June 2014 Employment: And the Happy Face Keeps Smiling

So, Rhode Island’s unemployment rate is now below 8% for the first time in a long time.  Our 7.9% rate is still the worst in the country, but at least it’s a tie with Mississippi.  RI Dept. of Labor and Training Director Charles Fogarty is quick to point out that the last six months have seen the biggest employment boom since the U.S. Bureau of Labor Statistics began looking at the numbers this way in the 1970s.

According to the numbers, 3,246 more Rhode Islanders were working in June than in May.  That’s up 16,368 since December.  That’s despite the fact that the state is still on the wrong end of just about every national ranking, according to the RI Center for Freedom & Prosperity’s newly released Report Card.

It’s also despite the fact that a separate measure, counting up jobs that are based in Rhode Island, has only continued the steady growth that it’s had since the recession ended.  In fact, the number of such jobs fell in June.  Not to worry, though; the official voices have an explanation for that:

The economic improvements in [Connecticut and Massachusetts] may indicate why more Rhode Islanders are recorded as working in monthly jobs reports, University of Rhode Island economics Prof. Leonard Lardaro said. The number of employed Rhode Islanders has been going up at roughly twice the level, he said, as the number of jobs based in Rhode Island.

“So to some extent, what we have is Rhode Islanders getting jobs out of state, and that’s what is substantially helping our unemployment rate decline,” Lardaro said. “My guess is the out-of-state employment is substantial because our neighboring states are doing substantially better than we are, namely Massachusetts.”

Why guess, though?  The numbers are pretty easy to check.  The following chart subtracts the increase in employment from the increase in new jobs based in each New England state.  A negative result means that — according to Lardaro’s interpretation — residents of the state had to find their jobs outside of its borders.

In June, only Maine created enough jobs to share some with its neighbors.  For that one month, the data shows 10,890 more New Englanders claiming to be newly employed than can be accounted for by the number of jobs reported to be newly created in the region.  For the first six months of the year, that deficit is 113,362.

Where are all of these New Englanders working?  Not elsewhere in New England, apparently.

I should stress that it’s conceivable that there’s an explanation; maybe Connecticut has been sending a lot more workers into New York City, so folks have been flowing from Massachusetts to take Connecticut jobs, and Rhode Islanders are spreading out everywhere, including Maine.  The point is that such an interpretation really shouldn’t be offered on its own merits without additional explanation.

My interpretation continues to be that the employment/unemployment numbers for the entire country, but especially Rhode Island, are simply not reliable and will be adjusted downward dramatically next January (i.e., after the election).  Here’s the picture that the government’s numbers paint of Rhode Island’s employment and labor force (employed people plus people who’ve recently looked for work):

Placing these lines in comparison with those of our neighbors shows both that the trend isn’t entirely unique to the Ocean State, but that the trend is even more pronounced, here.

Naturally, a state can’t have among the fastest-growing economies and not make up ground compared with the competition.  In that regard, my regular distance-from-peak chart is conspicuously different from every prior iteration in that Rhode Island is no longer an outlier.  (It’ll be interesting to rerun these charts after the January revision.)

Similarly, Rhode Island has made up an astonishing amount of ground when it comes to the amount of employment added since the national jobs landslide ended, in February 2010.

The most telling chart, however, continues to be the employment versus jobs chart for Rhode Island.  The lighter area represents jobs based in Rhode Island, as estimated by the government and benchmarked to actual tax forms.  The darker area is the survey-based employment number, from which the unemployment rate derives.

As you can see, the RI-based jobs have been on a steady increase (a little under the inflation rate), while employment is now taking off after years of false starts.  I, for one, fully expect the post-election revision to prove this boom to have been another false start, at a level roughly equivalent to prior years.

NOTE: Regular readers will note that this post is missing the chart showing the employment numbers compared with state income tax revenue.  The reason is that the state Dept. of Revenue Division of Revenue Analysis takes a little longer to produce the June edition of its revenue report so as to include an annual summary.  As soon as the numbers are available, I’ll post an update.

Disclaimer: The views and opinions expressed in The Ocean State Current, including text, graphics, images, and information are solely those of the authors. They do not purport to reflect the views and opinions of The Current, the RI Center for Freedom & Prosperity, or its members or staff. The Current cannot be held responsible for information posted or provided by third-party sources. Readers are encouraged to fact check any information on this web site with other sources.

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