State’s low jobless rate offers incomplete economic outlook

Statehouse Report
December 2, 2016

By Lindsay Street

More people found more jobs in October as the state’s jobless rate fell to its lowest level in 15 years, but don’t expect unfilled positions and the resulting higher wages just yet.

The state is still grappling with a disconnect between employer needs and employee skills, according to several experts.  And while the unemployment rate continues to plummet, they say it doesn’t take into account those who have dropped out of the labor force or those who are working part-time but need to work full-time.

Added to those woes, for every unfilled job in the state in October, there are nearly two unemployed persons in the labor market, according to S.C. Department of Employment and Workforce (DEW), which tracks labor in the state.

“So is everything hunky-dory with all the needs we have? Or is there still an underlying problem?” asked S.C. Small Business Chamber of Commerce CEO Frank Knapp said.  “ I think you’ll find out there is still an underlying problem,”

S.C. Chamber of Commerce CEO Ted Pitts echoed Knapp’s sentiment.

“South Carolina employers wouldn’t tell you there’s a shortage of workers,” Pitts told Statehouse Report. “There’s not been a lot of conversation that our unemployment rate is getting too low … It would be more of a conversation about ‘I need workers available that have the right skills.’”

Clemson University economics professor Scott Baier said low unemployment numbers were “typically a good thing” but you have to look beyond that singular data point and compare it with others for an accurate assessment of how the economy is faring.

The latest data

The seasonally-adjusted unemployment rate fell to 4.7 percent from 4.9 percent in September, the lowest level since March 2001. October’s decrease marks the sixth consecutive month that the unemployment rate has dropped from the 12-month high of 5.8 percent in April.

Last October, the jobless rate pinged at 5.5 percent. Since then, the number of employed people has increased 59,347, and the labor force has increased by 43,460. The number of unemployed South Carolinians fell by 15,887.

But the statewide numbers don’t reflect the disparity between some metropolitan regions experiencing sub-4 percent joblessness and a county like Orangeburg where unemployment increased to 9.3 percent.

The Charleston metropolitan area and Greenville County’s jobless rates were 3.9 percent in October. Many of the counties along the state’s I-95 corridor, where job opportunities in manufacturing are fewer, still have greater than 6 percent unemployment.

How is unemployment calculated?

The state’s unemployment is calculated via three factors: a 1,300-person survey conducted by the federal Bureau of Labor Statistics, unemployment insurance claims and employer establishments.

The selected households are surveyed for four months, rotated out for eight months, and then surveyed for four final months. For the survey, a person is counted as employed if he or she is 16 or older and worked at least one hour for pay in the last week, or at least 15 hours unpaid for a family business. To be counted as unemployed, a person must be 16 or older and have no job at all during the survey week. However, according to a DEW information sheet, that person must be “able, available and actively looking” for work.

Identifying gaps

Since the Great Recession ended, the chief complaint about using jobless rates as an indicator of recovery has been that some would-be laborers have simply “dropped out” of the market.

“The unemployment rate has been the number that people look at but there have been some odd things happening coming out of the Great Recession, there have been a lot of people dropping out of the labor force,” economist Baier said.  “The unemployment rate can be misrepresentative.”

And there is simply no way to count those would-be workers unless they return to the job hunt.

Another factor also contributes to a skewed view of the economy when looking just at unemployment numbers: the survey conducted on households considers employment to be at least one hour of paid work for the previous week, meaning that the jobless rate considers full-time and part-time or temporary employment to be the same. However, Baier said you can hedge your economic outlook by looking at employment growth industries that typically hire workers for 40-plus hours a week, like construction or professional.

The jobless rate also misses out on reflecting the state’s skills gap, which S.C. employers often bemoan. The state has workers, in terms of numbers, but employers say those workers don’t have the training and skills necessary to fill the thousands of jobs that are available.

The bigger picture

The jobless rate is only one part of the S.C. economy. Clemson’s Baier said when you read a monthly unemployment report, give it a sight-and-smell test by traveling around the state. Are people shopping? Are new businesses opening? Are things being built?

“The amount of construction, amount of traffic, the amount of people that appear to be out shopping are all clear indications that the economy is doing OK,” he said. “We’re doing probably as well as the national average —  if not better.”

Are wages up, unemployment down and jobs up?

“That’s a healthy sign for the economy,” Baier said. South Carolina appears to have two out of three of these factors (jobless rate down and jobs up) but since fourth quarter 2015, average weekly wages have fallen from $860 to $804, according to DEW.

But as the economy picks up, that might change.

“When the labor market gets tighter, firms have a harder time filling positions and they may have to offer higher wages ,” he said.  “Low unemployment is typically a good thing, because that means wages should be rising as well.”

That potential wage increase and difficulty filling positions don’t worry Baier.

“You’d be hard pressed to find an economist to say, ‘Well the unemployment rate is too low,’” Baier said. Higher wages means more local spending, which funds more jobs, he added.


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