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In a previous post, the topic of discussion was the stagnancy of the labor force during the 1980s (click here). In that case the size of the labor force was flat for about five years because of a regional recession, weak wage and salary job growth, and negative net migration. This post will look at the size of the labor force during the Great Recession and beyond.

Local Area Unemployment Statistics (LAUS) are available for Colorado beginning in 1976. Since then, the month-over-prior month labor force increased about 87% of the time (383 of 442 months). In a vibrant economy, periodic ups and downs are expected, but increases in the size of the labor force are generally the rule of the thumb.

Between April 2000 and October 2012 there were 30 months with decreases in the month-over-prior month size of the labor force. In January 2008 there were 2,722,015 workers. By April 2009 the number had risen to 2,758,468 workers.

During the past 42 months, there were 19 month-over-prior month declines. There were 2,725,803 workers in the October 2012 labor force. This was 32,665 fewer than the level in April 2009 and essentially the same as January 2008.

Next, we will look at three data sets for the period: Wage and Salary job growth, Net migration, and the Unemployment Rate.

For the years, 2009-2012, wage and salary job growth was devastating, with back-to-back net job losses in 2009 and 2010. The net change in wage and salary jobs follows:
• 2008 19,000
• 2009 -104,700
• 2010 -23,300
• 2011  33,000
• 2012 est  45,000

Unlike the 1980s, when the state experienced negative net migration, there has been solid positive net migration, i.e. more people moved into the state than out of it. The net migration follows:
• 2008 45,000
• 2009 36,300
• 2010 37,000
• 2011 34,900
• 2012 est 36,800

For this period the unemployment rate varied from 4.8% to 8.0%. While the monthly rate has dropped from a high of 9.0% in 2010, the 2012 annual rate remains the same as it was in 2009.
• 2008 4.8%
• 2009 8.1%
• 2010 8.9%
• 2011 8.3%
• 2012 8.0%

For all intensive purposes, the size of the labor force will be about the same as it was at the end of 2009 and the number of employed and unemployed workers will be similar.

• The 33,000 wage and salary jobs added in 2011 lowered the unemployment rate by 0.6% points, yet growth of 45,000 jobs in 2012 will lower it by 0.3% points.
• For the period 2008 to 2012, total net migration was 190,000; approximately 125,000 of these individuals are 16-65 years old.

This raises a series of questions:
• How many people have become contract or 1099 workers? How many have become sole proprietors and owned family businesses? How many people are working temporary jobs? Will they still work in this capacity when the economy recovers or will they take wage and salary jobs?
• How many workers have stopped working who don’t show up in the data?
• What are the in migrants doing? Did they take jobs that Colorado residents might have taken? Are they working in other capacities?
• How many families with dual incomes now only have one income?
• Have the published unemployment numbers been manipulated to meet political agendas?

There seem to be more questions than answers and the numbers do not seem to reconcile. As grave as the employment situation has been, it appears that the unemployment rate may be inaccurate and may have understated the magnitude of the problem.

©Copyright 2011 by CBER.

The unemployment rate is one of the most popular, but overrated statistics for measuring the performance of the economy. It is such a crude measurement of economic performance that the state’s labor economist was recently quoted in the media as saying that it shouldn’t be taken at face value.

The calculation of the unemployment rate is simple. The number of unemployed workers is added to the number of employed workers (wage and salary, sole proprietors, and others) and that equals the size of the labor force. The unemployment rate is simply the number of unemployed workers divided by the size of the labor force.

In other words, the size of the labor force is a key component in determining the accuracy of the unemployment rate. This brings us to the topic of this post – the size of the labor force.

Local Area Unemployment Statistics (LAUS) are available for Colorado beginning in 1976. Since then, month-over-prior month labor force increased about 87% of the time (383 of 442 months). In a vibrant economy, periodic ups and downs are expected, but increases in the size of the labor force are generally the rule of the thumb.

There are two periods when the size of the labor force did not increase, during the 1980s and the late 2000s. The following analysis looks a period during the 1980s.

Between September 1984 through April 1989 the size of the labor force declined in 29 of 53 months.

In August 1984 the size of the labor force, as measured by LAUS data,  was 1,719,239. It declined sharply in 1985, bounced back for most of 1986, and fell sharply in 1987. It remained flat for much of 1988 and into the first part of 1989. In June of 1989, the labor force was reported at 1,719,824. From that point, it continued to grow.

Next, we will look at three data sets for the period: Wage and Salary job growth, Net migration, and the unemployment rate.

During this period, Wage and Salary (CES)  job growth was weak, with net job losses in 1987. The net change in wage and salary jobs follows:
• 1984   75,100
• 1985   16,400
• 1986  -10,400
• 1987       4,300
• 1988    23,500
• 1989    46,200
• 1990    38,600

The CES and LAUS series are different measures of employment, but they should tell a similar story about changes in employment.

During this period the state experienced negative net migration, i.e. more people moved out of the state than into the state. The net migration follows:
• 1984      2,782
• 1985      5,172
• 1986     -5,270
• 1987   -13,997
• 1988   -24,280
• 1989   -18,752
• 1990   -12,964

For this period the unemployment rate varied from 5.4% to 7.5%. It remained at a higher than normal level because unemployed workers were able to move outside the region and find work. The annual unemployment rates for this period were:
• 1984   5.4%
• 1985   6.0%
• 1986   7.5%
• 1987   7.5%
• 1988   6.4%
• 1989   5.6%
• 1990   5.1%

The labor force was stagnant for about five years for the following reasons:
• There was a regional recession
• Weak wage and salary job growth
• Negative net migration.

A similar stagnancy in the size of the labor force occurred during the 2000s. It is more difficult to understand and will be discussed in a later post (click here).

©Copyright 2011 by CBER.