Now, the Answer to the "12,000 Added Jobs But Same Unemployment Rate?" Question

As much as I like to rail about government bureaucracy–come on, who doesn’t?–I often see signs that our government is populated by hard-working, competent people. (Whoops, there go our eastern Washington readers.)

Yesterday I wondered aloud at the seeming discrepancy between a report that the state added 12,000 jobs in January, and another report that indicated our unemployment rate had either stayed the same or edged up imperceptibly.

Sheryl Hutchison, the state’s Employment Security Department communications director, wrote in to explain, in refreshingly clear terms:

On the surface, it seems illogical that the unemployment rate could increase at the same time jobs are increasing. The answer lies in the definition of “labor force.”

As the economy starts to improve and more jobs become available, discouraged workers will start looking for work again–thus increasing the total size of the work force. Since these individuals haven’t found a job yet, it causes the unemployment rate to increase.

For several months now, our economists have been predicting this phenomenon would occur as the economy starts to pick up–and it appears that it’s starting to happen. As illogical as it seems, it’s actually a positive sign that the economy is starting to move again.

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The question of whether an unemployment rate is what it says it is, if it doesn’t count all the ready-to-work unemployed, aside, at least it makes sense. If and when the job market starts to get back to its feet, the news that people are hiring will draw thousands back to the labor force. The Seattle Times economy reporter Jon Talton vouches for this reading in his post today:

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As to the January employment report showing that Washington state added more than 12,000 net new jobs, the first gain since 2008…we’ll see. Washington has been hurt less than other states by the Great Recession. Still, like every state, we face a problem with underemployment and discouraged workers, and it will take some time even to recover the lost ground. By April, we may see a trend.

In an email, Talton said, “Yesterday’s announcement is better than the opposite and might mean a turnaround, albeit a slight and slow one.” But he again added that the value of these metrics is largely for longer term posterity–a single month’s results don’t signal much. Except that, of course, any added jobs is better than none.