12 years of change in D.C. economy, yet some residents remain excluded from employment booms

A recent blog post noted that in the five years after the Great Recession, DC resident employment increased rapidly, but unemployment went down only slowly.

The loose connection in D.C. between resident employment and unemployment is not new, but remains cause for concern. From 2009 to 2014, DC unemployment went down by only one for every increase of ten in employed residents.

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In the 2002 to 2007 pre-recession period, however, the comparable impact of resident employment gain on unemployment was even less. Then the decline was only one-half of an unemployed person for every ten additional employed residents (that is, reduction in the number of unemployed DC residents, 1,041, was only 5 percent as much as the 23,652 increase in resident employment). The strong growth in labor force and resident employment relative to the population overpowers the relationship between unemployment and resident employment in the chart below:

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The relationship between resident employment and unemployment in D.C. was also quite loose in the recession years. From 2007 to 2009, unemployment rose by 15,829, but there was only a decline of 1,920 in employed residents. That is, unemployment rose 8 times faster than the resident employment. In the U.S. the relation was closer to one-to-one, and in the suburbs, less than 1 to 2.image005

Situations in which an increase in employed residents is associated with a relatively small decrease in the number of unemployed are not unique to D.C., but they seem to occur where job growth occurs and the unemployment rate is already quite low.  For example, in the U.S. from 2002 to 2007, the decrease in the number of unemployed was about 10 percent of the growth in resident employment, but the U.S. was starting from a 5.6 percent unemployment rate, close to what some thought at the time was a full employment number. In the DC suburbs, over the 2002 to 2007 period, the reduction in unemployment was about 7 percent of the growth in employed residents, but the suburban unemployment rate in 2002 was 3.4 percent. In North Dakota, as the energy sector expanded from 2009 to 2014, the decline in the number of unemployed was 5 percent of the gain in resident employment, but in 2009 the unemployment rate there was 3.6 percent. These are all instances where the booming economy and a tight labor market invites new working adults to join the labor force.

In D.C.’s case, the unemployment rate in 2009 was 10.0 percent and the bump up in resident employment over the next five years did not translate into more jobs for the existing unemployed.  Even when plenty of people were unemployed in the District, they did not benefit from the economic expansion or found jobs.

The BLS labor force and Census population numbers are summary data snapshots at two points in time. These snapshots, as important as they are, do not give a very good picture of the degree to which changes may be occurring in the composition of the labor force and population that have a bearing on the connection between resident employment and unemployment. But these snapshots do suggest some significant changes have occurred in the dynamics of the DC market over the past 12 years.

This can be seen most clearly in the pre-recession period from 2002 to 2007. DC’s labor force went up by 22,611 over those years while the population increased by only 2,575. Where did the additional labor force come from? Some no doubt came from the existing population as the falling unemployment rate encouraged more people to seek and obtain work. But to get such a large increase from the existing population seems questionable when the 1,041 decrease in unemployment that occurred was such a small percentage of the growth in resident jobs. The most likely explanation is that the growth in the labor force was largely the result of migration patterns, the churn in the city’s population. With little change in the overall level of population, the net result of who moved in and who moved out could easily have produced an increase in persons who were in the labor force and employed.

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Summary labor market and population statistics do not give information on who the unemployed are and how the composition of unemployment may have changed over the last 12 years, but such details are important for understanding current labor market dynamics in D.C. and when considering policy remedies. From numerous studies that have been done in D.C. and elsewhere it would be expected that a large share of the unemployed in D.C. are people lacking job skills and work experience. Beyond that, however, other matters to consider are the degree of turnover among the unemployed, how important the discouraged worker phenomenon is in the composition of measured unemployment in D.C., whether migration patterns that have increased the labor force also contribute in some way to D.C. unemployment, how long unemployed persons have lived in D.C., and whether the operation of the District’s unemployment insurance system has any particular effect on measured unemployment. It would also be useful to know more about how the relationship between resident employment and unemployment described here for DC compares with that of other cities.

What exactly is this data? Labor market data is from the Bureau of Labor Statistics. BLS develops these statistics with the assistance of models, with inputs that include population numbers from Census, unemployment insurance statistics, the American Community Survey, and the Current Population Survey administered by the Department of Labor for and in cooperation with Census. BLS revises data as more information becomes available. The data used here reflect the comprehensive revisions released on March 4 2015 to take account of population and other changes; these revisions were not just to the most recent year but to the entire data series.

Labor market data is the seasonally unadjusted quarterly average for the December quarter for the years shown. The data for the DC suburbs is calculated by subtracting amounts for the District of Columbia from the totals for the Washington Metropolitan Area.

Population numbers for the December quarter are taken from Moody’s Analytics (Economy.com), which derives quarterly estimates from annual Census Bureau population numbers.

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