April 9, 2014
By Jonathan Drapkin / For the Times Herald-Record
One of the most highly reported numbers about the state of the economy has always been the unemployment rate.
It is the gold standard of economic measures. Or maybe I should say “was.” For some very legitimate reasons, the use of the unemployment rate to take the pulse of the economy is now losing ground.
The latest blow to the reliability of the unemployment rate came from Janet Yellen last month as she presided over her first policy meeting as chair of the Federal Reserve.
Yellen, in sum, said the Fed was not going to rely so much on the unemployment rate as it would on a range of indicators that were expected to give a more accurate view of the economy’s health.
To those who’ve watched the use of jobless rates to paint an unduly rosy (or alternately, an unnecessarily pessimistic) picture of the economy, the move toward other indicators is welcome.
And it’s an important move for the Hudson Valley. For months, at Pattern for Progress, we have been saying that it is crucial to acknowledge that, despite a declining unemployment rate, there are substantially fewer people working in the region than there were prior to the Great Recession.
For instance, according to the state Department of Labor, in December 2007, there were 941,200 nonfarm jobs in the Hudson Valley, while in December 2013, there were 912,000 nonfarm jobs in the region. That’s a loss of 29,200 jobs.
The national and local media, including the Times Herald-Record, deserve kudos for helping to unmask the perils of the unemployment rate.
Back in January, the media reported an average 2 percent decline in the region’s jobless rate, which is huge. The next day, however, the Record and other media ran stories that examined the overall loss of jobs.
Numbers can mislead
When the rate goes down, we all have a tendency to say, “This is good.” But this number can be very misleading unless we examine the workforce in full — the number of employed, unemployed and those who’ve simply stopped looking — to see the trends.
In fairness, this works both ways: When the unemployment rate goes up, the workforce could be expanding and therefore one number looks bad, but things are actually improving.
No one, including Pattern, wants to be the bearer of bad news, but a rush to jump for joy over the decline in the rate needs to be tempered by the sobering news that there is also a decline in the number of people working. One of the reasons we focus on these kinds of numbers is to get a full sense of whether things are getting better or not.
A full set of indicators — like wage rates and employment by demographic unit — also helps elected officials decide where precious tax dollars should be spent.
As my old professor from the Bureau of Labor Statistics said when I was pursuing my master’s in economics, “I know numbers are boring, but they tell a story. You have to decide whether you want to read the whole story.”
The unfolding story of what we hope will be an economic recovery is a fascinating one for the region. It tells us one thing: We still have work to do.
Jonathan Drapkin is the president and CEO of Hudson Valley Pattern for Progress, a nonprofit research, policy and planning group that seeks regional solutions to increase the vitality of the region. He can be reached at .
