What To Learn From The Unemployment Rate
Monday, August 01, 2011
Writing on the brink of financial armageddon, it's hard to find anything useful to say about it, except to marvel that the Republicans in Congress still (!) have yet to present a list of proposed cuts anywhere close to the dollar sum they are demanding be cut from the US budget. I want to see a moratorium on attention to people who demand budget cuts who don't have the guts to say what it is that should be cut. I submit my columns a couple of days before they run, so I'm hoping that a deal has been reached before publication. But I despair of our ability to avoid foreseen disaster, especially when the Republican party sees political advantage in triggering it.
At this point, it's not even clear that Speaker John Boehner has the votes to do anything beside force a default. So we'll turn instead to the consequences of the last few years' disastrous economic policies and wait a few weeks to examine the consequences of this year's. I read last week that Rhode Island's unemployment rate is now the third-worst in the country, behind only Nevada and California. This will doubtless provoke all the usual moaning about our taxes, "business climate," corruption, and the courtesy of our convenience store clerks. You know the drill.
Our state's high unemployment rate is a disaster for all of us, and there are very few ways to sugar-coat it, but there is some perspective worth considering. That is, when comparing states to one another, it's worth wondering if a state is a valid unit of comparison. Rhode Island is smaller and more urban than any other state in the country, so what do you really learn by comparing us to Wyoming or Alaska? If unemployment is higher in cities than outside them, then isn't the fact that we're more urban than other states an ideal way to skew the comparison? When you're trying to learn something from a comparison, isn't it best to compare apples to apples? This is a pretty elementary point of experimental design, which is probably why you can generally count on reporters to ignore it.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTOther comparisons are better.
In economic matters, I long ago noticed that Massachusetts was a better comparison to Rhode Island if you leave off the Berkshires and Cape Cod. Without them, the mix of city and suburbs is much closer to ours, and so is the population composition. This makes it more likely that differences between our economy and theirs are related to policy differences. And since the Bureau of Labor Statistics collects unemployment data by metropolitan area, why don't we see how the Providence metro area (which includes Fall River according to BLS) fares among other metro areas? Here's the answer: we have nothing to be proud of, but there are 41 metro areas in fourteen different states doing the same or worse than we are.
Overall, we're in the 12th percentile, tied with Dalton, Georgia, and Los Angeles. Worse off than we are you'll find cities in North and South Carolina, Florida, Nevada, Texas, Oregon, New Jersey, California, and Connecticut, among others. The point here is that if you're going to claim that taxes or high state spending are responsible for our high unemployment rate compared to other states, it's a lot trickier argument to make than you might think. After all, Nevada is a very low-tax kind of place. So how is it that all three of their metro areas (Las Vegas, Carson City, and Reno) are doing worse than we are? Taxes are higher in Oregon, but Corvallis has an unemployment rate of 5.8% (94th percentile) while Bend is worse off than we are, at 11.6% (9th percentile). Midland, Texas is among the best places to find a job in the country (98th percentile at 4.6% unemployment) and Brownsville among the worst (6th percentile at 11.8%).
We could act, but we don't.
None of this is to counsel epistemic despair. There are decent answers to the question of why our economy is worse off than Midland, Corvallis, or Boston (82d percentile at 6.6%). A casual read of the list seems to show that college towns are doing pretty well (five out of the top ten), which implies to me that education could be a fairly important economic determinant. That wouldn't be particularly surprising, but it would be a good argument not to cut URI still further (which we are doing).
The list also tells us that the foreclosure crisis plays a big role in the unemployment rate, which is why Nevada, Florida, and California are in such trouble. Relative to a lot of other places, foreclosures have hit pretty hard here, but there's been pretty much zero state-level policy response. In other states where judges are always involved in foreclosures it's been easier to slow the pace, but they're not here, and the housing market, so often the engine of our recoveries, remains a shambles, with over a quarter of the houses on the market either short sales or in foreclosure.
The upshot is this: Rhode Island has some serious economic problems, and has had them for a very long time. We haven't acted where we could have (preventing foreclosures) and we have acted in ways that have been harmful (cutting URI). In my opinion, the only way to solve problems is to look at the evidence and act accordingly, but that's not really the fashion these days.
Tom Sgouros is the editor of the Rhode Island Policy Reporter, at whatcheer.net and the author of "Ten Things You Don't Know About Rhode Island." Contact him at [email protected].
If you valued this article, please LIKE GoLocalProv.com on Facebook by clicking HERE.
