The Palmetto Insider

The blog of the South Carolina Policy Council

New Unemployment Figures: A light at the end of the tunnel … or just a nightlight?

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Time for a recurring feature here at Palmetto Insider—the monthly take on the recently released unemployment data.

In July, we reported that unemployment is an unreliable figure when it comes to gauging the economy’s health. This is because the unemployment rate undercounts the number of unemployed, masking the state’s shrinking labor pool. It is also because it doesn’t indicate that public sector hiring is outpacing private sector job creation.

What’s the story for the most recent data from July 2010?

  • South Carolina’s unemployment rate increased from 10.7 percent to 10.8 percent
  • The total size of the state’s labor force decreased by 6,682 workers (2,150,200 in June to 2,143,400 in July)
  • Total employment in South Carolina fell by 6,918 (1,919,500 in June to 1,912,500 in July)

While this 0.1 percent increase in unemployment does not seem like much, it suggests South Carolina’s economy is shrinking—literally driving existing workers out of the state.

The last time the labor force was this low was July 2008.

The state’s response is predictable. According to John Finan, executive director of the Department of Employment and Workforce, the Retail Trade and Construction sectors are moving in a lateral motion. He said the government is “committed to assisting job seekers in finding employment.”

But it’s the notion that government is in the business of finding people employment that has our economy in such a pickle. The government’s role should be to protect private property rights and allow entrepreneurs in the market to create jobs and help job seekers find employment.

Between bailouts, health care mandates, and all of the other government interventions, one can understand why the private sector has been slow to recover. The government is sending a clear message— “we are in charge, we’ll fix everything”—that is encouraging many in the private sector to sit on their thumbs. The academic term for this is “regime uncertainty”— a phrase coined by economist Robert Higgs to demonstrate why the recovery from the Great Depression took so long. Higgs writes:

In any event, the security of private property rights rests not so much on the letter of the law as on the character of the government that enforces, or threatens, presumptive rights.

The “character” or attitude of the current regime is intervention first. But by its very definition, government intervention is arbitrary. Thus, there is uncertainty in the private sector.

There is one bright spot in all of this. While total government shed 5,500 jobs this month, the private sector added 6,900 jobs. Most of that gain comes from the Professional & Business Services sector, which increased employment by 4,800 jobs.

The biggest decline in the public sector comes from local government—which cut 3,600 jobs based on the seasonally adjusted data. These are expected losses from the release of summer employees.

South Carolina continues to be above the national unemployment rate, which remained unchanged at 9.6 percent.

Here are the unemployment rates for our neighbors:

  • Georgia: 9.9 percent (down from 10 percent in June)
  • North Carolina: 9.8 percent (down from 10 percent in June)
  • Alabama: 9.7 percent (down from 10.3 percent in June)
  • Tennessee: 9.8 percent (down from 10 percent in June)

Without looking into the details of what is driving the decrease in unemployment in neighboring states, it’s difficult to know what to make of these numbers. But the likelihood is that people are leaving South Carolina for greener pastures.


Written by Geoff Pallay

September 8, 2010 at 3:40 pm

2 Responses

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  1. […] we can afford it. Because, of course, things aren’t getting any better economy-wise here in South […]

  2. […] getting jobs. Which is one reason the state’s unemployment rate has long been among the worst in the […]

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