Know What the Jobless Numbers Mean


The latest unemployment statistics released last week showed another statewide increase in Hoosierland. That news, however, does not mean that pessimism should reign. History shows that job creation is one of the last areas to recover. Thus, unemployment stats are a result, not a cause, of economic normalcy.

Need evidence? Following the recession that ended in November 2001, the unemployment rate reached a peak of 6.3% in June 2003. Similarly, in the July 1990 to March 1991 downturn, national unemployment went from 6.8% at the end of the official recession to 7.8% in June 2002.

Earlier recessions did not show such a long lag time. Reasons for the change include more reliance on the service sector today, less use of temporary layoffs and a large increase in part-time workers. John Challenger, CEO of the outplacement firm that bears his name, explains:

"A lot has changed since these earlier recessions. For one, companies are less likely to use temporary layoffs today. They are also more likely to use part-time employees whose status can move to full-time as the economy improves. Unfortunately, the movement from part-time to full-time does not impact the unemployment rate.

"The earlier recessions occured at a time when our economy was dominated by manufacturing. It was common practice for plants to temporarily shutter operations, only to call back workers when business conditions improved. The service sector, where today’s employment is concentrated, is less likely to make temporary cuts.

"Companies are also turning increasingly to part-time workers during these slowdowns. There are about nine million people currently working part-time for economic reasons. That is the largest number of economy-related part-timers in government records going back to 1955. As the economy improves, employers are likely to move these workers to full-time status. However, the unemployment rate will not reflect the improving conditions since these part-timers are currently counted as employed."

One more factor at play. Today’s technology that increases productivity allows employers to be more selective in their hiring. Many jobs require more technical know-how and skills than in previous generations, lessening the number of people being hired just because they’re a "warm body."

So, while the monthly numbers are important, don’t confuse them with lack of economic progress.

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