Unemployment picture weakens

By J. Patrick Coolican

Monday, Dec. 21, 2009 | 2 a.m.

The unemployment rate in Clark County dropped from 13 percent to 12.1 percent from October to November. But the reaction, even from politicians usually willing to grab credit for a warm day in May, has been muted.

So, what gives?

The answer lies in the method used by the federal Bureau of Labor Statistics to compute the unemployment rate.

Once you understand that process, the situation in Southern Nevada looks worse, not better.

Here’s the story: Every month the bureau takes a survey of roughly 60,000 American households, which accounts for about 100,000 workers.

They ask everyone in the household 16 and older if they’ve worked during the previous month. If a respondent has worked even one hour, he counts as employed.

If the respondent hasn’t worked but has searched for a job during the previous month, he’s officially unemployed. If he hasn’t worked and hasn’t searched for a job, then he doesn’t get counted as unemployed.

The upshot: The real unemployment rate is much higher than what the government reports, because there are lots of people working part time who would rather be full-time and others who would like to work but have quit looking.

(As a rule of thumb, economists believe the broader unemployment rate — counting part-timers and those who have quit looking — is 80 percent higher than the official one, meaning the real unemployment rate in Nevada is 20 percent.)

In Southern Nevada, the situation has played out this way: Although there aren’t any new jobs, there are fewer workers looking for work.

There were an estimated 119,000 job-seekers in Southern Nevada, down from October’s 124,700. That drop in job seekers lowered the unemployment rate.

So where are those extra job seekers?

There are only two possible answers. Either people have grown so frustrated that they’ve quit looking, or they’ve picked up and moved elsewhere.

For now, no one really knows the answer because the survey data aren’t detailed enough to tell us.

We know construction employment is off 25 percent in the past year, for instance, but we don’t know what those workers are up to.

“Have they been leaving town? Are they hanging out, but not searching for work? We’re not really sure,” said Jeff Waddoups, a UNLV labor economist.

Experts have offered informed speculation, however, and there’s no consensus on which factor is most important, the “Get out of Dodge” factor, or the “I’d rather watch ‘Law and Order’ than look for a job” factor — leaving town, or giving up.

Jeff Hardcastle, the state’s demographer, said his reading of data, such as school enrollments and turned-in driver’s licenses, leads him to believe people are not leaving Nevada in droves.

He reasons that this recession has been different from others because of what economists call “simultaneity” — it has happened everywhere and all at once. Previous recessions rolled across the country in waves and hit certain areas harder than others, giving unemployed workers options to go elsewhere for work. This recession has limited those options.

Other analysts, while conceding the answer to the question is close to unknowable at the moment, disagree with Hardcastle and say people are leaving.

Elliott Parker, an economist at the University of Nevada, Reno, said he can think of no reason why the number of discouraged unemployed would increase so appreciably, so he reasons people must be leaving Nevada. Simple economics dictates it, he said: Just as people moved here for jobs for two decades, they will go elsewhere now that there are no jobs.

Although the recession has hit the entire country hard, there’s no question some regions are doing much better than Nevada. A recent Moody’s Economy.com report, for instance, asserted that this state is the only one still suffering severe economic recession, whereas the rest of the country is either growing or witnessing a moderation of the slowdown.

If laid off workers are aware that better times are coming to other regions, it stands to reason they might have left.

Jeremy Aguero, principal of the consulting firm Applied Analysis, has looked at data such as school enrollment and the residential vacancy rate — now 8 percent compared with 6.9 percent a year ago — and he also thinks people are leaving.

He notes that construction once accounted for as much as 12 percent of our workforce — now about 8 percent — and says many of those workers have left, not to be replaced with new residents.

The completion of CityCenter likely left thousands of construction workers without a jobs. With the collapse of the construction market, there’s very little reason for them to stay, at least by conventional economic motives.

“Why did people move here? They moved here for economic opportunity, not the stellar social services,” Aguero quipped. “When that opportunity is gone, they don’t come here.”

Steve Ross, secretary-treasurer of the Southern Nevada Building and Construction Trades Council, said his members have often moved around the country chasing work and thinks they are doing the same during this recession. But he said there’s also a permanent group of tradesmen with roots here, who are staying in the belief that a construction turnaround is coming. (Economists and local forecasters are practically unanimous, though: A construction turnaround is not coming.)

D. Taylor, secretary-treasurer of the Culinary Union, which represents many workers on the Strip, said, “There’s no question some of our folks have left the state.”

He also said the Culinary workforce, in the aggregate, has seen a reduction of work hours between 10 percent and 12 percent. That could be the result of layoffs, hours being cut, or some combination of the two.

The Census Bureau should provide some final guidance to this question of whether people are leaving Southern Nevada when it releases its July 1, 2009 population estimate.

The answer, it turns out, matters greatly.

As Aguero noted, the Nevada economy and the fiscal structure of its government finances are hugely dependent on growth. “I can’t point to another economy more dependent on growth,” he said.

Some economists have likened it to a Ponzi scheme, in which we always needed new residents to create the economic activity and tax revenue to pay for the needs of the current residents. Once they stopped coming, the whole structure collapsed.

Is there any hope? Have we turned a proverbial corner?

Waddoups was blunt: “No.”

He then added: “I was thinking this week, man, we need five or six CityCenters to get back to where we were.”