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Is Bragging on Job Creation Warranted?

By Thomas Scovill
Madison, Alabama

In urging voters to support more bond money for economic incentives for business to locate or expand in Alabama, Governor Bentley has bragged that he has created over 26,000 jobs since taking office in January 2011. This is a laudable accomplishment, but how does it compare to the job growth that Alabama needs?

Sadly, as shown in the data below from the Alabama Department of Labor, during Governor Bentley’s tenure Alabama has lost over 21,000 jobs.

This is more than 1,000 for each month of the Bentley administration. And the labor force has shrunk by more than 48,000 or more than 2,400 per month.

April 2010 January 2011 September 2012
a.  Labor force (row b + row c) 2,211,657            2,203,287   2,154,856
b.  Employed (people with jobs)       2,000,309            1,998,201   1,977,008
c.  Unemployed(people without jobs but looking for work, e.g., drawing unemployment benefits)          211,348              205,086      177,848
d.  Unemployment Rate (U3)     (100 * row c / row a) 9.6 % 9.3 % 8.3 %
      Reference: http://www2.labor.alabama.gov/LAUS/default.aspx

April 2010 is the first employment report using 2010 census data, Governor Bentley took office in January 2011, and September 2012 is the most recent period reported.

The data show since April 2010 the U3 unemployment rate has decreased and that the number of people employed and unemployed have decreased as well. The size of the labor force has also decreased because for this report it is defined by the government as the sum of employed and unemployed. Its hard to be pleased by a smaller unemployment rate when its based on fewer people working and a smaller labor force. This trend existed before Governor Bentley took office and it has continued since then.

The problem is larger than the numbers in the table show. The U3 unemployment rate is not especially useful in the current economy because it does not account for a large number of persons who want jobs but have stopped looking for work or who have taken part time employment because they cannot find full time jobs. To understand the magnitude of the job problem in Alabama we need to know something about how many people are not working that want to.

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By the government definition, in April 2010 there were over 2.2 million people in the Alabama labor force (working plus not working but looking for work). There is no reason not to think that just about as many people want to work today. Of course some people have retired or left the state, but these are offset by new workers moving into the state or entering the work force after finishing school.

If in September of 2012 we had a labor force of the same size as April 2010, we would have nearly 56,000 more people without jobs, or total jobless of about 235,000 and an unemployment rate of 10.5 percent. And this understates the problem because in April 2010 there were many jobless people not included in the data for that month, e.g., people who had stopped looking for work or who had taken part time employment because they could not find full time jobs. The real size of the April 2010 labor force would have been greater than 2. 2 million (but not as large the population 3.0 million between age 18 to 65 reported in the 2010 census).

To get at this problem the government also reports a U6 unemployment rate which considers everyone working, not working but looking, discouraged and not looking, and part time workers who want full time jobs. For the 12 months ending in September, the average U6 rate for Alabama was 13.6 percent (U3 is currently 8.3 percent). Unwrapping these numbers suggests real unemployment in Alabama may be more than 100,000 higher than the U3 unemployment number and that in September 2012 as many as 278,000 people in Alabama who wanted to work did not have jobs.

However you look at it, Alabama has a jobs problem that is much bigger than indicated by the monthly unemployment reports that receive so much attention in the media. And the problem is getting worse.

Of course, the larger solution to firing up the economy requires federal action, but with President Obama’s reelection there is little to look forward to in that direction.  And the government of Alabama is not doing enough to be noticed statistically. With respect to jobs, we cannot afford an Alabama government that merely keeps doing what it has been doing. It is time for bold leadership.

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