Go figure: The meaning behind Oregon's unemployment

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Wednesday, February 01, 2006
By Brandon Sawyer

Oregon’s unemployment rate — a persistent sore spot for politicians and business groups — was the nation’s highest or second-highest state rate for 43 consecutive months (April 2001 to October 2004) according to Art Ayre, state employment economist. frictional, cyclical and structural. Ayre says all three have converged to drive up Oregon’s rate during and after the recession of 2001. The most common component, frictional, includes people who are attempting to change careers, who have recently moved to the state without a job, who live in isolated rural areas Lately, the rate has trended down toward what some economists have viewed as an “optimal rate,” about 5.5%. At 5.7% in December, it remains nearly a percentage point above the national rate of 4.9%. As of November, it is the eighth-highest rate among the 50 states and the District of Columbia. Economists identify three unemployment components — where job searches take longer and those who work in highly seasonal industries such as agriculture and food processing. The state has a relatively large proportion of people meeting such criteria. Oregon having the second-highest state-mandated minimum wage in the nation could also contribute to a frictional effect, both by drawing more job candidates and discouraging additional hiring. Cyclical unemployment may weigh heavy on Oregon because some of its major industries, such as wood products and other durable goods, expand and contract faster than others in response to economic shifts. The downturn in high-tech industries about fi ve years ago severely tarnished the state’s employment picture. High tech will probably not recover to where it was in the late ’90s, says Ayre, but it should remain flat over the next 10 years. However, select industries, such as software publishing, seem to be making a comeback. The fi nal component, structural unemployment, includes the loss of jobs to cheaper labor overseas and the automation of industries that previously provided steady jobs. Oregon suffered such structural changes in its timber industry during the early ’80s, and like much of the United States, it has lost a signifi cant number of manufacturing jobs during the past decade. Regulation of the fishing industry and the rise in electricity prices for aluminum plants has also displaced workers in the region.

 


How it’s calculated

The U.S. Census Bureau conducts the monthly Current Population Survey, which uses probability sampling to estimate national numbers of employed and unemployed persons. State-level data are combined with a time series model to produce state estimates. The survey categorizes respondents as follows:

Employed persons

  • Were employed but did not work due to vacation, maternity leave, illness, inclement weather, childcare problems, labor disputes, etc.
  • Worked at least one hour as paid employees during the week surveyed or in their own business/profession/farm or at least 15 hours as unpaid employees of a family-operated business.

Unemployed persons

  • Had no employment during the week surveyed.
  • Were available to work.
  • Made specific eff orts to find employment during the last four weeks, or were waiting to be recalled to a job from which they had been laid off.

Excluded persons

  • Under 16 years of age.
  • Only performed volunteer work.
  • Worked only in own home doing housework, home repairs or caring for own children/elders.
  • On active duty in the armed forces.
  • In prisons, mental facilities, nursing homes, etc.
  • Nonworking students and retirees.
  • Disabled and unable to work.
  • Only looked for work passively by reading help-wanted ads or taking a job training class.
  • Discouraged workers” who believe there are no jobs available for them.

The Census Bureau processes the data, which is analyzed and published by the U.S. Bureau of Labor Statistics.

The unemployment rate is calculated as follows:

  1. Total employed + total unemployed = labor force.
  2. Total unemployed ÷ labor force = unemployment rate.
  3. Rate is adjusted to remove eff ects of seasonal changes such as weather, holidays and school schedules.

For the latest month available, December, here is how the calculations look for Oregon:

  1. 1,748,313 + 101,639 = 1,849,952
  2. 101,639 ÷ 1,849,952 = 5.5%
  3. Seasonally adjusted rate: 5.7%

 


The good and bad of high unemployment

Higher unemployment may benefit businesses that export products to distant customers. The greater availability of labor makes it easier for them to offer competitive wages and control costs. Oregon’s high unemployment has a more profound negative eff ect on businesses that sell products or services locally. These depend on customers among the wage-earning local population.

 

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