Not so fast: Recession complicates effort to measure Maine and nation’s economic recovery

The pace of Maine’s economic recovery heard an encouraging word this week from Binyamin Appelbaum, of The New York Times, but his look at the nation’s job recovery comes against a backdrop of debate among economists about the standards by which post-recession progress should be measured.

It also comes against the backdrop of election season, which has political campaigns curating their own exhibits of fact, but I’ll get to that later.

In a nutshell: Appelbaum argues the percentage of all adults with a job better indicates economic recovery from the Great Recession than the unemployment rate. That jobless rate measures only people who are looking for work — and the depth of the last recession caused a lot of people to stop looking. So, do we want a measure that counts people giving up their work search as a plus?

Glenn Mills, chief economist at the Maine Department of Labor’s Center for Workforce Research and Information, told me that aspect of the unemployment rate has for some time driven many economists to look elsewhere for insight into the recovery.

“There’s a pretty broad consensus among people in my world that because of the length and severity of this downturn that [the unemployment rate] became a less useful indicator than it was in the past,” Mills said.

That’s where the employment-to-population ratio — those employed compared with the total adult population — comes in. (I’ll refer to that ratio — expressed as employed adults per 100 adults — interchangeably as the percentage of employed adults.)

Mills said that he considers that percentage alongside other measures, but prefers using it to compare Maine to other states and to gauge the overall health of the economy, particularly as the state’s demographic trends have long indicated this would be a period of slow growth in other regards.

“Every news release that puts us at the bottom for GDP growth or any of the other things is no surprise,” Mills said.

Appelbaum points out in his blog that Maine is just one of three states that “have retraced more than half of their losses [since the start of the recession],” regarding the percentage of adults with jobs. Utah and Texas were the only other states recovered at least half of the loss since late 2007.

Maine is a bit of an anomaly among those states, he wrote, because its economy expanded less since 2009 than any state except for Connecticut. One factor is certainly that Maine is one of two states where population — the denominator in the employment-population equation — has been essentially flat in recent years.

Add to that: Mills said the state was relatively insulated to the impact of the financial crisis, compared with places like New York City where finance jobs dried up or Arizona and Nevada where the real estate market rapidly collapsed.

“We had many industries that were hit hard, but our economic structure is not such that we’re heavily weighted to any of the really bad industries that went down so much,” Mills said, noting that resurgence in industries like car manufacturing has also led areas of the country to bounce back more quickly than Maine.

In any case, as the percentage of employed adults gains attention as an economic indicator nationally and in Maine, below is an effort to put those figures in a national context.

The chart below, using Bureau of Labor Statistics data compiled by The Hamilton Project, provides a view of how the percentage of adults with jobs has changed since the recession in each state and the number of jobs that would need to be regained to reach that level again. (It does not measure that change against the lowest point of the recession, as Appelbaum does in his article.)

And here’s a look at the states ranked by the percentage of employed adults, where North Dakota ranks at the top. Maine is 17th:

As for the employment-population measure, it has critics — like Samuel Kapon and Joseph Tracy at the Federal Reserve Bank of New York — who argue it overstates problems in the country’s job market because more people are set to retire than enter the work force.

Appelbaum notes that concern as well:

A growing share of adults is too old to work, because baby boomers are aging into retirement while fewer immigrants are arriving to take their places in the work force.

While debate about how to measure the post-recession economy continues politely on, the loudest critics and champions of these statistics in the coming months will surely be politicians.

And how to weigh their words against the numbers — as economists debate how to weigh the numbers — will only become more of a challenge. It could perhaps be a theme of the 2014 election, where Democrat Mike Michaud and Independent Eliot Cutler caught early criticism from Republicans for citing incorrect job figures from a report by The Pew Charitable Trusts (note: Pew blamed the problem on an update from the Bureau of Labor Statistics; also, I refer to other figures from Pew in just a moment, so there you have it).

Continuing in that campaigning vein: After The New York Times mention came press releases from Republican Gov. Paul LePage and the Maine GOP. The latter conflated two separate figures in concluding:

The New York Times today ran a story about how Maine is one of only three states to recover more than half of the jobs lost during the recession.

As I wrote two weeks ago, Maine has in fact recovered about half of the jobs lost since the recession, but it’s not just one of three states to do so.

Pamela Prah at Stateline, funded by The Pew Charitable Trusts, wrote in January:

Only 15 states and the District of Columbia have recovered all the jobs they lost during the recession, according to the latest report from the Joint Economic Committee, which was created by Congress to review economic policy. The 15 are Colorado, Iowa, Louisiana, Massachusetts, Maryland, Minnesota, Montana, Nebraska, New York, Oklahoma, South Dakota, Texas, Utah, Vermont and West Virginia.

Maine isn’t on that list and has about 15,000 payroll jobs to make up to be back at pre-recession levels. But economists largely challenge using those figures, too, as a lone benchmark because they don’t expect many jobs shed in the recession to come back.

And there are other issues in looking at that metric, as Ben Casselman wrote at the blog FiveThirtyEight earlier this month, that mean the country’s total payroll job recovery to pre-recession levels “isn’t much to celebrate.”

There are more than 6 million more working-age Americans today than when the recession began. Adjusting for population growth, we’re still millions of jobs short of where we were 6½ years ago — and have seen hardly any jobs recovery.

So, what’s the good news and what’s the bad news? For economists, it’s not so easy to say. It’s not so hard, on the other hand, for politicians.

 

 

 

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Darren Fishell

About Darren Fishell

Darren is a Portland-based reporter for the Bangor Daily News writing about the Maine economy and business. He's interested in putting economic data in context and finding the stories behind the numbers.