Author: Andrew Berger-Gross
As 2015 continues to unfold, economic statistics (such as those produced by LEAD in partnership with the Bureau of Labor Statistics) will shed light on whether the rapid improvements in labor market conditions seen throughout 2013 and 2014 are here to stay. Ideally we would like to see job growth proceed at a pace that restores us to prerecession levels of unemployment. We must understand, however, that the population of unemployed North Carolinians is a diverse bunch, each with their own unique challenges and service needs. While some groups of unemployed will be helped by an improving economy, others face difficulties that are less amenable to improvement through economic growth alone.
Previous dispatches from LEAD explored the long-term unemployed (and the persistent difficulty of matching them to available jobs) as well as unemployment among the youth labor force. In this installment, we examine another two subsets of the unemployed population — those who are unemployed because they lost or left their most recent job (“separators”) and those who are entering the labor force either for the first time or after a period of nonparticipation (“entrants”).
These two groups share some obvious similarities. Both separators and entrants are jobless and actively seeking employment. The success of each group in finding work is dependent to some extent on economic conditions, in particular labor demand (i.e., the number of jobs available.) But a quick glance at data from the Current Population Survey (CPS) reveals that these two groups have different degrees of responsiveness to economic conditions.
Unemployment due to job separation surged in North Carolina during the last two recessions (2001 and 2007–2009) and their aftermath, but declined rapidly as the economy reverted back to recovery mode. Unemployment among labor market entrants, however, was much less cyclical than for separators; entrant unemployment increased slightly during the past two recessions and declined only marginally during subsequent recoveries.
Let’s take a moment to scrutinize these trends individually. Unemployment due to job separation has declined to a level unseen since the height of the mid-2000s recovery, following on the heels of a downward trend in layoffs and indicating that the business cycle in North Carolina is now deep into recovery territory. This rosy picture is further bolstered by evidence from national recession trackers who are finding that the U.S. economy remains at very low likelihood of experiencing recession.
However, while these data suggest that our economy is in recovery, you shouldn’t necessarily conclude that the plunge in layoffs means that all is well with our state’s labor market. Although job losses in North Carolina are below the historical norm, job creation was also stuck below historically typical levels during much of the recovery. Some economists believe that this reduction in both hiring and firing activity is evidence of a slowdown in labor market dynamism that could potentially signal underlying weakness in the economy.
Interpreting trends in entrant unemployment is a bit trickier. Both types of entrants — those re-entering the labor force after a period of nonparticipation as well as new entrants to the labor force — continue to weigh on the unemployment rate to a greater degree than experienced during the aftermath of the 2001 recession.
Although we have very little data about these subgroups, we can make some educated guesses about what is driving their joblessness based on existing evidence. Early research found that unemployed re-entrants are often job separators who are essentially continuing extended spells of unemployment. This suggests that the upward trend over time in re-entrant unemployment might be related, in part, to the increasing prevalence of long-term unemployment, and that the re-entrant unemployed may face similar obstacles to employment as the long-term jobless. Meanwhile, unemployed new entrants are those who have no previous labor market experience, suggesting that these job seekers may be facing the same barriers to success as the youth unemployed.
However, it is difficult to discern precise explanations for the upward trend in entrant unemployment using these data alone. It is possible that other factors, such as the changing demographic makeup of the labor force, are playing a role. All we can say for sure right now is that, as with long-term and youth unemployed, the plight of the entrant unemployed in North Carolina has been slow to respond to the economic recovery experienced by our state over the past few years.
General Disclaimers:
Estimates from the CPS are derived from a survey and are subject to sampling and nonsampling error. Any mistakes in data management, analysis, or presentation are the author’s.