Friday, October 28, 2011

Understanding Unemployment

[Johnathan Clayborn]
There are some things that I read, and then later I have one of those "hey, wait a minute" moments. A few weeks ago I read an article in the Arizona Republic newspaper and then I had one of those moments. In summary the article said that in terms of job loss over a 3 year span, Phoenix was the third highest ranked city in the country.

What caused me to have the “wait a minute” moment was that I had recalled reading a different article a few weeks prior to that stating that Phoenix was one of the fastest growing cities in the country during that same time frame. This got me thinking; did we actually really lose jobs, or did we just not create enough jobs to meet the demands of the increased population? Those are two very different situations. Naturally, I decided to find out for myself.

One of the first questions that I had was about the population they were measuring. The article said that Phoenix was the 3rd highest ranked city in terms of Job loss. Did they mean Phoenix, only Phoenix and nothing but Phoenix, or did they mean the “Valley Metro Area” as it is known locally? The article wasn’t clear so I decided to investigate both.

The second question that I had was about the unemployment rate itself. The article gave no indication which unemployment rate they were going from, or where they had obtained that figure from.

First, I wanted to clarify “unemployment”. According to the Bureau of Labor Statistics there are actually six different classifications of unemployment numbers. These are categorized as U-1 through U-6. When calculating employment and unemployment ratings they take the population and look at the people aged 16-65. This number constitutes the labor force, the total number of people who are of working age. For Arizona as a state for 2010 these numbers range from 6.3% unemployment (U1) up to 18.4% unemployment (U6).

There is a system that the Bureau of Labor Statistics has adapted to dividing and sorting people into each category. For the most part the “standard” unemployment number is the U3 category. One thing that I found very interesting between U3 and U4 is that if an employed person becomes discouraged and stops actively looking for work, then they are no longer counted as part of the U3 bracket. So, how does one qualify as a “discouraged worker” according to the BLS? They did not fill out a job application for four weeks. So, if someone is laid off, gets fired, etc. and does not fill out a job application for 4 weeks or longer, the BLS no longer includes them in their unemployment calculations.

In terms of population I decided to start with just Phoenix alone. I went back to 2000 and gathered population data until 2010. From 2000 to 2003 the population increased by at least 10,000 people every year. From 2003 to 2006 the population increased at least 20,000 people each year. In 2008 it only increased 9,000 people. 2009 saw an increase of roughly 150 people, and then in 2010 the population fell approximately 10,000 people.

There are a number of reasons why the population of Phoenix has stagnated and declined. Most experts attribute the largest bulk to the poor housing market. As so many people are finding themselves ridiculously upside down on their housing costs and owing two or three times what their home is now worth many are electing to walk away from their homes. One article in the Arizona Republic covered this very topic. As evidenced they offered the following facts; foreclosure numbers have skyrocketed, water hookups are down, trash collection has slowed, crime has dropped throughout the city, the number of calls to the police department has also declined. This is surely an indication that the people are gone, but does that mean that they have really left forever?

As any native knows, it’s not smart to do an analysis of Phoenix without also including the rest of the Valley in your figures as well. As a prime example, I work in Phoenix, but I live in El Mirage. Last year I lived in Glendale prior to moving out west. My primary motivation for moving? Economics. The housing was cheaper, and the crime rate was lower. Although Phoenix may be experiencing a slow in population, the West Valley certainly is not. A comparison of data from the 2000 census to the 2010 census shows that West Valley cities are booming. El Mirage, for example, exploded from a sleepy town of 7,600 people in 2000 to a busting town of 31,800. The population of Avondale more than doubled in that same time frame. The population of Goodyear more than tripled. The city of Peoria increased by 50%. And the small town of Surprise almost quadrupled in size. This seems to support evidence of a “reshuffling” of people in addition to general growth. Examinations of the population estimates from the Arizona Workforce Informer also seem to support that as well. Avondale showed a steady climb in population increase, but El Mirage did not. There were large spikes in 2001, 2002, and 2010. Peoria showed a spike in 2006. Surprise was another town that showed large population spikes from 2003-2007. To show that this phenomenon is not normal population expansion let us consider some of the other valley towns. During this same time frame the city if Tempe started at 158,600 in 2000 and reported 161,200 in 2010. Fountain Hills only showed a 2,000 person increase during the same time frame. Apache Junction only increased by 21 people. Cave Creek only increased by 1,287 people. The City of Glendale only reported a net growth of just shy of 8,000 people. Litchfield Park increased 1,666 people. Carefree increased only by 436 people.

Based on these numbers, clearly not every city within the valley was growing. Of towns sized between 2,500 people and 10,000 people only Buckeye, El Mirage and Queen Creek showed incredible growth. The town of Maricopa, which is officially in Pinal County, is another spot that people of Phoenix have flocked to. In 2000 that town was not even incorporated. By 2010 they had a population of 43,500. These towns are further away from the main city area and housing demand was low, so houses were inexpensive. They still are inexpensive by comparison today. Houses in my neighborhood have going rates of around $50 per square foot. Meanwhile houses in the neighbor around my work in downtown Phoenix are selling for around $120 per square foot.

Now that we understand a little more about the population situation, let’s go back to the original article again. The article says that the Phoenix area was one of the worst in a comparison of 50 metropolitan areas in terms of number of jobs from 2008 to 2010. By “Phoenix area” I can only assume that they mean the Phoenix-Mesa-Glendale Metropolitan Statistical Area (MSA) as that the term used by the Census Bureau and the Bureau of Labor Statistics. Looking at the entire area, yes, there does seem to be a hit. According to the U3 unemployment category, numbers for this MSA have jumped from 5.3% unemployment to 9.2% unemployment. There was physical loss of about 70,000 jobs. But that’s not the whole story. From 2008 to 2009 the loss of 70,000 jobs occurred, in that one year alone. The next year, despite creating almost 9,000 jobs, our unemployment rate still continued to climb and we had an additional 5,000 more that were unemployed. To me, this speaks that the problem is two-fold. 1) Some companies that are providing jobs for the valley are leaving, closing down, or outsourcing jobs. 2) Not enough new jobs are being created to meet the demand of the increase in population.

It seems as though most of the news articles we read about unemployment are only reporting part of the problem. They throw vague numbers and figures out there that people don’t understand in an effort to get people to watch the news. It’s something I see all of the time “Is your water hazardous to your health? We tested Valley water supplies for a harmful chemical and we have the results, tonight at ten!” And then, of course, that’s the last story they show you and it turns out that there’s nothing to be afraid of after all. Do yourselves a favor, double check the facts for yourself. You don’t have to take everything you read or hear or see at face value. Too many people read something online and pass it along as “truth”. Wild conspiracies get started, outright absurd ideas (like shape-shifting aliens that have taken over the governments of the world) and just out and out lies. Not to mention those annoying “pass this email on” messages. Just because the news reports something doesn’t make it accurate.  

As always, don’t just take my word for it. Here are my sources:

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These blogs represent my thoughts, ideas and opinions. They may be different from yours. You may not agree with them. While I do enjoy a good, polite debate on a topic (where points are countered with other points based on logic, reason and fact), I do not enjoy an argument (where you tell me that I am wrong simply because you disagree and cannot offer any reasons to support your position). I am very respectful of others, and I expect everyone on here to be respectful in return, not only to me, but to each other as well. Disrespectful posts will be deleted automatically. Feel free to share your ideas, but keep it civil, please.