According to Fox 21 online, Wisconsin unemployment rates fell for the month of August 2009. Is the fact that Wisconsin unemployment rates fell indicative that the recession tide is turning?
Don’t count on it. Call me a skeptic, call me pessimistic – call me whatever you want. The fact of the matter is I don’t think that a decline in Wisconsin unemployment – or any other state’s unemployment level for that matter – indicates that our overall economy is strengthening.
Don’t get me wrong. Declining Wisconsin unemployment levels is a welcomed piece of good news. But – is it? To know if declining Wisconsin unemployment is really as good as it sounds, you need to know how unemployment rates are calculated.
According to the US Bureau of Labor Statistics, unemployed individuals counted in calculating the unemployment rate are:
Persons are classified as unemployed if they do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work. Actively looking for work may consist of any of the following activities:
An employer directly or having a job interview
A public or private employment agency
Friends or relatives
A school or university employment center
Sending out resumes or filling out applications
Placing or answering advertisements
Checking union or professional registers
Some other means of active job search
This leads me to question how Wisconsin unemployment rates declined. Is it because of an increase in available jobs, or is it because some individuals stopped actively looking for work. If people stopped looking for work, that would make the official “unemployment” rate decrease.
While it is entirely possible that declining Wisconsin unemployment is because the local economy is thriving, it’s also entirely possible that the declining Wisconsin unemployment rate is because people aren’t looking for jobs. With a national net job loss of 216,000 jobs in the month of August 2009 reported by the US Bureau of Labor Statistics, I think that the declining Wisconsin unemployment rate is due more to the lack of job searching than the creation of jobs.
Before getting excited about promising job data, look at the situation from all different angles. While it would be nice if unemployment rates came with a transparent explanation, the chances of that happening any time soon are slim to none.