June 2017 Employment: If Everything’s Improving, Why Is Income Down?

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The increases in Rhode Island’s employment statistics cooled a little in June, although employment, labor force, and jobs based in Rhode Island all showed increases.  Because the labor force increased more than employment, however, the state’s official unemployment rate ticked up a tenth of a percentage point, to 4.2%.

Of course, those numbers come with the caveat that Rhode Island’s annual experience has been a big improvement early in the year that the federal Bureau of Labor Statistics (BLS) largely revises away the following January.  Even so, the number of Rhode Islanders who say that they are employed remains 13,989 below the state’s pre-recession peak, while the labor force remains 18,116 below its peak.

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The fact that the employment deficit is smaller than the labor force deficit explains the state’s low unemployment rate, without painting a positive picture.  The following chart shows that the state’s unemployment rate would still be 7.2% if so many Rhode Islanders hadn’t stopped looking for work.

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Bringing Rhode Island’s neighbors into the picture shows that the Ocean State hasn’t been alone in employment growth, suggesting that (to the extent the improvement isn’t just statistical noise) local policies don’t deserve much of the credit, if any.  Indeed, the general picture is one of an increasing gap between Rhode Island and the two states that surround it.

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Nationally, Rhode Island is one of 10 states that has yet to recover all of the employment it had at its pre-recession peak, although sixth-worst may be the best relative standing the Ocean State has had since the market crash… and Vermont now has given Rhode Island a break as the worst in New England by this measure.

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Perhaps the most significant of the dubiously positive news for Rhode Island is that the state has finally recovered all of the jobs based in the state from its pre-recession peak, which the Ocean State has bested by 600 jobs.  Better yet, these numbers tend to be more stable, so this milestone might actually prove to have been real.  Of course, the state took a long, long time to get back to this point, and the long slog suggests that overcoming the loss of the last decade was more the result of an inevitable trend of meager 1% annual growth than a recent boost from government policy.  Indeed, the two completed fiscal years during Democrat Governor Gina Raimondo’s term have seen slower job growth than the two fiscal years before she entered office.

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A deeper picture of Rhode Island’s economy can be viewed on the RI Center for Freedom & Prosperity’s Jobs & Opportunity Index (JOI).  In summary, Rhode Island remains in its 48th-in-the-country rut, as any improvements are undone by slippage elsewhere.  On the positive side of the ledger, employment and jobs are up and SNAP enrollment is down, while state and local taxes have decreased some.  Canceling those improvements out, however, are increases in Medicaid enrollment, a decrease in personal income, and an increase in federal taxation.

The only significant change in the New England race is that Vermont edged past Maine by not slipping as much since April.

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  • BasicCaruso

    More pseudo-scientific “research” from the fringe right.

    Why is income down? In no small part, this is because Boomers are retiring in increasing numbers. Cause for concern but hardly the mystery Justin claims. Yes, if only “so many Rhode Islanders hadn’t stopped looking for work”! #NoRetirement

    http://www.nytimes.com/2013/04/11/booming/baby-boomers-pay-biggest-share-of-income-taxes.html
    David J. Kautter, managing director of the Kogood Tax Center at American University, notes that as people get older, they tend to earn more, which is likely to give them a bigger tax bill. The Tax Foundation report said that the highest average income in 2010, $79,787, was found for people ages 55 to 65. The figure was $40,980 for people ages 26 to 35.

    • Mike678

      Russ,

      If one retires, does not someone step up and take that position? If I am 61 and turn 62 then retire, does not a person 54 turn 55 and fill that gap? Unless, of course, that job is no longer there….

      • BasicCaruso

        In some cases, yes, and generally at a lower rate than the more senior person who is retiring. In other cases, no, there are fewer and fewer people of working age, so not all Boomer positions will be back filled.

        It’s an interesting topic and not all economists agree, but to simply ignore the issue as Justin does is to be deliberately misleading. Here the FRB in Philly attributed fully two thirds of the decline to demographic factors.

        https://philadelphiafed.org/-/media/research-and-data/publications/research-rap/2013/on-the-causes-of-declines-in-the-labor-force-participation-rate.pdf

        • Justin Katz

          As usual, you dance all around the core question. If the money isn’t going to pay senior employees, it’s going somewhere. Some portion goes to a raise or new hire at a lower rate, but there’s still the remainder. That wealth doesn’t just disappear out of GDP (and if it does, that’s a problem).

          Bottom line: states are split nearly 50:50 on income going up or down by this measure. I’d rather be among the other half. Employing more people at lower wages would be fine if the system weren’t reducing the total pay.

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