The following report is an overview by Don Schunk, research economist at Coastal Carolina University, of employment/unemployment data for August 2009 released today by the South Carolina Employment Security Commission and the U.S. Bureau of Labor Statistics.

Highlights from August 2009 data:

* South Carolina's unemployment rate fell to 11.5% in August from 11.7% in July. The state's jobless rate has fallen for the second consecutive month. In a near repeat of the July data, the most recent decline in the unemployment rate was driven entirely by a further decrease in the size of the state's labor force. Between July and August, the labor force declined by 7,900, the number of unemployed individuals fell by 6,100, while the number of employed individuals also fell by 1,800. What's happening here? Yes, the number of South Carolinians officially counted as unemployed has fallen each of the last two months. This happens when either: those individuals find work, or when those individuals become discouraged and drop out of the labor force. Since May 2009, the state's labor force (people either working or actively seeking work) has declined by just over 28,000. This is entirely consistent with the observation that the number of continued claims for unemployment insurance appears to have peaked in April and May. Taken together, the data suggest that the decline in continued claims since spring has been due to individuals giving up on the job search, perhaps coupled with the exhaustion of unemployment insurance benefits.

* Total employment in South Carolina is down 4.1% over the last 12 months. The total job count during August was 78,900 below the August 2008 levels. While the state added 14,300 jobs between July and August, this was due to typical seasonal hiring patterns. On a seasonally-adjusted basis, total employment was flat or slightly down in August, consistent with an economy that is at or near the bottom in terms of job losses.

Looking ahead...

The sharp increases in the state's unemployment rate during the last half of 2008 and early 2009 were primarily driven by incredibly large and rapid job losses. From this point forward, those job losses will be slowly moving towards zero. As we try to pin down the future for the state's unemployment rate, then, we need to focus more on changes in the size of the labor force. Over the last few months we have seen a substantial decline in the labor force. Discouraged workers giving up the job search have worked to reduce the labor force by more than 28,000 people between May and August. As shown below, this is consistent with a peak in continued claims for unemployment benefits in April and May 2009.

Given the recent trends on the employment side, if the state's labor force had simply remained unchanged over that period then the state's jobless rate would be closer to 12.6% right now. At some point down the road, people will begin to search again and will return to the labor force. I continue to expect that at that time we will again see upward pressure on the unemployment rate, unless job growth rapidly returns. While the U.S. recession has likely officially ended, I do not see enough sustained strength in the near term to generate enough jobs for those individuals as they return to the work force. We have turned one important corner: initial claims for unemployment benefits peaked in April 2009. However, as the second graph shows, historically a peak in initial claims is followed by further upward pressure on the unemployment rate for another year or two. For additional information, contact: Don Schunk, Research Economist, dschunk@coastal.edu , 843-655-0995 or 843-349-2485.