Friday, July 11, 2008

Got a Job? You're in Good Company

by Osman Parvez
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I've said it before and I'll say it again. In real estate, for primary home markets (not vacation homes), employment is the critical factor.

Yesterday, the Wall Street Journal had a piece on the unemployment rate, as measured by the number of Americans who register for jobless benefits. Curiously, the number of people registering has remained essentially constant even as the workforce has expanded.

From A Jobless Stat That Has Kept Its Measure, by Mark Gongloff
(link, subscription req'd):
Since July 1978, the U.S. labor force has grown more than 50% to 154 million people from 102 million. As the number of people in the labor force grows, you might think the number of people who occasionally turn to the government for unemployment benefits would also grow.

But it hasn't. About 348,000 individuals filed to get new jobless benefits in the first week of July 1978; the weekly average of "initial claims" so far in 2008 has been about 363,000.
Let's drill down to Colorado. The latest employment release was May's data, which showed that statewide the jobless rate was 1.2 percentage points higher than a year ago when it stood at 3.7 percent.

After adjusting for normal seasonal movements, the estimated number of employed dropped 14, 600 over the month to 2,631,200. This is still an increase of 36,600 from last May’s total of 2,594,600. The estimated count of unemployed jumped 14,000 during the month and has risen 35,900 from a year ago.

The Boulder-Longmont MSA showed a 3.9% unemployment rate and 172,581 employed in May 2008, compared with 170,195 employed and 2.8% unemployment a year ago. That's an increase of 1.1% to unemployment but we still picked up over 2,000 jobs. In my opinion, both statewide and within our local region, we are still essentially healthy, picking up more net new jobs than those filing for unemployment.

Of course, the picture isn't so black and white. Why haven't claims grown in proportion to the growth of the population?
There are several reasons claims haven't grown as much as the labor force has. First, there are about 2.2 million more self-employed people now than 30 years ago. They aren't eligible for jobless benefits. Second, the economy has gotten more efficient and less volatile, with fewer mass layoffs and re-hirings. The unemployment rates associated with claims above 400,000 were much higher 30 years ago than in the past two recessions.
I'm not sure if anyone has done a comprehensive study on Boulder's employment. If so, I'd be interested to know the percentage of self employed individuals. Here in our neighborhood, on any given day, you'll find a surprising number of folks who are working from home. The neighborhood is far from deserted in the middle of the day. And it was this way well before gas prices hit $4/gal.

The article also mentions that economists look at 400,000 as a warning bell of recession. We hit that number at the end of June.

On a final note, Sun Microsystems cut 212 jobs in Broomfield and Louisville as part of a previously announced downsizing. From the Daily Camera:
Thirteen people -- eight in Broomfield and five in Louisville -- are expected to lose their jobs between July 21 and Aug. 4, while 199 more workers -- 131 in Broomfield and 68 in Louisville -- are expected to be laid off between Sept. 8 and 22.
The cuts represent 8% of Sun's local workforce and more cuts are expected.

image: magerleagues

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1 comment:

  1. The WSJ observation that the number of jobless claims did not grow in proportion to labor pool can be explained if we look at the quality of jobs and the education levels of the newly added labor force. I have not looked at the data but my thesis is that number of jobless claims is not tied to the number of people but the number of "low quality and low skill jobs". As our economy expanded, the types of jobs added were "high quality and require better skills". We can extend this to explain why the claims remained almost constant.

    Another point is the article is looking at two points in time and comparing them and not looking at the distribution.


    On your point on "net new jobs added in Longmont", I am not sure we can declare "healthy" without looking at the types of jobs added and the median income.

    ReplyDelete