FOR IMMEDIATE RELEASE
November 25, 2015
RI Employment Picture Tainted by Dwindling Labor Force
Center to publish new quarterly jobs index in 2016
Providence, RI — The traditional monthly unemployment rate, widely reported by most news outlets, often paints an incomplete and misleading snapshot of the true jobs and economic picture in the state, according to a monthly analysis by the nonpartisan Rhode Island Center for Freedom & Prosperity.
While the U.S. Bureau of Labor Statistics (BLS) measures six levels of unemployment, U1 thru U6, it is only the U3 unemployment rate that is regularly cited: U3 narrowly measures the number of unemployed people as a percentage of the labor force. However, U3 is largely dependent on labor force size; so when the labor force drops, usually considered a negative economic indicator, it generally produces a lower U3 unemployment rate, which is conversely seen as a positive.
For instance, in October of 2015, Rhode Island’s unemployment rate dropped, from 5.4% in September, to 5.3% in October. But, as has often been the case, that apparent positive outcome is the result of two negative trends; employment levels actually dropped (by 630 people) and 1,636 Rhode Islanders gave up looking for work, thus shrinking the labor force.
“The falling unemployment rate is the one statistic that Rhode Island politicians like to cite as evidence of economic progress,” said Research Director Justin Katz, “but two losses don’t make a gain. If our state’s poor business climate hadn’t driven so many people out of its labor force since the recession, unemployment would never have dipped below 8%, and it would be on its way back up, right now.”
Among the specific findings in the October analysis:
- RI’s unemployment rate would be 8.2% if the state had maintained the same size labor force at it had before the recent recession
- RI lags far behind its MA and CT neighbors in terms of recovering its employment and labor force levels since before the recent recession
For graphs, charts and a more detailed analysis of Rhode Island’s October employment status click here.
In order to account for this contradiction and to provide Rhode Islanders with a broader and more accurate picture of the state’s actual jobs market, in Q1 of 2016, the Center plans to publish a quarterly Jobs Opportunity Index which will incorporate all six BLS Unemployment categories. The other BLS U-categories more broadly take into account such measurements as underemployed and discouraged workers; people who are willing to work, but for whatever reason, have not looked for work or who are working only on a part-time basis – yet who do not fit the narrow U3 definition of “unemployed”.
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About the Center
The nonpartisan RI Center for Freedom & Prosperity is Rhode Island’s premiere free-enterprise research and advocacy organization. The mission of the 501-C-3 nonprofit organization is to return government to the people by opposing special-interest politics and advancing proven free-market solutions that can transform lives by restoring economic competitiveness, increasing educational opportunities, and protecting individual freedoms.