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State Unemployment Rate Falls, But Jobs Still Lagging

By BEN ZIMMER

June 11, 2012

Hearing Connecticut politicians speak about the state's jobs outlook makes my head spin.

As Gov. Dannel P. Malloy tells it, Connecticut is on the road to recovery and economic revival. He cites the state's 7.7 percent unemployment rate — its lowest in more than three years and below the national rate of 8.1 percent. He doesn't mention that in April the state lost roughly 2,000 jobs and now has fewer jobs than a year ago.

What gives? Is Connecticut's economy improving or continuing to sputter? Unfortunately, it is continuing to sputter.

There's an old saying that there are lies, damn lies and statistics. When it comes to understanding what is going on in Connecticut's economy, the unemployment rate is a statistic that lies.

The reason is that the unemployment rate includes only jobless Connecticut residents who have actively looked for a job in the last four weeks. Those who have given up trying to find a job are excluded. Since February 2011, the number of these people and their woe have increased dramatically. If those who have stopped looking for work but still want to work were included in the unemployment rate, the rate would be 8.1 percent.

Moreover, for the purposes of calculating the unemployment rate, the Department of Labor counts several categories of people as "employed" who may not consider themselves employed — for instance, unpaid family workers. Since April 2008, these workers have increased from 3 percent to 7 percent of the workforce. Many of them don't consider themselves employed because they aren't earning income. If the net increase since 2008 of these questionably defined "employed" were excluded from the employment base, the unemployment rate in Connecticut would soar to over 11 percent.

The employment statistic that best reflects what is actually going on in Connecticut's economy is not the unemployment rate but the number of people employed in the state. And this statistic paints a dismal picture.

The governor's office brags about having created 16,000 jobs since his election. But this is only 13 percent of the roughly 115,000 jobs Connecticut lost since the economy turned down in 2008. This pace of recovery is well below that of the U.S. economy as a whole during the same period. The U.S. has gained 2.7 million jobs since November 2010, about 30 percent of the 9 million jobs lost during the recession.

The slow pace of Connecticut's recovery is hardly surprising given the incoherent economic and jobs policies emanating from Hartford. Gov. Malloy touts his deals in which employers are paid to keep or bring jobs to the state — the First Five program and Jackson Laboratory, for example. But for everyone other than these lucky companies, Connecticut is an even more difficult place to do business and employ workers than before the governor was elected.

Gov. Malloy's record tax increases, which fell most heavily on those earning between $50,000 and $100,000 per year, have increased the cost of employing Connecticut residents. The legislature has passed new mandates and regulations adding to Connecticut's already inflexible business environment. And the governor's infrastructure and human capital expenditures are not investments for which the benefits exceed the costs. Rather, they require the state to borrow hundreds of millions of dollars with little chance of paying back their costs through new economic activity.

As a result, the state's long-term debt continues to grow, making businesses ever more reluctant to invest in Connecticut when they can expand their companies more safely elsewhere.

Until we address the underlying causes of Connecticut's employment stagnation, we can expect more of the same — no real job growth while our politicians keep telling us everything is going just fine.

Ben Zimmer is the executive director of the Connecticut Policy Institute, a nonpartisan research institute on Connecticut public policy founded by Tom Foley, a former Republican candidate for governor.