Friday, September 21, 2012

Unemployment rate falls as labor force shrinks in August

Colorado gained 4,554 jobs in August 2012 compared to August of 2011, and the non-seasonally-adjusted unemployment rate fell year-over-year from 8.1 percent to 7.8 percent. According to the most recent employment data, collected through the Household Survey and released today by the Colorado Department of Labor and Employment and the BLS, total employment in August, not seasonally adjusted, rose to 2.52 million jobs. The decline in the unemployment rate, however, was driven by a decline in the total labor force size which decreased, year over year by 5,271 to 2.73 million workers. 

In month-to-month comparisons, the (not-seasonally adjusted) unemployment rate fell from 8.3 to 7.8 percent from July to August this year.  1,935 jobs were added month-over-month while 12,749 people left the work force over the same period.

As can be seen in the second graph, total employment rose slightly from July to August, while labor force size fell.  Since employment grew slightly while the labor force shrank, the unemployment rate fell.The labor force size is nearing its 2008 peak levels, although total employment is still 112,000 below peak levels.

The jobs deficit has been cut in half since late 2010, although the current deficit of 112,000 below the peak does not include the jobs needed for all the new entrants into the workforce since 2008. Under normal conditions, the labor force would grow by 25,000 per year. This is a conservative estimate. So, in the four years since mid-2008, the labor force would have grown by an additional 100,000.  This means that to truly bring the unemployment rate down to 5-6%, the state needs to add 200,000 new jobs.  

In the third graph is shown the year-over-year comparisons, by percent, for total employment. August 2012 was the 20th month in a row showing a positive year-over-year change in total employment.

The graph also shows the year-over-change in the labor force. Total labor force size fell 0.1 percent from August 2011 to August 201. 

Overall this report shows that job growth continues, albeit at a tepid rate.  The labor force decline signals that discouraged workers continue to be factor in calculating the unemployment rate as employment growth is not strong enough to drive substantial increases in labor force participation. 

These numbers come from the Household Survey employment data, so the size of the workforce is dependent on the number of people stating that they are actively looking for work if not employed. Discouraged workers who have stopped looking for work are excluded. On the other hand, the Household Survey picks up on small business and start-up employment that may be missed by the Establishment Survey, the other commonly-used measure of employment.

Note: This analysis reflects newly revised data released in January. In most cases, total employment was revised upward for the months of 2011.