemployed are withdrawing (bad news).” For more insight into the decreasing unemployment rate in Massachusetts, I got in touch with Professor Michael J. Carter, who is the chairman of the UMass Lowell Economics Department. Like McLaughlin, Carter has been studying the seasonally adjusted data.

“The headline number for Massachusetts was a decrease in the unemployment rate from 7.6% to 7.4% between July and August,” Carter told New England Post. “This decrease occurred despite a decline of 8,900 in overall jobs between July and August. Data on job creation is based on a survey of employers while data on unemployment is based on a survey of households… Hence, the two surveys can sometimes (as in August) paint a different picture.”

As Carter pointed out, Massachusetts job creation/loss data vary substantially on a month-to-month basis. However, looking back a full year, trends become clearer. “Year to date, the private sector has added 47,700 jobs and since August 2010, it’s added 52,900… an annual growth rate of 1.9%.”

So where are all of these jobs in the Bay State coming from? According to Carter, employment gains over the past year have been highest in “Professional Scientific and Technical Services.” However, “the job growth over this period has actually been fairly broadly distributed across industries… even construction has added jobs.”

The striking exception to this trend in job growth has been in state and local government employment. “As federal stimulus money has dried up this year and state and local tax revenues remain low, there has been a net job loss of almost 5,000 state and local government employees in Massachusetts since August 2010,” Carter told New England Post. “If the government and private sector job data is merged, the overall growth rate of employment from August 2010 to August 2011 is reduced to 1.5%.”

Related posts:

1. Employers Add No Net Jobs in Aug.; Rate Unchanged
2. Conn. Registers Steep Job Loss in Aug.
3. RE/MAX: July Too Hot to Shop for New England Homes
4. Interpreting the Fed: How Did it Lower Rates This Time?
5. NH Jobless Rate Climbs in July

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