Connecticut citizens may be forgiven their confusion after hearing the latest state employment report. A record number of jobs were created at the same time that the unemployment rate increased and the number of residents employed declined.
Democrats, in absolute control in Hartford, trumpeted the jobs number. Critics highlighted the unemployment rate and the decline in resident employment.
It's a parlor game for statisticians and politicians, a game that obscures the real issue which is private sector employment. Private jobs haven't seen any real growth in Connecticut since Ronald Reagan was president.
Private sector jobs are the ones that matter, because they generate real economic activity. More private jobs are always a good thing. More government jobs constitute excess beyond a certain point. We can debate where that point is, but not that the point exists.
Moreover, private sector jobs generate tax revenue, while government employee compensation is the biggest category of government expense. Yes, government workers pay taxes, but their after-tax compensation is still the biggest category of state and local government spending. Given Connecticut's dismal fiscal condition, this dichotomy is very relevant.
Unfortunately, since December 1990, Connecticut has registered the nation's worst private jobs performance, growing at a scant 2.3 percentage rate - just 39,000 jobs in almost a quarter century. Second-worst Rhode Island grew at twice the rate. Nationally, private sector jobs grew 25.6 percent, creating about 23 million new positions.
Note that the Great Recession hit most states harder than Connecticut, so the recession is not the cause of Connecticut's poor 23-year performance.
Are there any signs of better days ahead?
Here are Connecticut's latest employment numbers. Non-farm employment grew by less than 2,000 jobs per month in the first half of the year, but surged by an eye-popping 11,500 jobs in July. The July gain included, unfortunately, an outsized proportion of government jobs (4,200).
Moreover, the July number is seasonally-adjusted and that made a huge difference: the actual number (not seasonally-adjusted) of non-farm jobs declined by 12,100. The non-adjusted number of private sector jobs increased, but only by 900 jobs. Such a slight gain doesn't signify a reversal of the state's long-term stagnation.
All of these numbers are drawn from the Current Employment Statistics collected from 145,000 employers nationwide (557,000 worksites), including about 4,000 Connecticut employers, in a monthly survey conducted by the U.S. Bureau of Labor in coordination with state departments of labor.
Another survey, the "Household Survey" conducted by the U.S. Census Bureau, covers about 60,000 homes (an estimated 1,200 in Connecticut). It delivered the bad news, the increase in the unemployment rate and the decline in the number of Connecticut residents employed. The unemployment rate ticked up 0.1 to 8.1 percent, while the national rate ticked down to 7.4 percent, widening the gap by which our state lags behind.
Occasionally, in counterintuitive fashion, the unemployment rate worsens despite an increase in jobs. As the job market improves, previously discouraged workers recommence job searches, i.e. re-enter the labor force. They are added both to the numerator (the unemployed) and to the denominator (work force) of the unemployment rate calculation, which increases the percentage rate.
Other anomalies in labor market statistics are not natural or logical. They are methodological. They originate from the use of two very different surveys, the "Household Survey," or "Current Population Survey" (CPS), and the "Current Employment Statistics" survey (CES). Here are the major differences. The CPS includes self-employed individuals, the CES does not. People with two payroll jobs are counted once in the CPS, but twice in the CES. Connecticut residents who work out-of-state show up in Connecticut's CPS numbers, but not its CES tally - note that the reverse also occurs with out-of-staters working in Connecticut.
Sorting out the many cross-currents amongst the various survey numbers is a frustrating exercise even for professional labor economists. So citizens should choose one measure to gauge progress. That number should be private sector jobs, not "non-farm" jobs or other measures.
Moreover, citizens should ignore month-to-month gyrations since seasonal factors can cause dramatic spikes. And, finally, citizens should ignore politicians trying to score points on the basis of one-month statistical flukes - in either direction.