Unemployment drops to 8.4 percent, but that’s not the whole story

The state announced today that the unemployment rate dropped three-tenths of a point to 8.4 percent in November, the lowest it’s been since June 2009. But behind that simple, oft-quoted statistic is a complicated calculation, based on surveys.

Gov. Dannel P. Malloy’s office issued a cautiously optimistic statement that pronounced the number “encouraging,” yet acknowledged “more needs to be done” to promote job growth.

The governor’s office noted that the number of non-farm jobs reached 1,628,700, about 7,500 more than a year ago and the biggest the job roll has been since the recovery began in January 2010.


Source: CT DOL

In a statement announcing the unemployment rate and jobs numbers, the governor’s office mentioned a half-dozen measures the administration has taken to boost jobs, an invitation to link those acts to a sinking unemployment rate.

“The state for too long sat idle, letting opportunities for job growth occur elsewhere,” Malloy said. “We can no longer afford to sit by and let that happen, and that’s why I’m specifically encouraged by the ongoing work of the state Department of Economic & Community Development (DECD), whose efforts to put the state on a path towards growth will help play a major role in the reinvention of how our state does business.”

But another way to view the Connecticut labor market is that job growth has slowed after three months of gains, even though the unemployment rate did shrink. How can the number of jobs pretty much plateau, while the unemployment rate dropped significantly?

One reason is they are based on separate surveys. They usually track each other, but not always.

Under contract with the U.S. Department of Labor, the Census Bureau gathers unemployment data from a detailed household survey.

Since the state-by-state sample is small, it is supplemented by what Andrew Condon, the research chief for the state DOL, calls “a pretty complicated, black-box” calculation.

It is good for trends, but not so good for plotting month-to-month changes, he said Monday.

“Trying to interpret a monthly number is hazardous,” Condon said.

The total jobs number is gleaned from a survey of about 3,000 businesses in Connecticut, with an effort to make the sample representative of the various business sectors.

A representative sample is crucial, given the volatility of the labor market. Malloy is fond of referring to Connecticut’s job market as being stagnant for 22 years, which is true when measured by overall net job growth.

But among various “supersectors” tracked by the state, there are huge gainers and losers. And the gainers and losers vary, depending on whether the comparison is month to month or year to year.

Take the construction trade, a relatively small supersector in Connecticut with fewer than 50,000 jobs.

From November 2010 to November 2011, there was modest good news: employment grew by 600 jobs to 49,300.  But from month to month, the picture is less rosy: the total number of construction jobs shrank by 1,600 from October 2011 to November 2011.

unemployment rate

Source: CT DOL

Manufacturing, a sector more than three times the size of construction, is up 300 jobs over last month, but still down 800 jobs over the year.

Leisure and hospitality, with 137,800 jobs, is up 800 from October, but unchanged over the year. A further complication is that types of businesses within the sector performed differently: Over the year, a small gain in restaurants and hotels was offset by declines in arts, entertainment and recreation.

The largest of the supersectors is education and health services at 316,700 jobs. Since November 2010, it has added the most jobs: 4,300. But the gains are not uniform. Private education declined by 400 jobs, while health care and social assistance added 4,700 jobs.

Confusing? Let’s back up a bit and look at the bigger picture: How does the state measure up against pre-recession Connecticut?

Connecticut lost 119,200 non-farm jobs in the recession, which ran from March 2008 to January 2010. With the latest number, the state has recovered 35,200 jobs, not quite 30 percent of the total.

The DOL’s full monthly report is available online.