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Regional economists question employment figures
BLS methodology change leads to 2% jump in unemployment
By Matthew French
Staff Writer
When the Bureau of Labor Statistics announced its January unemployment figures, people in the greater Charleston area found the population of workers had shrunk while the number of unemployed people had simultaneously grown.
Economists indicate this result causes a ballooning of unemployment figures. And that, say area experts, is what happened.
For the last half of 2004, the Charleston/North Charleston area had a fairly steady unemployment rate of about 4.6% on a month-by-month basis, according to data provided by the Bureau of Labor Statistics, a division of the U.S. Labor Department. In January, the unemployment rate jumped to more than 6%, based largely on new data collected by the BLS.
But area economists who keep an eye on the economic health of the Lowcountry say the new figures are probably inaccurate and want an explanation why the federal government made the changes.
“The unemployment numbers are nonsense,” says Al Parish, director of the Center for Economic Forecasting at Charleston Southern University. “They came up with a new methodology for reaching their numbers, and they really messed it up.”
Parish says the bureau did what it calls a re-benchmarking of the 2000 census data to determine the total number of employed people in the region and decided that it had been overestimating Charleston’s working population for years.
“The BLS shows local unemployment jumped 2 percent, and 40,000 people just disappeared from the labor force; not 40,000 jobs, mind you, but 40,000
people,” he says.
Jacki Renegar, the former director of the Center for Business Research with the Charleston Metro Chamber of Commerce and currently the vice president with Parish Renegar Associates, an economic and market research consulting firm, says the numbers the BLS used do not correlate with market research done in the area.
Data from the BLS shows the labor force, which had been calculated between 305,000 and 317,000 for the last six months of 2004, was now being estimated at between 272,000 and 277,000.
“BLS says they have been overestimating the number of employed persons in the tri-county area, so now, 30,000 to 40,000 people don’t exist,” Renegar says. “They say they were overestimating statistically the number of people who are employed in the region and have now adjusted it downward. That (reduction) represents a huge adjustment, and those numbers don’t look like they’re matching our region’s growth rate.”
At the same time that it was eliminating more than 30,000 people from the area’s workforce, the BLS numbers indicate more than 2,000 additional people were unemployed. The total number of unemployed people from the region for the last four months of 2004 hovered between 14,100 and 14,300. But the January figures indicate more than 16,600 people in the Lowcountry were unemployed.
“Every other economic indicator we have—building permits, home sales, car sales, electricity registration—suggest those numbers are wrong.” Parish says. “Existing home sales are up 27 percent year over year; that’s another new record. How can our unemployment figures be up by 2 percent?”
Parish says that a sudden jump in unemployment by 2% for this region would mean a loss of about 6,000 net jobs.
“If we had over 6 percent unemployment, it would be comparably easy for businesses to find qualified help,” he says. “I haven’t heard anybody say in the past several months that it’s gotten any easier finding qualified help. If unemployment increased by 2 percent, we would all be hearing about the pain in the business community, and we would be able to see the economic impact. If that happened at the national level, people would be crying about a Depression.”
The BLS says the new methodology “represents a vast improvement in the way government measures and tracks various components of the labor force.”
The commission recognizes that the new methodology “changed substantially” some data at the regional level.
“This is not a state problem, and it’s certainly not a local problem,” Parish says. “This is a federal problem.”
Business perception
Higher unemployment numbers tend to unnerve the public and can adversely impact consumer confidence. But the business community keeps a close eye on the numbers because they can mean the difference between growth and stagnation.
“With higher unemployment, a region could look either more or less attractive,” Renegar says. “If the number is too high, it makes the region look economically challenged and like you don’t have enough of a job base to employ everybody who wants a job. If the unemployment figure is too low, companies looking to come or existing companies looking to grow will say that the market is too tight and that they will either have to move their company elsewhere or import labor from outside the region. From a business perspective, you want to run unemployment somewhere in the middle.”
Both Renegar and Parish are confident that the problem will correct itself and say the preliminary March figures bear that out. The prospective numbers for March unemployment, released earlier this month, showed a dip in unemployment with the preliminary figures at 5.6%, or about 15,400 unemployed people in the region.
“But we now have a very difficult time explaining to people a jump from 4.6 to 6.5 percent unemployment,” Parish says. “You tell them that BLS changed their methodology, but all they see are the numbers.”
Data requires tweaking
Parish points to the large drop in unemployment from February to March (6.3% to 5.6%) as an indicator that the data will require tweaking before it can be considered accurate.
“We simply don’t have a jump of six- or seven-tenths of a percent, not here,” he says. “They see those kind of figures in the Grand Strand, where their employment tends to be very seasonal.”
Renegar says her concern is outside businesses will look at the sudden jump in unemployment numbers and get the wrong impression of the regional economy, which is, by most accounts, very strong.
“I thought the jump in January made us look like we were more on the economically challenged side, but we’re not,” she says. “We’ve done very well.”
And the Lowcountry isn’t alone in its concern over the new data used for collecting the unemployment figures. Both Atlanta and Houston face similar problems, according to Parish.
“According to census figures, Atlanta has added 500,000 people since the 2000 census was taken; but over the same time, they’ve added virtually no jobs,” Parish says. “So I figure 500,000 people must have been stuck in traffic around (Interstate) 285 for the past five years.”
Both Renegar and Parish plan to meet with BLS staffers separately in May and June to determine how the changes were made and whether they represent a fair depiction of the region’s workers.
“I want to meet with the staff that came up with these numbers because I have a lot of questions for them. I don’t think we can demand a recount, but these numbers have to be better explained,” Renegar says. “Hopefully, I can get more info from BLS from that meeting. Then I’ll either come back with more answers, or I’ll come back more confused.”
Matthew French is a staff writer for the Business Journal. E-mail him at mfrench@crbj.com.
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