What Jobless Numbers Can - and Can't - Tell Us
Forecasting economic recovery is art blended with science
The Connecticut Department of Labor says economic recovery is taking longer than expected because of the lingering effects of a balance sheet recession – the most severe of its kind. Sectors saw steep reductions in their networth and consumers are still paying off personal debt. It’s a delicate environment where any negative trends could tip the apple cart, say economists at a panel discussion at the Labor Department. WNPR’s Sujata Srinivasan reports.
There’s a lot of camaraderie and back-and-forth banter as economists across the state try to fill some gaps and offer perspectives that their colleagues at the Department of Labor might have missed. The panel meets every year to discuss current trends and changes that will affect the employment and occupational demand forecasts – key indicators of where the local economy is headed. Senior Labor Department economist Daniel Kennedy says though the projections are based on statistics, it’s not all about numbers.
“Forecasting is both an art and a science. And that’s knowing something that the models can’t estimate because they’re based on estimating historical data. And if you see something coming down the track like a switch track up ahead that the model doesn’t see because it isn’t there yet, then you would have to input that into the model by adjusting the forecast based on your judgment.”
The forecasting model starts off with a baseline projection and inputs include national employment and economic growth numbers. Those figures are starting to look up, but it doesn’t mean that the economy is out of the woods yet, says Steven Lanza, professor at the University of Connecticut.
“We gained jobs last year. The economy is going to want to move in a direction of adding to that job growth. But at the same time, we’ve got those other forces holding the economy back.”
Some of those forces are the effects of the sequester on employment; the impact of the economic crisis in Europe – a key trading partner; payroll tax increases and healthcare policies impacting small businesses. Recovery in the housing market would be a big plus. Also important are migration and out-migration patterns, says Susan Coleman, professor at the University of Hartford.
“Migration patterns are interesting because they help to paint the picture on how your workforce and how your employment picture and also how the wealth of the state is changing.”
For example, if more baby boomers choose to retire out of state, or graduating students take up jobs elsewhere, and if more – or less – high-skilled workers relocate to Connecticut, the forecasting model will be more accurate if it includes this information. Another key factor: healthcare. Peter Gioia, economist at the Connecticut Business & Industry Association.
“They have to take into account whether or not Obama Care may have some impact, particularly on companies that are just below 50 employees and if there may be changes there because of that.”
Not all panelists are economists. Orlando Rodriguez is a senior policy fellow at Connecticut Voices for Children. He wants the department to include the kinds of jobs gained versus the kinds of jobs lost by region. He’s concerned that if more high paying jobs are lost, it would affect the state’s income tax base. Connecticut Voices focuses on family healthcare and children’s education, and depends on state funding.
“What we really need to do is look at the details both geographically and by income, and get away from statewide averages because that masks too much that’s going on underneath.”
There’s a rather lively discussion on the volatility of the monthly unemployment numbers. Like other states, Connecticut is seeing large benchmark revisions after the payroll survey and statistical estimate of job counts was centralized by the U.S. Bureau of Labor Statistics. Peter Gioia, for instance, wants to know if the department could issue an addendum factoring in regional variations, which would reduce the volatility. But Daniel Kennedy says there’s a hitch.
“The problem is that we’d need the resources. And you know with the federal budget situation, we’re not about to get resources for that. That would have to come from the state. And the state’s budget resources are not in any condition either.”
The solution? To take the monthly job numbers with a pinch of salt and in conjunction with other economic variables. Kennedy says it’s a good idea to wait for the quarterly figures to get a better picture of what’s really going on.
For WNPR, I’m Sujata Srinivasan