Vermont’s official unemployment rate may be approaching pre-recessionary lows, but when part-time and other marginally attached workers are factored in, the rate has been slower to budge.
At 3.3 percent, the state’s official jobless rate remained second lowest in the nation in May, the most recent month for which estimates are available. The official rates from the Vermont Department of Labor only include jobseekers who have been looking for work for a four-week period. Averaged annually, the official rate in Vermont was 4.3 percent in 2013.
But discouraged and underemployed workers don’t show up in official rates. A more inclusive measure of “labor underutilization” averaged 9.3 percent last year.
Economist Tom Kavet of Kavet, Rockler & Associates, who consults for the Vermont Legislature, said in a normal economic recovery, he would expect the number to have come down more by now.
“Things are getting better, but we’re not back to anything near full employment,” Kavet said. “A lot of people would like to work more but are not able to.”
6 WAYS TO SLICE UNEMPLOYMENT
The federal government estimates unemployment six different ways to account for different segments of the workforce. Here’s a rundown, with more detail at the U.S. Bureau of Labor Statistics.
U-1: unemployed 15 weeks or longer
U-2: job losers + temporary workers
U-3: official rate — jobless available to work who have looked in most recent four weeks
U-4: unemployed + discouraged (potential workers who have dropped out of the labor force but looked for jobs in the last year)
U-5: unemployed + discouraged + other marginally attached (available for work, but hadn’t looked in last four weeks)
U-6: unemployed + discouraged + marginally attached + part-time workers who’d prefer full-time work
The reasons are hard to pin down, but Kavet said employers appear to be holding back because they’re not confident consumer demand will grow enough to justify more hiring.
Another possible reason for the disproportionately high percentage of part-timers? Businesses are avoiding the cost of benefits by keeping workers just shy of full-time employment, Kavet said.
“It’s likely that’s happening,” he said. “Avoiding the costs associated with full-time employment is one of the reasons there’s been more part-time and temporary employment in this (recovery).”
Pat Moulton, secretary of the Agency of Commerce and Community Development, said she thinks the dichotomy is more a matter of mismatched skills.
“I rather think the issue is that the underemployed, those working below their skill level, are having a hard time finding the right full time job at their skill level,” Moulton said by email. “Further, I believe there are a percentage of the discouraged workers that are running in to job openings beyond their skill levels.”
The state is working to provide greater job opportunities for both the unemployed and underemployed, Moulton said. “But this takes time.”
Whatever the reason for stubbornly high rates of “labor underutilization,” Vermont is not alone in the trend. Data from the Bureau of Labor Statistics show that around the country, the most inclusive measurement has been slow to budge. Nationally, it averaged 13.8 percent in 2013.
Known as U-6, this figure is always higher than official unemployment rates because it’s more inclusive. It accounts for those who have all but dropped out of the workforce, and even people who are working part-time but would rather have full-time jobs.
But it’s not always this much higher than the official unemployment rate, known as U-3, which essentially just counts jobless people who have looked for work in the last four weeks.
And the difference between the two figures is bigger in Vermont than most of the rest of the country.
Vermont’s annual average U-6 rate has been more than twice the state’s official unemployment rate since 2010. Nationally, the U-6 rate in 2013 was 86 percent higher than official figures — the biggest the gap has been in at least a decade.
Comparatively, Vermont rates well either way, according to Mat Barewicz, Vermont’s economic and labor market information chief. The official unemployment rate remained second-lowest in the nation in May; the alternative rate accounting for discouraged and underemployed workers was sixth-lowest — even if the difference between the two rates was higher in Vermont than the rest of the country.
Barewicz said a significant portion of the state’s employment profile is seasonal. Close to 10 percent of the state’s labor force is employed by the leisure and hospitality sector, in which part-time work is common.
He also noted that a study by the state’s Department of Tourism found a high degree of job satisfaction among leisure and hospitality workers.
But the number of part-time workers captured in the U-6 unemployment rate reflects people working part-time because they can’t find full-time jobs — not because they choose partial employment.
“You have this work ethic that is so ingrained,” said Gerry Ghazi, president, CEO and co-founder of the workforce development organization Vermont HITEC. Adult students often come to HITEC holding down multiple jobs to make ends meet, Ghazi said.
“But then their family life suffers because they’re … trying to balance three different employers,” he said. That’s why HITEC’s focus is on full-time, livable wage jobs that offer benefits.
“I agree that working part-time is not the highest economic outcome,” Barewicz said.
On the other hand, he said, it’s better than no job at all. Roughly 1.7 percent of Vermont’s workforce was considered long-term unemployed in 2013, according to BLS data that estimates the number of people out of work for 15 weeks or more.
“They talk about this new job market where it’s easier to get a job when you have a job,” Barewicz said. “At least they (part-time workers) have got a foothold on the economic ladder such that they’re looking to advance.”
Nonetheless, a disproportionately high level of under-employment is worth noting, Kavet said, not only as a business trend with financial and personal consequences for workers. It also could shed light on a worrisome inconsistency in the state budget.
He pointed to a disconnect in Vermont between employment and income. The issue emerged in April and May of this year, when the state’s collection of personal income taxes fell far below forecast. Kavet said he normally would expect the state to collect more income tax revenue at a time when the official unemployment rate is down to 3.3 percent.
The discouraged and part-time employment situation “has got to tighten up before you can really say the economy has improved,” Kavet said.