The Times West Virginian

September 29, 2013

Drop in state’s unemployment rate isn’t all because of job creation

By Jessica Borders
Times West Virginian

FAIRMONT — Economic experts are forecasting a slow, continual drop in West Virginia’s unemployment rate.

The Labor Market Information unit of WorkForce West Virginia’s Research, Information and Analysis Division recently published the August 2013 labor force estimates for the state and counties.

The state’s seasonally adjusted unemployment rate went up slightly — 0.1 percent — from the previous month. The rate rose from 6.2 percent in July to 6.3 percent in August.

“The state, as a whole, experienced a very small increase in unemployment from July,” said Dr. Amy Godfrey, assistant professor of economics at Fairmont State University. “Even with this increase, West Virginia’s unemployment rate is 1 percent below the national average. It is also well below the state’s unemployment rate of 7.6 that we had last August.”

She explained that most of West Virginia’s counties went through a decrease in unemployment from July to August, but 15 counties saw their rates rise, which contributed to the slight overall increase in the state’s unemployment rate.

“However, from last August, the unemployment rate in the state has declined significantly even with the number of individuals in the labor force also declining,” Godfrey said. “Note that the unemployment rate is calculated by dividing the labor force by the population. This decline in the number of individuals in the labor force can be attributed to individuals becoming discouraged and no longer looking for work as well as individuals in our state retiring.”

She said the small rise in the unemployment rate from July to August can be connected to the decreases in jobs in the leisure and hospitality, manufacturing, and state government sectors. The drop in the unemployment rate over the year is related to the increases in employment in the mining and logging, state government, and education and health services sectors.

“The unemployment has improved some since the beginning of 2013,” said John Deskins, who became director of the West Virginia University College of Business and Economics’ Bureau of Business and Economic Research on July 1. “Without a doubt it’s good news that the unemployment rate is falling.”

He said natural resources and mining have had a great impact on the state’s employment, with the the gas industry serving as a driving force. Construction, which has seen a lot of activity associated with the oil and gas boom, is also performing well.

Almost all of the state’s industry sectors have grown over the past year, except for government, which has seen a considerable decline, Deskins said.

The fact that West Virginia’s unemployment rate stands well below the national rate, which has been the case for about five years now, is encouraging. But he cautioned that the drop in the state’s rate isn’t all because of job creation.

A big driver in the declining unemployment rate is people leaving the labor force. If an individual is unemployed and isn’t able to find a job, he or she may decide to be a stay-at-home parent, go back to school or retire early and quit looking for employment. This factor makes the unemployment rate somewhat misleading, Deskins said.

“Because of the nature of our economy in West Virginia, there’s more to it than just unemployment rate,” he said.

The state’s labor force participation rate is really low, which can partly be attributed to West Virginia’s older population that isn’t looking for jobs. But the age distribution isn’t the only component, Deskins said.

He said the good news is that the state has added jobs, but the unemployment rate is falling for both good and bad reasons.

WorkForce West Virginia’s latest report shows that the state experienced an increase of 700 unemployed residents, with total unemployment going from 48,900 in July to 49,600 in August. Total unemployment dropped 11,600 from August of last year, when the number was 61,200.

Total employment saw a decline of 1,900, going from 746,000 to 744,100 in that time frame. It also decreased 700 from last August, which was recorded at 744,800.

Total nonfarm payroll employment rose 1,700 from July to August, representing an increase of 900 jobs in the goods-producing sector and 800 jobs in the service-providing sector. It went up 7,600 compared to August of last year, showing a gain of 4,000 jobs in the service-providing sector and 3,600 jobs in the goods-producing sector.

Joe Jarvis, employment programs specialist with WorkForce West Virginia, explained that the total nonfarm payroll employment is determined based on a survey of West Virginia establishments, but doesn’t include farms and farm workers. The total employment figures, on the other hand, are established by surveying state residents who may or may not be employed in West Virginia.

“For example, I may live in Marion County, but work in Harrison County,” he said. “If this is the case, I would be counted in total employment for Marion County (my residency) but counted in the total nonfarm payroll employment of Harrison County because that is where my job is actually located.”

The not seasonally adjusted unemployment rate went down 0.1 percent, going from 6.2 percent to 6.1 percent from July to August. Jarvis said this small drop was a result of people who were working or seeking work withdrawing from the labor force to go back to school.

Data that isn’t seasonally adjusted shows the actual value, which can be affected by the season, production cycles and holidays and can fluctuate drastically, he said. Not seasonally adjusted information is often used to evaluate changes over years and to help identify shifts over time.

“By seasonally adjusting employment, statisticians attempt to adjust the influences of predictable seasonal patterns to reveal how employment and unemployment change from month to month,” Jarvis said. “The adjustment consists of either raising or lowering the actual employment reported by a certain percentage to reflect the normal seasonal increases or decreases that historically occur. Seasonally adjusting data helps users create projections and forecast more accurately. It also helps readers to not be misled by sudden fluctuations in month-to-month numbers.”

Deskins said he expects the unemployment rate in the state and nation to keep falling, with West Virginia’s rate staying below the national average. He anticipates that the state’s unemployment rate will drop steadily over the next five years, and said it will probably take until 2017 or 2018 to return to pre-recession levels.

“I believe the unemployment rate in the state and (Marion) county will continue to decline but in very small intervals,” Godfrey added. “The state is dealing with individuals becoming discouraged and giving up on looking for work. For Marion County, jobs are being filled and the economy is growing but at small increments.”

In Marion County, the seasonally adjusted unemployment rate was 5.3 percent in August, which was also the county’s rate in May. The rate went up and remained at 5.5 percent in June and July, before dropping back down, Jarvis said.

Godfrey reported that Marion County tied with Kanawha County for the state’s 10th-lowest unemployment rate. All of North Central West Virginia is experiencing low unemployment rates like Marion County. The county’s rate has decreased since July and also since August 2012, when it was 6.6 percent, and is below the state’s current average.

“Note that the labor force in Marion County has grown since last August, which is the opposite of what is occurring in the state as a whole,” she said. “This indicates that the county is adding jobs and has less individuals becoming discouraged.”

Email Jessica Borders at jborders@timeswv.com or follow her on Twitter @JBordersTWV.