Washington is lagging on employment, despite a booming economy in Central Puget Sound. Part of the problem is how unemployment is measured, and usually reported. The state’s standard or “U-3” unemployment rate of 5.7 percent in August exceeded the national average for the month of 4.9 percent, but on the broader “U-6” unemployment measure, the news was even more alarming. Washington ranked 13th highest of 50 states at 10.7 percent, from the third quarter of 2015 through the second quarter of 2016. The national average for U-6 unemployment in the same period was 9.9 percent.
Not Looking, Or Under-Employed
U-3 unemployed are defined by the U.S. Bureau of Labor Statistics (BLS) as those who have recently searched for work and could start working if offered a job. The U-6 classification is U-3s plus the unemployed who haven’t recently looked for work, and “involuntary” part-timers who want full-time work.
The difference between the two groups is striking. The U-6 Washington state cohort adds another 90 percent to the standard U-3 group. According to data from the Federal Reserve Bank of St. Louis, Washington’s U-6 unemployment in the second quarter of 2016 includes 183,600 more residents than the 204,800 classified as U-3. The U-6s included 42,200 “marginally attached,” or not currently seeking work; and 141,400 “employed involuntarily part-time.”
The Washington Employment Security Department (ESD) had not published U-6 unemployment rates for the state. (Editor’s Note: Since the publication of this article, that has changed. ESD has started to provide U-6 data online. ESD director of Communications Janelle Guthrie recently emailed Lens, “This month, we included alternative measures of unemployment as your article suggests. We also now list this on our labor market information pages.” The latest ESD monthly unemployment report now includes a prominent link to alternative measures including U-6.)
Washington ‘Trying To Hide The Problem’
“Instead of dealing with [unemployment] in an honest and straightforward way and looking for solutions for these folks, we are trying to hide the problem by using an artificial rate that doesn’t count” those who “have given up,” said State Sen. John Braun (R-20). He is Vice-Chair of the Senate Commerce and Labor Committee.
“The numbers need to be as accurate as possible because we base legislation and our outreach into the community on numbers like those,” said State Rep. Gina McCabe (R-14), Assistant Ranking Minority Member of the House Labor and Workplace Standards Committee. “We want the actual numbers even if it requires another category showing this segment.”
“The [national] unemployment rate is an illusion, a misleading number that, when recited in reassurance, smacks of a lack of understanding and empathy for Americans struggling to gain a foothold in an economy that has undergone a profound and detrimental transformation,” wrote Sarah Kendzior in Quartz Magazine last month.
State’s Rural Economies ‘Very Difficult’
“There is a wide disparity between the…below national (unemployment) rates in the Seattle Puget Sound core and in my district,” said Braun. “We’re not making any progress and this is a direct result of Seattle-centric policies that have made the economies in rural districts in Washington very difficult.”
Braun’s legislative district includes Lewis County, which had the sixth highest U-3 unemployment rate in the state in August, at 8.2 percent, according to ESD.
Braun said this is especially due to the “overregulation of resource economic opportunities” from timber to mining to farming. Also mitigating against fuller employment in his district, said Braun, is the state’s Business and Occupation (B&O) tax, a gross receipts tax, on manufacturers in Washington.
As Bloomberg View reported, the national unemployment rate was the same in July 2016 as it was in July 1997 at 4.9 percent. On the other hand, July 2016’s U-6 unemployment rate of 9.7 percent is greater than 1997’s 8.6 percent.
It is important to take the “headline unemployment number with a grain of salt, and to question claims that happy days are here again,” wrote Bloomberg columnist Justin Fox.
U.S. Labor Force Participation Down
One reason why is declining rates of labor force participation, defined as the percent of the civilian non-institutional population 16 years old and greater that is actively looking for work. BLS reported last month the U.S. labor force participation rate in mid-2016 had dropped to 62.7 percent. BLS data show that is the lowest since 1977.
State-by-state BLS labor force participation data show that for August (bottom of page, here), Washington’s rate was 63.5 percent, lower than 23 other states.
Weak labor force participation rates make unemployment look lower than it really is, Investopedia wrote in June. Those not looking for work aren’t counted in U-3 numbers.
“During bad times like the recent few years it is scary to hear” U-6 unemployment rate compared to the lower U-3 rate,” wrote Tim McMahon, editor and author of the Unemployment Data website. “So the government prefers the U-3 number and unfortunately the news media plays along” and uses it “because it is the ‘official’ unemployment rate.”
Technical, Vocational Education
Braun told Lens that one strategy to lower unemployment is for the state to more greatly encourage and support technical education in high school and colleges, to help students onto a pathway to meaningful employment.
State Sen. Steve Conway (D-29) told Lens one way to address the rural-urban unemployment split in the state is to develop strategies for bringing more industries into rural areas. He is a member of the Senate Commerce and Labor Committee.
The city of Quincy, WA has already done this by attracting tech companies such as Microsoft and Yahoo! to host data centers, said Conway.
“There has been great leadership in recent years trying to take advantage of electric power for development of these data farms, and a base like that can expand opportunities in [those] communities,” Conway added.
By Washington state metropolitan area, Seattle-Bellevue-Everett in August had the lowest U-3 unemployment rate, of 4.1 percent; versus Bellingham, 6.1 percent; Tacoma, 6.6 percent; Kennewick-Richland-Pasco, 7.2 percent; and Longview, 7.7 percent, according to state data.
By Washington county, King County and San Juan County were tied with the lowest August U-3 unemployment rate at 3.9 percent, followed by Lincoln County, 4.2 percent; Snohomish County, 4.4 percent; and Asotin County, 4.7 percent, according to ESD.
Ferry County had the state’s highest unemployment rate last month at 9.8 percent; followed by Pend Oreille County, 9.0 percent; Grays Harbor County, 8.8 percent; and Wahkiakum, 8.4 percent.