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Arizona Unemployment Rate Drops To 5.9%

Stuart Kinlough/Getty Images/Ikon Images

By Howard Fischer
Capitol Media Services

PHOENIX -- The state's jobless rate shrank by close to 45 percent last month.
At a press conference Thursday, Gov. Doug Ducey called the announcement of a 5.9 percent seasonally adjusted employment rate ``a really good sign that people are getting back to work.''
But there may be less there than meets the eye.

A good portion of the drop in the seasonally adjusted unemployment rate from 10.7 percent in July has nothing to do with a bunch of Arizonans suddenly finding work. It's because some just gave up.
A lot of them, in fact.

The state Office of Economic Opportunity reports the labor force declined by more than 145,000. By contrast, the overall employment levels -- the number of folks actually working -- went up by just 32,109.

Doug Walls, the agency's director of research administration, said that huge drop is unusual.
``On a monthly basis, it's common to see the labor force fluctuate a couple of thousand or in the tens of thousands,'' he said, Walls called that 145,000 drop ``the largest decline on record ... back to 1990.''

In fact, Walls said, the state's labor force participation in August -- the number of people working or looking for work as a percentage of the total adult population -- dropped to just 58.5 percent. That's the lowest rate on records going back to 1976.

Ducey dismissed all that as irrelevant, saying he doesn't believe that having fewer people looking for jobs -- or not -- affects the unemployment rate.
``That's not how those numbers work,'' the governor said.
But the figure is a simple question of math.
Surveyors ask people if they're working and, if not, are they looking. Those two figures combined create the labor force which, as of August, was 3,420,111.
Into that is divided the number of people who say they were looking for work. In August, that figure was 202,449 versus 380,231 in July.
So for August, the number looking number divided into the labor force level creates a 5.9 percent jobless rate.
By contrast, the labor force for July was 3,565,784 and the number looking for work was 380,231 -- the 10.7 percent figure for that month.

So where did those people go?

"There are a lot of different reasons why an individual might exit the labor force,'' Walls said. That can include not just retiring but loss of a job and waiting for it to return.
"We're not able to dive into those and break those out at this time,'' Walls said, with no current data on people who the federal government classify as "discouraged workers.''
The governor conceded that could be a factor.
``It's not unusual in an economy, especially when you have some of the challenges that we've had across the country, that people who are displaced get discouraged,'' Ducey said. But he insisted that is not a function of a weak economy.
``They didn't disappear,'' he said.
``They haven't yet re-engaged,'' Ducey continued. ``They need to know that there are positions available for them.''

The state did gain jobs last month. And there were some particular signs of life in the retail sector as Walls said people are out shopping again, particularly for durable goods, generally defined as items that last more than three years.
But other figures from Thursday's report also suggests continued weakness in Arizona's labor market despite that 5.9 percent jobless.

There was an overall gain of 79,200 jobs between July and August. But 44,600 of those were in state and local education -- usually folks not on contract like bus drivers, cafeteria staff and custodians -- with reemployment typical at this time of the year. And another 6,900 of the jobs gained were at private schools, largely postsecondary education institutions, also typical for August.

Factor those out, it puts the month-over-month job growth in the private sector at just 23,500. And it still leave private sector employment in Arizona 94,700 less than the same time a year earlier.