Number Crunch: Why South Carolina’s, and Sumter’s, unemployment rate can be misleading

On the surface, Tuesday’s report by the Bureau of Labor Statistics saying South Carolina’s seasonally adjusted unemployment rate has fallen to its lowest point in more than 15 years should be cause to celebrate.

The underlying factors slightly beneath this widely-reported figure, however, can be a reason to curtail that celebration, if not trigger some alarm.

According to BLS, the August 2016 unemployment rate for the Palmetto State sat at 5.1 percent, its lowest point since a 4.9 percent rate in April 2001.  Not only is this figure down roughly a half point from a year ago (which was the starting point of a six-month period where the rate remained essentially unchanged), but it has dropped somewhat rapidly from 5.8 percent just four months earlier.

So, at first glance, using only this figure, it would appear South Carolina might be coming out of an economic malaise and moving toward a more prosperous future.  And, it still might be doing so, but according to the data, if it is, there will be fewer people enjoying it.

labor-forceThat’s because, according to the labor force figures that make up the unemployment rate are showing a steady decline of South Carolinians participating in the state’s job market.  During the past four months, according to the BLS’s seasonally-adjusted figures, more than 18,200 people have left the state’s labor force.  For comparison, that’s roughly the labor force of nearby Clarendon County.

In fact, during that same time, the state’s rate has dropped despite actually losing about 1,000 jobs statewide.  One way to lower the unemployment rate is to gain jobs.  Another is to lose people looking for work in the first place.  According to the BLS, South Carolina is currently doing the latter.

The same thing is occurring in Sumter, although here the unemployment rate as of July 2016 (the most recent figures) sits at 6.4 percent, the highest of any metropolitan area in the state.

Looking back four months as we did with the state figures (but this time the period is from March to July) Sumter has seen its unemployment rate drop from 6.6 percent.  But, like the state figures, the Gamecock City has done so not by gaining jobs.  BLS says Sumter actually lost about 350 jobs during this time, but was able to see its unemployment rate drop by also losing about 480 people from the local labor force.

Still, it should be pointed out that local figures are not seasonally adjusted, and can fluctuate quite a bit more than on the state level.  Still, a lack of growth over a long period can also be concerning, and Sumter’s current labor force is below what it was a decade.

But what this also means is that a future unemployment rate increase should not necessarily be interpreted as a negative and could actually be a positive indicator, once again, depending on the underlying numbers.  An increasing unemployment rate doesn’t necessarily mean a loss of jobs, but could mean more people are ready to engage in the job market.

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