Maine Jobs versus Employment
In my previous blog, I noted the apparent discrepancy between a shrinking labor force but increasing employment. The answer may lie in the difference between the definition of jobs and employment. “Employment” is a term used in the unemployment survey while “jobs” is a term used in the wage and salary employment survey both of which are published by the Maine Department of Labor. The key difference between employment and jobs is that employment includes the self-employed whereas jobs only include those employed by someone else.
The attached chart (click “continue reading” to view chart) shows the growth in employment versus jobs since the recession began in January 2008. Overall, employment and jobs closely track one another with a few exceptions. However, one of the exceptions occurred in October 2009 where employment went up while jobs went down. This suggests that employment went up because of increased numbers of self-employed.
The problem I have with this is that self-employment is not as economically stable as jobs, especially in a recession. Some would argue it is a form of “under-employment” which is a situation where a worker, while employed, is earning less than before–a prime example is someone going from full-time work to part-time work.
As a result, the unemployment survey is implicitly making a judgment that self-employment is the economic equivalent to a full-time job when it accepts, at face value, someone reporting in as self-employed. This is an open question and certainly more so during a recession.
Therefore, the data suggests that the decline in unemployment was a result of two factors. First, more than half of the unemployed gave up and dropped out of the labor force. Second, many of the remaining joined the ranks of the self-employed which is like leaving one foot in the labor force and one foot out of the labor force.
However, since there is no official category for them, they are classified as employed. Only time will tell if they are truly in long-term employment positions, but with jobs declining it appears their grip on employment is tenuous at best. So it’s best to take the apparent dip in unemployment in October (see previous blog) with a big grain of salt.