December 2014 Employment: Stagnation, but the Calculated Rate Looks Nice

Rhode Island’s unemployment rate dipped below 7% for the first time since April 2008, in December, which is a milestone for anybody who believes the unemployment rate measures anything real.

It’s true that employment data from the federal Bureau of Labor Statistics (BLS) shows employment up by over 1,200 people, in December.  But that last-minute gain didn’t quite bring the state back to where it was at the midpoint of 2014.  Meanwhile, the labor force (those working or looking for work) continued its decline, shrinking by almost 700 in the last month of the year.

RI-laborforceandemp-0107-1214

Rhode Island’s performance by these metrics stands in stark contrast with results in Massachusetts and Connecticut.  In both of the Ocean State’s neighboring states, 2014 continued to see strong growth in both labor force and employment.

RI-MA-CT-labor&unemployment-perc-jan07-dec14

On the national scene, Rhode Island remains in the bottom three, for recovering employment lost since its peak.  As other states gradually cross the 100% line, Rhode Island wallows below 94%.  With Michigan making strides toward recovery and no Northeastern state within four percentage points, Rhode Island is firmly entrenched among America’s economic basket cases.

US-employmentpercofpeak-1214

Returning to the state-level view, the comparison of Rhode Islanders who say that they’re employed (the darker area) with the number of jobs estimated to exist within the state (the lighter area) shows that, despite employment’s going up while jobs went down for the month of December, trends continue largely unchanged.  Jobs are increasing at a slow rate while employment oscillates around stagnation.

My running theory has been that the most important difference between the two data sets is that employment includes Rhode Islanders who work for themselves and those who own the businesses at which everybody else works.  Taken in that way, the story of the state’s recovery (such as it’s been) is that an insider culture is leading established businesses to absorb more and more of the entrepreneurial economy, which is harmful in the long run, because it (1) drives out productive Rhode Islanders who can’t find the jobs that they want, and (2) makes it less likely that Rhode Islanders will find and pursue the innovations that could chart a new course for the state.

Post 4 of my series looking at job creation versus job destruction will look at this dynamic with a new detail, but for now, this chart tells the story.

RI-employment&jobs-0107-1214

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