The Atlanta Fed's SouthPoint offers commentary and observations on various aspects of the region's economy.
The blog's authors include staff from the Atlanta Fed's Regional Economic Information Network and Public Affairs Department.
Postings are weekly.
Regional Employment: Private-Sector Services Carry the Load
We've talked quite a bit about regional labor markets during the past several years. Recently the message has been that modest gains are bringing total employment for the six states in the Sixth Federal Reserve District closer to prerecession levels, but there's still a ways to go.
The chart below is one we've used before, and it shows the percent change in employment from peak to trough (jobs lost during the downturn) and the percent change from trough to present (jobs gained during the recovery). For the Sixth District measure, the percent decline in total employment—peak to trough—was 8.5 percent. The trough to present reading—percent increase in total employment during the recovery—is 5.1 percent through July.
Here's another way to determine the healing process of southeastern labor markets. We know that the sectors hit hardest during the downturn were construction and manufacturing. The chart below uses the same methodology as the earlier chart but breaks down employment by sector rather than by state. We see just how deep the job losses were in these goods-producing sectors, and although gains are being logged since the trough for these two sectors, we are nowhere near the prerecession level of employment.
Therefore, apart from construction and manufacturing, regional employment may not look so bad after all. The chart below highlights this point. The red line represents total services employment for the region as a whole. The value is indexed to December 2007, the peak of total employment for regional services employment. As you can see, employment levels are just below their prerecession peak.
Glance back to the second chart for a moment. The government sector has not yet hit its trough, as indicated by the fact that its reading for “trough to present” is zero. Another way to think of this is that government is still acting as a drag on the region's overall labor market recovery. Subtracting government employment from the total services measure of regional employment gives us a reading on total private-sector services jobs for the region, represented by the blue line. As you can see, the blue line is above 100, meaning that total private-sector services employment for the states of the Sixth District has recovered to its prerecession level.
I share these figures not to argue that regional labor markets have recovered, but it is important to recognize how areas of significant weakness are skewing the overall employment reading. Where do we go from here? Well, it is probably unrealistic to think that construction employment will return to its prerecession levels anytime soon. That level represented an unsustainable level of activity in homebuilding. It is also a stretch to see manufacturing employment rebounding at a fast pace as we know that many shuttered factories are unlikely to reopen, and even if they do—or if new plants come online—they will likely require fewer workers because of automation and other capital investments that have made many factory jobs redundant. Finally, with government spending almost certain to remain restrained, it is rather unrealistic to expect significant gains in government employment.
That situation leaves us with private-sector services employment to carry the load. Since these jobs represent about 70 percent of total employment in the region, continued gains here are likely to have a very positive impact on the overall employment picture. That said, it will be some time before we can expect total employment in the region to get back to prerecession levels.
One final thought: according to data from the U.S. Bureau of Labor Services (BLS), through July 2013, over 660,000 more people are unemployed than in December 2007, when the recession began. In addition, regional rates of underemployment (the BLS refers to these as “alternative measures of labor underutilization”) remain very high. The broadest measure of labor underutilization, referred to by the BLS as U6, is calculated by dividing the total unemployed, plus all marginally attached workers, plus total employed part-time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers. Weighting Sixth District states by respective labor forces gives the region as a whole a U6 reading of just under 15 percent, which is down from 17.5 percent witnessed in late 2010 but well above the headline regional unemployment rate of 7.6 percent
Any measure of the health of regional labor markets must always take these figures into account.
By Mike Chriszt, a vice president in the Atlanta Fed’s public affairs department
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