This week, the Vermont Labor Department reported the state unemployment rate had gone up for a second straight month. It rose to 3.7 percent in July.
But monthly jobless numbers tell only part of the story. There is good news in the latest report.
The monthly unemployment figure is a measure of people in the labor force who don’t have jobs but are actively looking for work.
When it goes down, that’s usually seen as a positive sign, but there’s more than one way for that to happen.
That’s because the rate can go down simply because people are giving up on finding jobs and leaving the labor force, so they are no longer counted in the monthly tally of the unemployed.
In that case a drop in unemployment rate is not necessarily good news.
“There are also times when a rising unemployment rate can be good news if what it means is more people have started to look again,” says Jack Hoffman is Senior Policy Analyst with the Public Assets Institute.
Hoffman says the good news behind the unemployment numbers is that this year, there have been five months when the labor force increased, including last month.
Before this year there were 25 straight months of people dropping out of the labor force.
“It’s important for the economy to have more working-age people working,” says Hoffman. “There’s more economic activity, it generates more tax revenue. It’s just better to have more people working.”
Not surprisingly, an increase in the labor force is often a reflection of the fact that more jobs are available.
Economist, Tom Kavet of Kavet, Rockler and Associates, which does economic analysis for the legislature, says discouraged workers who have dropped out of the labor force may not look at employment numbers, but they know when jobs are more plentiful.
“They see their friend getting a job, they see more help wanted signs out and then they feel like, ‘alright this isn’t a futile exercise, I’ll go back and apply for a few more jobs,’ and they get one,” says Kavet.
Kavet expects labor force participation to increase over the next year or two. Given the fact it's tied to job growth it will likely be a gradual process.
Even with this year’s increases there are nearly 11,000 fewer people in the labor force than at its peak in March 2009.
Just as the monthly unemployment figures can be deceptive on a statewide level, countywide figures can be misleading.
The July Economic Review and Revenue Forecast produced for the legislature by Kavet’s firm shows Orleans County with the highest unemployment rate in the state.
Despite that, the county is outpacing others in both labor force and job growth.
“There’s real job growth there and a situation we haven’t seen in 35 years,” says Kavet.
Compare Orleans County Orange and Windsor Counties, which Kavet says have much lower unemployment but virtually no job growth since the recession.
It illustrates why monthly jobless numbers tell only part of the story.
By The Numbers: What's Behind the Monthly Unemployment Report
