Colorado Recovery Watch - August 2012
The most recent economic data from the U.S. Bureau of Labor Statistics show a decrease in the state and national unemployment rates, unfortunately for the wrong reasons. The Colorado unemployment rate moved from 8.3 percent in July to 8.2 percent in August while the national rate moved from 8.3 percent to 8.1 percent in the same time frame. The decrease in the Colorado unemployment rate was primarily due to a decrease in the labor force as more than 11,000 Coloradans gave up the search for work in the month of August. Adding to the disappointing news, employment levels remained largely unchanged throughout the state and enrollment in safety net programs such as Medicaid, CHP+ and SNAP increased from July levels.
In August, Colorado’s unemployment rate decreased from 8.3 percent to 8.2 percent. (Figure 1) Although this is the first decrease in Colorado’s unemployment rate since April of this year and is one-tenth of a percentage point lower than a year prior, this month’s decrease is due to workers exiting the labor force, not an uptick in hiring. The August unemployment rate is more than four percentage points higher than when the recession began. The national unemployment rate also decreased, from 8.3 percent to 8.1 percent. Again, this decrease is largely due to a shrinking labor force nationwide.
Colorado’s unemployment rate is now the 21st highest among the 50 states.1 Furthermore, the most recent economic forecast from the Colorado Legislative Council staff (LCS), released September 20, recognizes the weak economy both on the national and state level. Consumers and businesses are holding back on things like spending, hiring and investment because of economic and political uncertainty, according to LCS. As a result, LCS expects economic growth to lose momentum as 2012 comes to a close, nearing recessionary levels in the early part of 2013.2
Current unemployment compared to past recessions
The Colorado unemployment rate remains elevated, at 8.2 percent, 56 months since the beginning of the 2007 recession. The August unemployment rate is only 0.8 percentage points below the highest unemployment rate during this recession, which occurred during September 2010, 38 months after the start of the recession. By comparison, 56 months after the beginning of the 1981 recession (which was the most severe recession of the previous three) the unemployment rate was 6.9 percent, almost two percentage points lower than the high of 8.8 percent set during that recession. The long-term disability associated with the 2007 recession illustrates the severity of the great recession especially when compared with the previous three economic downturns. (Figure 2)
Unemployment rate and the labor force
The unemployment rate has an important connection to the size of the labor force. To be counted as unemployed, a worker must be actively looking for a job. The labor force is defined as the number of workers with a job or actively looking for work. In August, more than 11,000 individuals left the labor force, revealing the primary reason for the drop in unemployment rate. Despite the large single month decrease, the labor force in Colorado remains about 2,500 people larger than it was in August of 2011.
Furthermore, there are almost 37,000 fewer people in the Colorado labor force now, compared with the peak that was hit in April 2009. As workers exit the labor force, the unemployment rate could become a misleading indicator that does not capture the frustration of finding a job in today’s market. On the other hand, when job prospects improve and workers begin to re-enter the labor force, the unemployment rate may not drop dramatically despite encouraging signs such as hiring and employment growth.
The U.S. Bureau of Labor Statistics uses two different surveys to measure employment around the nation. The Local Area Unemployment Statistics survey (LAUS) and the Current Employment Statistics survey (CES). The LAUS includes the self-employed, striking workers and farm jobs while the CES does not. This difference in survey definitions results in to separate measures of employment. However, in August both surveys showed similar results. (Figure 4)
In the state of Colorado, the LAUS survey reported employment at just under 2.5 million people for the month of August. The survey also reported a loss of nearly 9,000 jobs leaving the employment level essentially unchanged. According to LAUS, the current level of employment is 4.15 percent lower than it was in December 2007, the beginning of the Recession. Similarly, the CES reported no change from July to August, keeping the level of employment near 2.2 million people. (Figure 4)
When the recession began in December 2007, Colorado had 2,350,200 jobs. Since then, Colorado has experienced 31 months of job losses. Colorado 's employment trough occurred in January 2010 when Colorado had 141,000 fewer jobs than it did before the recession started. In August 2012, Colorado has 56,900 fewer jobs. (Figure 5)
Colorado's jobs deficit, or the difference between the number of jobs Colorado has and the number it needs to regain its pre-recession employment rate, is 217,100. That number includes the 56,900 jobs Colorado lost plus the 160,200 jobs it needs to keep up with the 6.8 percent growth in population that Colorado has experienced in the 56 months since the recession began. (Figures 5-6)
As the job shortfall numbers show, Colorado has still not recovered from the 2007 recession. Elected officials at the state and federal level need to implement a focused plan to put people back to work, and need to be wary of any decisions that could result in further harm to the economy.
Medicaid and CHP+
Public assistance for health care remains of critical importance for Coloradans in the current recovery. The caseload for Medicaid and Child Health Plan Plus (CHP+), the programs that provide medical assistance to low-income residents and children, has increased more than 65 percent since the start of the recession. So despite increases in unemployment and poverty this year, the rates of families without health insurance has actually declined. The month of August saw a return to caseload growth after a small decrease in July. The total caseload in August grew by nearly 6,500 people to a total enrollment of 655,796.4 (Figure 7) Over the past year, more than 77,000 new patients were enrolled in public health assistance, an 11.7 percent increase from the August 2011 level. The growth of public medical care for Coloradans during the recovery is testament to the programs’ importance to the state’s well-being.
During the month of June (the most recent data available), enrollment in the Federal Supplemental Nutrition Assistance Program increased only slightly from 493,638 people in May to 494,316 in June. Total enrollment is now 6.4 percent higher than it was in June of 2011 and is nearly double the pre-recession level of enrollment. With almost 10 percent of Colorado’s population enrolled in SNAP, the program remains a crucial safety net for those who are still badly suffering as a result of the 2007 recession. (Figure 8)5
August shows troubling signs of a weak recovery
Although August saw a decrease in both the state and national unemployment rates, the economy remains troubled. A large exit of individuals from the labor force was the primary driver for the decrease in unemployment rate. Colorado’s unemployment rate is now 0.1 percentage point higher than the national rate, although this difference is statistically insignificant. Not only did workers leave the labor force, but the level of employment in Colorado remained largely unchanged and a serious job shortfall remains in the state’s working age-population.
Safety net programs such as Medicaid and SNAP, have become an essential tool of survival for many individuals and families throughout Colorado during the recession and the current weak, prolonged recovery. With enrollment up in August the importance of these programs remains clear. As the most recent release from CLS reported the state General Fund finished fiscal year 2011-12 with a surplus of some $523.3 million dollars, policy makers around the state need to recognize that many of our neighbors throughout the state are still suffering from the recession and that any new policies or use of public dollars must be aimed at creating a public benefit for the entire state, especially for low-income Coloradans.6
303-573-5669 ext. 316
1 Economic Policy Institute analysis of U.S. Bureau of Labor Statistics Current Employment Survey data.
2 “Focus Colorado: Economic and Revenue Forecast,” Colorado Legislative Council Staff: Economics Section, Sept. 20, 2012.
3 Colorado Legislative Council Staff for the chart design.
4 Analysis of “Premiums, Expenditures and Caseload Reports,” Colorado Department of Health Care Policy Financing.
5 Analysis of U.S. Department of Agriculture SNAP program data, provided by: “Latest Available Month - State Level Participation,” USDA Food and Nutrition Service.
6 “Focus Colorado: Economic and Revenue Forecast,” Colorado Legislative Council Staff: Economics Section, Sept. 20, 2012.