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Unemployment rate proves inaccurate { December 2006 } Original Source Link: (May no longer be active)
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Jan 29, 12:12 PM EST
Unemployment rate proves its vulnerability to reality
By ALAN SAYRE
AP Business Writer
NEW ORLEANS (AP) -- Louisiana's hurricane-ravaged economy got a bit of surprising news last week when the state labor department reported that the unemployment rate had dropped by nearly half. Tempered enthusiasm is in order, though, since facts, in this case, get in the way of percentages.
The state's jobless rate, which officially dropped from 12.1 percent in November to 6.4 percent in December, has long been spun in various directions by various interests, depending upon how the economy is doing.
Of course, when the economy is growing, the unemployment rate drops. And when the economy is stagnant, which largely was the case even before Katrina, it can be used in an attempt to demonstrate job strength - often for political speechmaking or Chamber of Commerce boosterism - that simply isn't there.
Take the lesson of Hurricane Katrina and its unwelcome cousin, Rita. In this case, the unemployment rate has been proven largely worthless for serious and accurate analysis of the state's economy.
By the time Katrina and Rita had done their respective numbers on Louisiana in August and September, the state had lost more than 205,000 non-farm jobs, including enough in the New Orleans area to completely wipe out 40 years of job growth, along with 11 years statewide.
As businesses reopened, relief workers poured into the state and some residents returned, around 14,000 or so jobs crept back into the picture in November, along with 9,500 in December.
More jobs, yes. But Enough to slash a double-digit employment rate that far?
"We have slight improvement in employment, maybe enough to bring down unemployment three- or four-tenths of a percent, but not enough to bring it down this far," said Loren Scott, a retired economics professor at Louisiana State University.
Then, how did the unemployment rate take such a miraculous drop? There were several factors - almost none having anything to do with actual people at work in Louisiana.
The state labor department had an explanation in its monthly release: an unusually large one-month reduction in unemployment claims - about 100,000 - and the use of a new statistical model that puts more emphasis on those claims.
An end to an unemployment claim doesn't mean someone found a job. Too often for the economy's comfort, it means the benefits simply ran out. In the case of the hurricanes, the state allowed the unemployed to sign up for three months of worth of benefits in September, and the drop started in late November. Speculation is that some workers simply didn't sign again, for whatever reason, while others were ruled ineligible.
But there's more.
For one, the monthly statistics don't include Louisiana residents who are out of state. Just like during normal slow times, the jobless who leave Louisiana drop out of the monthly report and become some other state's statistic, thus taking upward pressure off the jobless rate.
A clue about how many Louisiana residents are out of state might be culled from the statistic known as the civilian labor force, generally defined as the total of civilian employment and unemployment, excluding members of the armed forces and not in institutions.
The civilian labor force in the state fell by 239,870 in the December-to-December comparison. And with a major concern being how many residents won't come back, consider this: the labor force dropped by 11,208 in December alone, indicating, perhaps, workers who came back after the storms, took a look around and decided to move on.
A huge increase in employment in New Orleans, where a typical business complaint now is having jobs, but not enough people to fill them, also would require a huge increase in available housing. In November, a group of state university economists estimated - in their own words, conservatively - that 270,000 houses in the New Orleans region had been destroyed or left unfit to live in.
The economists said New Orleans would regain 31,000 jobs by 2007, provided that half of the damaged - not destroyed - residences can be occupied. Scott, one of those economists, said the report was "really being optimistic with that figure."
Just as anyone who puts any stock in the latest unemployment figure is being.
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EDITOR'S NOTE: Alan Sayre is the New Orleans-based business writer for The Associated Press.
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