Unemployment numbers in Virginia paint an inaccurate picture

By Kaitlyn Speer | Watchdog.org, Virginia Bureau

ALEXANDRIA, Va. — Virginia’s unemployment rate increased for the second straight month in June. While the numbers may be cause for concern, one economist says there’s more to the story.

Virginia’s jobless rate stood at 5.3 percent in June, the Virginia Employment Commission reported last week, up from 5.1 percent in May. Virginia is one of only 14 states in which unemployment rose in June, while the rate declined in 22 others. It stayed the same in the remaining 14 states.

Keith Hall, a senior research fellow at George Mason’s Mercatus Center in Fairfax, said the numbers reported by the commission aren’t a good indicator of the real economic situation. That’s because there’s such a high margin of error in the state rate — one percent — versus one-fifth of one percent for national unemployment numbers, Hall said.

“If you really look at the small changes, you see a lot of false signals,” he said. “Much more accurate is the total nonfarm payroll jobs. If you look at that, you’ll see job growth.”

The Bureau of Labor statistics reported 3,770 nonfarm jobs created in June.

Besides, the unemployment rate doesn’t take into account the number of people who drop out of the labor force, said Brian Baugus, professor of economics at Regent University in Virginia Beach.

Participation in the labor force dropped to 63 percent, according to a recent report.

Baugus did say there is some good news.

“First of all, we are below the national average. That’s something, and of course, we are below the peak of a couple of years. The longer term trend is positive.”

Unemployment rates in Virginia cities vary, especially between say northern Virginia and southwest Virginia.

“The thing we need to be thinking about, is that it’s a very an uneven situation,” Baugus said. “(When we) talk about the government’s effect on unemployment, look at the suburbs all well below Virginia’s unemployment rate.”

The unemployment rate is 3.7 percent in Arlington as of March 2014, and Fairfax had an unemployment rate of 4.1 percent — both well below the current average.

In the coal region, along with some of central Virginia and parts of the Shenandoah Valley, unemployment is much higher.

“Those folks are probably suffering 7 or 8 percent,” Baugus said. “That’s the bigger issue — pockets doing well and pockets that aren’t.”

Virginia employment figures are also largely propped up by federally funded jobs.

A study published last year by the Mercatus Center said about 30 percent of Virginia’s workforce is employed by government contracts, compared to 20 percent nationwide.

“But for the seven in 10 working Virginians not directly or indirectly on government payrolls — Virginia’s “real” private sector — labor market conditions have remained grim since 2007,” the report said.

–Kaitlyn Speer is an intern for Watchdog.org, Virginia Bureau. She can be reached at kspeer@watchdog.org or on twitter at @KSpeer11.