Letter to the Editor

Comment on fedgazette article on underemployment and labor shortages.

Published September 1, 2002  | September 2002 issue

To the Editor:
I was drawn to your July fedgazette article on underemployment and labor shortages. We are researching these same issues here, following lots of local statistical and anecdotal stories, like the ones you chronicle in Montana, North Dakota and South Dakota. Published official estimates showing county unemployment rates of around 1 percent, 2 percent or 3 percent have driven economic development and workforce professionals to fund studies that document "underemployment" in their communities. That is, while acknowledging the ostensible full employment in their county, they make the case that there are still plenty of workers available if one takes into account those working part time wishing to work full time, or those working in occupations for which they are overqualified.

While this is a valid research question and a partial explanation for the fact that employers can find workers in counties with such low unemployment rates, I believe there is another explanation—local labor force estimates often widely understate the amount of unemployment in counties. I looked up the recently released census unemployment data for some of the counties you mention and compared those to the estimates published by the various state agencies in March of 2000—the time of the census. For some of the communities you cite, the census points to labor slack, not labor shortage. In Brookings County, S.D., the census reports an unemployment rate of 4.9 percent, well above the 1.2 percent estimated at that time by the state labor department. Similarly, the census reports that Ramsey County, N.D., had an unemployment rate of 7 percent, not 4.9 percent as estimated by the state. That is, there were actually plenty of unemployed persons available for work.

On the other hand, it was encouraging to find that the census estimates for the other counties mentioned (Flathead County, Mont., McIntosh County N.D., Bismarck, N.D., Beadle County S.D., Codington County S.D.) were fairly close to those published earlier by the state labor departments.

I found here in Kentucky that the state agency-generated county labor force estimates for March 2000 rarely aligned to those reported by the census, with the census finding higher unemployment rates in 93 of the state's 120 counties. In 19 counties, the state had underestimated county unemployment rates by more than 3 percentage points, and in two counties by over 7 percentage points. The decennial census is the only true household survey-based estimate of labor force status of the population in local areas. It appears that the previously published estimates by state labor agencies (typically showing very low unemployment rates) induced some economic development and political leaders to react by commissioning the sort of local underemployment studies you discuss.

Thanks for writing up these cases. We can all learn from a statistical autopsy of recent labor market conditions, and from the reports from people on the ground who deal with workforce issues daily.

Paul Coomes
Professor of Economics
University of Louisville
Louisville, Ky.