January 25

Maine Voices: Conclusion of ‘steady, modest job growth’ based on numbers, not reality

Statistics showing a drop in unemployment hide the fact that dropouts account for most of the decline.

By Braden Sinclair

WASHINGTON — It is a shame that it has become an acceptable practice to summarize something as immense as the U.S. economy with a single number.

about the author

Braden Sinclair of Eddington is an intern in the office of independent U.S. Sen. Angus King of Maine and an economics and political science major at the University of Maine.

While there are few who would argue against the significance of a low unemployment rate, the reliance on this number – both by the government and by media outlets – shows a startling disconnect between those who get the first glances at the monthly jobs report and those whose experiences actually are reflected in the data.

On Jan. 10, the number “6.7 percent” made its rounds, embellishing a 0.3 percent decline in the unemployment rate in December.

While it did not take the media long to connect the dots and recognize that the decline in unemployment was greatly influenced by discouraged workers leaving the labor force as opposed to actual job growth, there are some inclusions in the December jobs report that deserve more attention from the media and that could have direct impacts on Maine.

I had the privilege of sitting in on Congress’ Joint Economic Committee, where Erica Groshen, federal commissioner of labor statistics, testified on the December 2013 employment report.

At one point the commissioner referred to 2013 as a year of “very steady, modest job growth.” I respectfully question how someone could consider 2013 a year of “steady, modest job growth” while later reporting that two-thirds of December’s decline in the unemployment rate resulted from a decline in labor force participation.

In economics, there are six methods of measuring unemployment: U1 through U6. When the media report that unemployment has declined by .3 percent in the last month, it is referring to the U3 method.

What distinguishes this method from the others is that it discounts any person who is discouraged by the job market, and therefore not actively looking for work. In other words, an unemployed person not seeking a job does not contribute to the unemployment rate. This allows the unemployment rate to fall whenever an unemployed person becomes discouraged and decides to no longer look for work.

December’s decline in the unemployment rate is a reflection of our economy moving in the wrong direction.

This still leaves the one-third of the 0.3 percent fall in unemployment that resulted from actual job growth. There were 74,000 jobs created in December, bringing the yearly average to 182,000 jobs a month.

While news sources are reporting that the nation will be “back to even” (in regard to pre-recession payroll jobs) by the middle of 2014, this calculation was straight-lined by Groshen, assuming a continuing average of 182,000 jobs a month. December has cast doubts on whether that average will be maintained.

A substantial number of the jobs created in 2013 were in retail. So what does this mean for Maine?

In a report conducted by the Bureau of Labor Statistics in May 2012, Maine is shown to be in the lowest tier in regard to employing retail salespersons. The mean hourly and annual wages of these retail jobs in Maine fall short of the national averages (by 18 cents an hour and $360 a year respectively).

December realized a loss of 16,000 construction jobs, many of them in the Northeast, because of cold weather. Another area of concern is the veterans’ unemployment rate.

According to the Veterans Affairs Department, Maine is home to 127,694 veterans – one of the highest percentages per capita in the nation. The recent jobs report found that 7.3 percent of Gulf War-era veterans in the U.S. are unemployed, while a startling 15.6 percent of veterans between ages 18 and 24 are jobless (4.2 percent higher than nonveterans in that age group).

The majority of the jobs created last year favored those with less than a high school diploma. This drew some attention – particularly from U.S. Rep. Linda Sanchez, D-Calif. – to the breaking-down of employment statistics around low-, middle- and high-skilled workers.

Sanchez pointed out that the U.S. economy is geared toward creating new jobs for low- and high-skilled workers, not necessarily for middle-skilled workers trying to get their “foot in.” This is a grave concern for Maine, as these future “middle-skilled workers” continue to either leave the state for college or leave immediately after graduation in search of a more welcoming job market.

So while the media continue to tout the unemployment rate in response to the recent jobs report, I ask that you recognize this number for what it really is – an unjust overgeneralization of the people whom you interact with every day. This number represents veterans, students and anyone else whose struggles are crunched into a measurement that misinterprets discouragement for economic growth.

— Special to the Press Herald

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