Washington State Unemployment

I really enjoy the graphics in the Sunday edition of the Business section of the Seattle Times. The TimesWatch section puts together quite a bit of data into twenty or so graphs that show the state of the state economy alongside the national economy. In the May 25th edition, the graph depicting state unemployment at 6.1% caught my attention. I wondered if the state economy was experiencing the same decreased employment percentage as the national economy is.

For those who do not know, I like to follow the employed percentage of population at the national level. While the economy appears to be recovering if you look at the 6.3% level of unemployment, there is a different picture if you follow the employed percent of population. This measure takes the sum of the employed and unemployed members of the population and divides it by the population of noninstitutional people. Now, while the employed number doesn’t concern itself with full or part-time work, and the unemployed part means you do not have a job but are actively looking for one, the ratio has some suspicious assumptions. Those assumptions are consistent and the best of what we have right now.

For the state of Washington, the same data exists using the same assumptions. In fact, the same Bureau of Labor Statistics web site contains data on each of the fifty states. I gathered the publicly released data on the unemployment rate, the noninstitutional population, the employed, and the unemployed counts for my own analysis. The result is contained on this page, but I will summarize the results here.

The monthly data goes back to 1976. The economy of Seattle was quite different back then as Boeing ruled the employment spectrum. Over the years, Boeing’s influence has waned as the technology sector started to become a much larger employer. I wonder if bio-technology is next, but I think I am getting away from the main point.

The unemployment rate has been on a roller coaster over the years and hit a recent peak of 10% in March 2010. Since then it has moved lower until it reached its current point of 6.1%. Meanwhile, the employed percentage of population looks nothing like the unemployment rate. You can see the end of the dot.com boom just as the year 2000 was beginning, but the line didn’t drop below its long-term average of 66.6%. That is remarkable to me and while I suspect it would tell some of the resilience of the state’s economy, I would be more inclined to say it was due to the variety of labor sources in the region.

Where the two line graphs coincide is at the end of their data streams. The employed percentage of population peaked in March 2009. The unemployment rate peaked in March 2010. These line graphs should be negatively correlated — when the unemployment rate is falling, the employed percentage of population should be rising. Instead, the employed percentage of population has fallen from 68.6% to the current level of 63.3% while the unemployment rate has fallen from 10.2% to its current level of 6.1%.

What I have done next is to take the long-term average of the employed percentage of population (66.6%) and applied it to the count of noninstitutional population and subtracted the current employment number. Finally, I divided the result by the noninstitutional population to derive an adjusted unemployment rate, which is currently at 7.2%. The most recent peak was 7.8% in December 2013. In March of 2010, when the published unemployment rate was at its recent peak of 10.2%, the adjusted unemployment rate was 6.0%. Why was it lower? Because the employed percentage of population was 67.5% back then, above its long-term average.

Why do I go to all of this trouble? The difference between the published unemployment rate and the adjusted unemployment rate may not seem like much, but it is 395,000 people. Adding that to the payrolls of Washington state employers means more income, more consumer spending, and more tax receipts for the state. The lower economic activity in the state, as shown by the lower than average employed percent of population, does have an effect. It is something to be concerned about and it is something that should be generating interest.

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Author: dmcnic

Educated as an economist, I now work as an Analytical Professional for a manufacturing firm. I have have a second job as a part-time lecturer at the University of Washington in Bothell. While all baseball interests me, the Mariners are my home town team. Married with one dog.

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