Maine’s December Unemployment Rate

Maine’s December Unemployment Rate

January 22, 2010 Posted by J. Scott Moody - No Comments

Today the Maine Department of Labor released December’s unemployment rate.  The unemployment rate increased by 0.3 percentage points to 8.3 percent in December from 8 percent in November.  The increase in the rate points to some interesting dynamics.

First, after four straight months of gains, the employment level fell by 1,333 jobs in December which is not a good sign–although some of this may just be post-Christmas losses in retail.  Second, thanks to the previous gains in employment, folks that had dropped out of the labor force were lured back in–711 folks rejoined the labor force in December.

Unfortunately, the new entrants to the labor force simply rejoined the ranks of the unemployed along with the 1,333 who lost their job.  This double-whammy lead to the 0.3 percentage point jump in the unemployment rate.

I bring this up because this will be an important dynamic that plays out in Maine’s labor force over the next 6 to 12 months.  Many folks who dropped out of the labor force will be tempted to jump right back in at any hint of economic improvement.  Yet, as December shows, the economy will be up-and-down all year long–with a better than 70 percent chance for a double-dip recession nationally (assuming no new federal stimulus).

As such, predicting Maine’s unemployment rate will be very tricky.  Even if job growth picks up, new entrants into the labor force could swamp the gains in employment and lead to higher unemployment rates.  On the other hand, job losses could be more than offset by folks leaving the labor force leading to lower unemployment rates.  So as I’ve been saying in previous blogs, solely watching the unemployment rate is not enough in understanding the future state of Maine’s labor force.