IBJOpinion

MARCUS: The highs and lows of unemployment

Morton Marcus
September 4, 2010
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Morton Marcus

Indiana’s unemployment rate in July was 10.1 percent—the 12th-highest of the 50 states. Nevada was running at 14.3 percent to lead the nation, while the lowest rate was 3.6 percent, in North Dakota. We’re much closer to the worst than we are to the best.

Are these the best of times or the worst of times? In material terms, these might be the best of times. Many of the poorest walk around with cell phones to their ears; children go to air-conditioned schools that are downhill (both ways) from home; machines for washing dishes and clothes stand ready for duty in many homes where baseball games are watched in HDTV on screens longer than the arm of any adult in the house.

Psychologically, these are bad times. Uncertainty is rampant in the economy. Fear and anxiety are responses to uncertainty that plagues many households and businesses. Most, however, responded to the current economic uncertainty with caution. They cut back on spending, increased cash balances, reduced debt, and assumed an adamant position sitting on their wallets.

Nonetheless, these are not the worst of times. As we scan the records of unemployment rates from January 1976 to the present, July was the worst month for only one state (Nevada, 14.3 percent). Indiana’s highest unemployment rate in those 34 years was 12.7 percent in January 1983. It was during that 1982-1983 recession that 29 of our 50 states experienced their peak unemployment rates.

That long-term view offers some comfort, but does not tell us if we are better off now than a year ago. Indiana’s unemployment rate in July was 10.1 percent, compared to 10.3 percent a year earlier. But we have learned that an improvement in the unemployment rate is not necessarily the sign of a healthy economy.

Over the past year, the number of people employed in Indiana has declined nearly 52,000 (1.8 percent), which is the fifth-worst case in the nation. Simultaneously, we saw the number of unemployed fall 11,000. Put those two numbers together and Indiana’s labor force dropped 63,300, a 2-percent decline, the sixth-worst case in the United States.

Our state’s economy remains in bad shape. We are one of 17 states that had the numbers of employed and unemployed people both drop in the past year. We’re in the same class as New York, Michigan, Wisconsin, Ohio and Kentucky.

Normally, when people lose jobs, the number of unemployed rises. These times are so tough that people who already are unemployed leave the labor force along with those losing their jobs. The result is that the unemployment rate may improve, although the underlying conditions are worsening.

Indiana had 39 counties in which the number of employed people grew in the past year. As the number of employed people grew in 26 of these counties, the number of unemployed declined and the labor force grew. Kosciusko (Warsaw) is an example: Employment grew 2,100, unemployment fell 900, and the labor force increased 1,200.      

The majority of Indiana counties (53) saw the number of employed fall. In 22 of these counties, the decline in employment was accompanied by a rise in unemployment. Vanderburgh (Evansville) exemplifies these counties with a 2,500 decline in employed people and a rise of only 900 in those unemployed. The result was a labor force shrinkage of 1,600.

By contrast, there were 31 counties where the numbers of employed and unemployed fell, depressing the labor force. Shelby County, for example, saw a 900-person decrease in its labor force, the combination of a loss of 700 people with jobs and a decline of 200 in those unemployed.  

As ever, the full story is always deeper than the headlines.•

__________

Marcus taught economics for more than 30 years at Indiana University and is the former director of IU’s Business Research Center. His column appears weekly. He can be reached at mmarcus@ibj.com.
 

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