Art Woolf is a columnist for VTDigger and a former associate professor of economics at the University of Vermont.
Vermont’s unemployment rate fell from 8.3% in July to 4.8% in August, one of the biggest declines of any state. Vermont is one of a handful of states with an unemployment rate below 5.0% — the U.S. rate is 8.4%. Vermont’s rate is now only a little more than two points higher than it was before the pandemic hit in March.
Good news, no? No.
If the unemployment rate fell because fewer people were unemployed, and therefore more were working, that would be good news. The number of unemployed Vermonters did fall in August, by more than 13,000. But that wasn’t because they all got jobs. The number of people who said they were working also fell, by 2,000.
So the formerly unemployed Vermonters didn’t get jobs. They gave up looking for work and left the labor force. Indeed, Vermont’s labor force, the sum of those working and actively looking for work, fell by 15,000 people and is now lower than it has been in 24 years.
Some of those people may be waiting for their old jobs to return. Some may have been self-employed who no longer can find customers for the goods or services they sell. Some may be unwilling to work due to fears of getting infected. Whatever the reason, it is odd that the dramatic change in the number of unemployed happened in August and not July, June or May. And for the nation as a whole, the number of unemployed fell, just as in Vermont, but unlike Vermont, the U.S. labor force increased in August.
Whatever is going on in Vermont, it is different than in the U.S.
Even more puzzling is that while the Labor Department’s survey of Vermonters found that 2,000 fewer residents reported they were working in August, the department’s survey of employers found that they had 3,700 more people on their payrolls in that same month. It’s hard to reconcile such diverging patterns, but I tend to put more stock in the employer survey as a better indication of what’s happening in Vermont’s economy.
The state’s employers have rehired about half the workers they let go during the worst of the economic lockdown and overall the number of payroll jobs is 10% less than it was in February. That’s 32,000 fewer jobs.
But some parts of the economy are faring much worse than that. Hotels, restaurants and bars employ only half as many people as they did before the pandemic hit. Construction firms have only three-quarters as many employees as they did before, and manufacturing employment is 9% below its pre-pandemic level. Those three industries account for two-thirds of the jobs that have not reappeared and are the hardest hit parts of the economy. I do not expect to see much, if any, employment growth in those industries in coming months.
That’s the economy as of mid-August. Economic indicators from the past few weeks show that there is modest improvement, but none that will likely change the August pattern. Fewer than 800 Vermonters were being laid off each week between mid-August and mid-September. That’s still three times as many as the same weeks last year, but it’s a lot better than several months ago.
Moreover, the number of Vermonters receiving unemployment insurance checks continues to fall. In early July 40,000 checks were written. That fell to 36,000 in early August and in mid-September it was 26,000.
So the number of people being laid off has stabilized, more people are leaving the unemployment rolls, and firms have been hiring 5,000 workers per month for the past few months. Those indicators show an improving economy.
But given the state of the national economy, and the Vermont industries where most of the job losses are evident, I expect those improvements to become much more modest in the months to come. We may continue to have a low unemployment rate, but we’ll continue to see many more people receiving unemployment benefits than normal and monthly job growth will be less than the 5,000 we’ve been experiencing.
