State Employment Update

01.22.2010

The Bureau of Labor Statistics released the monthly Regional and State Employment report this morning, and the news for Indiana was mixed.  

The state’s unemployment rate increased from 9.6% to 9.9% for the month of December.  The increase in the unemployment rate coincided with an overall decline in the labor force, and an increase in the number of unemployed.   Compared to its neighbors, Indiana does have the lowest unemployment rate.  All other states are above 10%, including Kentucky at 10.7%.

A bright spot in the report is that we continue to see a deceleration of year on year employment losses.  The December report indicated that employment losses from December 2008 to December 2009 stood at a minus 103,000.   This compares to a trough of 158,000, which occurred back in May.   We expect this deceleration in losses to continue. 

The month on month loss of 7,900 is a set back from recent months however.  Indiana had actually gained jobs in August and October, and had only minor losses in September and November.   For example, the August gain of 4,700 was actually one of the highest in the entire nation.    While the loss of 7,900 marks the steepest since July, it is still considerably lower than the 15,000 average losses we were observing in during the first five months of the year.  

Looking at specific sectors, two sectors did see monthly increases.  Financial activities and professional and business services saw small gains from the previous month.  Gains in both of these sectors suggest that we continue to see a recovery.   However, as we have indicated in the past, the recovery is going to be slow.

Construction saw losses of 4,200, reversing the previous months’ gain, and these numbers are adjusted for variations that we might experience during the winter months.     Manufacturing experienced losses of 1,100, also reversing the previous month’s gain of 5,000.  Nationally, we continue to see signs of a recovery in manufacturing due to restocking of depleted inventory levels.  The big question moving beyond this phase is whether the consumer will be able to sustain that demand.   Continued elevated rates of unemployment will challenge this sustained demand.

Trade, transportation, and utilities shed an additional 2,500 jobs from Nov. to December.   Retail trade and transportation sectors will continue to face challenges as long as the consumer remains reluctant to spend.  And the additional job losses will play a major role in contributing to this reluctance.

The government sector also reported losses of 1,300.  The weak economy is impacting tax rolls throughout the state, and these depressed revenues are now beginning to show up in the form of fewer jobs in the government sector.

While there were a few bright spots in this latest report, overall it was dismal.   The report indicates that states such as Indiana and the entire nation will continue to face employment challenges.  Employment will continue to impact retail spending, a significant contributor to overall GDP, and the housing situation.     The impact of employment on retail spending and housing represents the single greatest threat to the nation's overall economic recovery.   All will continue to adversely impact state and local government revenues, suggesting additional challenges for local and state governments as we go forward.

New Claims for Unemployment

New unemployment claims unexpectedly increased by 36,000 yesterday.  This suggests that the national labor market continues to face significant head winds.    Even though we continue to see signs that the nation's economy is undergoing a recovery, the job market will continue to challenge the overall speed of that recovery.   This is precisely why we have been calling for a U- shape recovery for quite some time.

The national report also indicated that claims for unemployment also increased in Indiana.  Indiana reported an additional 1,999 new claims for unemployment.   Layoffs in automobile, construction, trade, and manufacturing industries were cited.

As we indicated in the overall Outlook for 2010, the employment situation remains the greatest threat to the overall economic recovery.  Sustained rates of unemployment will continue to exert pressures on housing and commercial real estate.  The reports out today and yesterday suggest that we still have a way to go on the employment front.

Suggestions

If you have any suggestions on future columns or research about specific industries or other economic data, please send me an email at udufrene@ius.edu.

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This information is provided by

Uric Dufrene. 

Uric Dufrene, Ph.D. holds the Sanders Chair in Business in the School of Business at Indiana University Southeast.  He conducts research on local and regional economic trends, and teaches corporate finance at the undergraduate and graduate levels.   He previously served as dean of the School of Business.