Getting a handle on ‘unemployment’

Underemployed workers are not merely individuals who are not earning as much as they would have liked to; rather, they are individuals who are unable to find employment in jobs that match their skills and availability, and as a result are forced to survive on reduced earnings.

Noga O'Connor
Noga O'Connor

One effective way to gauge the effect of the recession on the state’s economy is tracking the state’s unemployment rate. But how accurate is the unemployment rate? The official rate for 2009 was 6.3 percent — does this mean that 93.7 percent of the labor force in Iowa was gainfully employed?

Not exactly.

The official rate only accounts for those actively searching for work. The Bureau of Labor Statistics offers annual averages for several broader measures. If we include, for example, those who want to work but stopped looking for work, the 2009 figure rises to 7.1 percent.

And what about underemployed workers, such as part-time employees who would have like to work full time, but whose hours were cut back or who are unable to find full-time jobs? If we add those who are involuntarily part-time, the 2009 unemployment rate rises to 11.7 percent.

To complicate things further, even the figure of 11.7 percent can be viewed as conservative. The Bureau of Labor Statistics has no measure of the number of Iowans that are working in jobs that are below their education, skill or experience levels — another form of underemployment.

These examples — involuntary part-time workers and workers who are employed below their skills — are of non-unemployment labor market behaviors that should not be overlooked when estimating the impact of the recession on the state’s economy.

Underemployed workers are not merely individuals who are not earning as much as they would have liked to; rather, they are individuals who are unable to find employment in jobs that match their skills and availability, and as a result are forced to survive on reduced earnings. In the case of over-educated workers, they are also not seeing the earning premiums that are needed to offset the financial investment in higher education.

Underemployed workers have a distinct effect on the labor market. Over-educated workers are taking jobs from those with less education, as there are still not enough jobs for everybody. As employers gravitate toward the more-educated workers, over-education at the top is accompanied by unemployment at the bottom.

Posted by Noga O’Connor, Research Associate

Jobs in Iowa: Partly Sunny with Scattered Showers

The labor force grew by 2,900 workers last month. This could be a sign of increased confidence in the market, as more Iowans decide looking for work is a worthwhile endeavor.

Christine Ralston

I cannot wait for the day when The Iowa Policy Project’s monthly JobWatch headline reads unequivocally, “Nonfarm Jobs Increase for 12th Consecutive Month and Unemployment Remains Steady at 3 Percent.”

Alas, the forecast is still a bit mixed: Iowa is certainly making headway in nonfarm jobs numbers, but we continue to see high unemployment rates.

The good news is pretty good. The number of nonfarm jobs in Iowa increased by 7,300 to 1,474,200 in March. This increase is heartening, though we do have a ways to go. Iowa is still down 16,200 jobs compared to last March.

Then there is that other number: the unemployment rate. The unemployment rate edged upward to 6.8 percent, from 6.7 percent in February and well above the 5.5 percent we saw this time last year.  The last time the unemployment rate reached 6.8 percent was July 1986, when the state was recovering from the chronically high unemployment of the early 1980s.

As is usually the case, Iowans are fortunate to be better off in terms of unemployment than the rest of the nation. The national unemployment rate remained steady in March at 9.7 percent.

But there are other clues in these numbers. The labor force grew by 2,900 workers last month and is up by 12,700 over March 2009. This could be a sign of increased confidence in the market, as more Iowans decide looking for work is a worthwhile endeavor.

March marks the third consecutive one-month improvement in nonfarm jobs, and the sixth in the last eight months. Iowa has posted an average gain of 5,100 jobs per month for the last 3 months. We are currently down 54,000 jobs from last decade’s high point (1,528,2000 in November 2007). Continuing this trend would be great… and would start to push us closer to that headline I can’t wait to type.

Posted by Christine Ralston

Federal stimulus impacts on Iowa

Here is a look at some of the impacts of the American Recovery & Reinvestment Act in Iowa:

FMAP (Medicaid percentage increase) FY2009-11 — $550.0 million

State Fiscal Stabilization (Flexible block grant) — $ 86.0 million

Education/ Child Care:

State Fiscal Stabilization fund (education) FY2009-10$386.4 million

Title 1 (supplemental support) — $65.3 million

IDEA (special education state grants)—$120.9 million

Child Care & Development Block Grant FY2009-10 — $18.1 million

Child Support FY2009-10 — $27.2 million

Unemployment Insurance (UI):

UI Benefit Increase ($25/week) — 212,422 recipients

UI Emergency Extension to 12/09 — 27,600 new beneficiaries

Employment Services FY09:

Youth Services — $5.2 million

Dislocated Workers — $6.3 million

Adult Activities — $1.6 million

Making Work Pay Credit — 1,110,000 taxpayers

Food Stamps FY2009-13:

Benefit Increase — $161 million and 279,000 recipients

Administration — $2.7 million

Child Tax Credit (tax year 2009 — lowers threshold to make credit available to families at $3,000 earnings):

Number helped lowering $8,500 threshold — 133,000

Number helped lowering $12,550 threshold — 156,000

Emergency Shelter Grant Pgm FY091 Add’l Funds — $16.8 million and 4,500 households