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

Highlights from September 2009 data:

* South Carolina’s unemployment rate rose to 11.6% in September from 11.4% in August. The state’s jobless rate reversed two months of declines during September. This increase is more in line with the overall state of South Carolina’s economy, as it reflects two ongoing negative trends: 1) the size of the state’s labor force continues to drop, and 2) total employment as measured by the household survey continues to shrink. Unlike the previous two months, the September drop in the labor force was relatively smaller than the decline in employment, thereby sending both the number of unemployed individuals higher as well as the unemployment rate.

Between May 2009 and September 2009, South Carolina’s labor force has declined by 32,500 individuals. It has been this sharp reduction in the labor force that has worked to keep a lid on the unemployment rate over the last few months. Even with the slight increase in September, the state’s official unemployment rate continues to understate the severity of the unemployment and underemployment problems we face.

* Total employment in South Carolina is down 3.6% over the last 12 months. Total employment in September was down by 68,700 positions versus September 2008. The year-over-year declines in total employment continue to shrink, consistent with an economy that has already seen the worst in terms of the pace of overall layoffs.

Looking ahead…

This increase in the unemployment rate during September is more consistent with the ongoing weakening of South Carolina’s labor markets. At this point in the economic cycle, month-to-month changes in the unemployment rate are largely driven by difficult-to-predict changes in the size of the labor force. The true underlying condition of labor markets is always hidden well behind the headline unemployment rate. Labor markets are incredibly dynamic, with jobs always being created and lost, people always moving into the labor force and others dropping out of the labor force.

The unemployment rate provides just a quick snapshot of the economy. During July and August, as the state’s unemployment rate was falling, that snapshot was out of focus. September’s increase provides a clearer image of the underlying state of our economy. Once we account for the number of individuals who have left the labor force entirely, as well as individuals working part-time rather than full-time, we get a better sense of the ongoing weakness facing South Carolina households. Because these households also represent consumers, the true unemployment and underemployment conditions also suggest ongoing weakness for consumer spending.

The attached graph provides just one indication of the impact of the declining labor force on the state’s unemployment rate since May 2009. Specifically, the red line charts the state’s official unemployment rate monthly since January 2009. However, what if the 32,500 people that have left the labor force since May 2009 had instead remained in the labor force? Given the actual trends in employment since May, how would this have affected our unemployment rate. If the state’s labor force was currently at the May 2009 level, then the state’s unemployment rate would currently be 12.9% instead of 11.6%. Why does this matter? It is likely the higher number more closely resembles the conditions facing South Carolina households. Add in the individuals working part-time rather than full-time, and the unemployment/underemployment rate is likely over 20 percent.

For additional information, contact: Don Schunk, Research Economist, dschunk@coastal.edu, 843-655-0995 or 843-349-2485.