Data Sense: Drop in working-age population drives down unemployment rate

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According to the latest data from the Colorado Department of Labor, the unemployment rate in Moffat County continued its gradual descent through the end of 2013. CDL estimates place the December 2013 unemployment rate at 5.2 percent. That’s down from the December 2012 rate of 7.5 percent, and is a continuation of the downward trend in the 12-month moving average unemployment rate that began in November 2012.

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Brandon Owens

The unemployment rate actually is a combination of two separate factors — the size of the civilian labor force and the number of jobs. The unemployment rate is equal to labor-force size minus the number of jobs divided by labor-force size. This rate represents the percentage of those in the labor force that are without a job. To be included in the labor force, one must either have a job or be actively seeking one.

Here’s the rub. Those individuals who have stopped looking for jobs are no longer counted as part of the labor force. So when unemployed individuals give up looking for jobs, the size of the labor force shrinks and the unemployment rate drops.

In fact, it is possible for the unemployment rate to drop precipitously without any new jobs being created at all. Is that what’s happening in Moffat County?

The short answer is no. The unemployment rate in Moffat County is not declining because people have exited the work force.

However, it isn’t declining because new jobs are being created, either.

Rather, the unemployment rate in Moffat County is on a steady decline because the working-age population in the county has declined. The decline in the working-age population in Moffat County is due to a combination of migration out of the county and the aging population — what we have previously called “The Graying of Yampa Valley.”

To reach this conclusion, we need to draw upon both the CDL employment data as well as population statistics from the Colorado Department of Local Affairs. The CDL data gives us the size of the civilian labor force and the DOLA data gives us the size of the working-age population.

The average size of the labor force in December 2009 was 8,829. At that time, the working-age population was 8,904. Note that the CDL includes part-time jobs in its employment totals, which inflates the local employment total. Typically, we would expect to see a labor-force participation rate (employment divided by labor-force size) in the 80 percent range, rather than the nearly 100 percent we see in Moffat County.

Fast forward to 2013. The average size of the labor force in 2013 was 8,217. By this time, however, the working-age population had declined to 8,444. Thus, between 2009 and 2013, the number of jobs declined by 509 and the working-age population declined by 460. So for every 10 jobs lost, nine working-age adults either moved out of the county or reached the age of 65.

There is some good news here. Despite the hardship endured by those who have lost their jobs and have been forced to relocate, there is a positive aspect to the decline in population in response to employment declines. This is the sign of a flexible labor market. As jobs decline and people relocate in response, this tightens the labor market and brings down the unemployment rate. This dynamic works in reverse, too — large increases in jobs will eventually drive up wages and encourage working-age adults to move back into the county. The data indicates that this may already be happening, albeit slowly.

There has been an increase of 163 jobs in the county since December 2012 and an increase of 427 jobs in the last two years. There’s still plenty of ground to cover in order to reach the peak employment level of 8,650 from December 2008.

Thus, many more jobs will need to be created in the county to counterbalance the twin impacts of migration and an aging population. However, the latest data indicates that the Moffat County labor market already has taken the first steps on the road to recovery.

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