Mixed Signals in Unemployment Report

Today's announcement that the state unemployment rate has dropped from 6 percent to 5.8 percent looks like good news, but there's a dark cloud over the silver lining. A closer read of the report indicates that our economy continues to slump. Although the rate dropped, the state lost jobs.

A large reduction in government jobs contributed to a seasonally adjusted loss of 18,200 nonfarm jobs in Washington in September 2008, down to 2,968,000. The decline comes after a revised gain of 13,900 jobs in July and 1,400 jobs in August.

So how does the unemployment rate decline even as jobs are disappearing. There are several explanations: people may be leaving the workforce faster than the labor market is shedding jobs; and, the data sources are different.

The job numbers are based on a survey of some 7,000 employers, while the unemployment rate is based on a smaller survey of households. Mary Ayala, chief economist for the Washington State Employment Security Department, said the surveys last month presented somewhat differing results, probably due to error rates that are inherent in telephone surveys.

The employer survey is undoubtedly more reliable. The Employment Services Department, which released the data, expects revisions.

... given the recent financial crisis that jolted every sector of the national economy, a revision to the September 5.8 percent is likely to occur. Therefore, the longer term estimates of Washington?s unemployment levels are more informative at this time. Washington?s employment level increased by 1.0 percent year-over-year, while the U.S. realized a loss of 0.7 percent. Similarly, Washington?s unemployment rate continues to lag behind the U.S. rate of 6.1 percent, suggesting that Washington?s economy is in relatively better shape at the moment than the rest of the nation.

Here are some highlights (lowlights?) on the job market. Key sectors continue to shed employment.

• Employment in the goods-producing sector shed another 3,600 (-0.71 percent) jobs in September, after losing 2,800 jobs in August. Among industries that fared better than others, aerospace industries added 200 jobs (+0.23 percent), after remaining unchanged in August, and other food manufacturing gained 200 jobs (+0.81 percent).
  
• The construction sector shed another 2,200 jobs (-1.1 percent) in September, following a series of consecutive monthly job losses that began in January 2008. The cuts primarily affected commercial construction; employment in residential construction exhibited no change from the prior month.
  
• Employment in the manufacturing sector declined by 1,400 jobs (-4.7 percent) in September, with most of the losses (-1,000) concentrated in the manufacture of durable goods.

Despite the drop in the unemployment rate, it's much too early to mark a turnaround.