To the casual observer, Hawaii’s comparatively low unemployment numbers have long been a point of pride.
The state’s unemployment rate was 4.5 percent in December compared with a national rate of 6.6 percent in January, according to the most recent data from the state and federal governments. Hawaii’s rate is the eighth lowest in the country, according to the U.S. Bureau of Labor Statistics.
But the official unemployment rate offers an incomplete portrait of what’s going on in Hawaii’s job market. The Wall Street Journal recently called the unemployment rate one of the “most misleading” numbers that shapes policy. The op-ed also called it a “statistical artifact.”
Hawaii’s unemployment rate doesn’t reveal how many people have to work multiple part-time jobs to make ends meet even though they really want one full-time gig.
“In an ideal world we’d have an account of all that but we don’t have any specifics,” said Bill Kunstman of the state Department of Labor and Industrial Relations. “That’s one of the things that sort of clouds the lens on the unemployment report… a lot of people may have multiple part-time jobs but that’s not how the question (in the monthly state survey) is asked.”
One of the major limitations of the standard unemployment rate is that it doesn’t represent the population of long-term unemployed people who have stopped searching for work.
One of the alternative measures of unemployment used by the labor statistics bureau includes all people who are seeking employment plus anyone who isn’t actively looking for a job but would accept one if the opportunity came up, as well as those who are forced to work part-time even though they’d rather work full-time. Some economists refer to this measure, which the bureau calls “U-6,” as the “real unemployment rate,” because it offers a clearer indication of unemployment and underemployment.
In Hawaii, the “real unemployment rate” was 11.5 percent in 2013 compared with 13.8 percent nationally.
Civil Beat analyzed 10 years of unemployment data and found Hawaii’s “real unemployment rate” fluctuated between 6.2 percent and 7.5 percent between 2004 and 2008 before nearly doubling to 15.5 percent in the year after the recession hit. The rate has been creeping down since it hit a high of 16.9 percent in 2010.
Even with its ups and downs, Hawaii’s main unemployment indicators — both the standard rate and the broader U6 measure — are consistently lower than their national counterparts.
So what is the state doing right?
Whichever measure you use, Hawaii’s unemployment rate tends to fluctuate less — for better and for worse — than unemployment in other parts of the country. Whereas other states might see huge job gains related to growth in industries like construction or oil, Hawaii tends to stay relatively flat.
North Dakota’s oil boom, for instance, has been a huge draw for the state. The population has swelled while unemployment is 2.6 percent, the lowest in the country — and in a range that many economists have described as “full employment.”
Hawaii’s remote location means fewer people tend to flock to the state for short-term booms.
“If you had a construction boom in Vegas, people in New Mexico, California, or Utah just hop in their cars and drive to Vegas,” said Carl Bonham, executive director of the Economic Research Organization at the University of Hawaii. “That’s less common in Hawaii.”
On the other hand, Hawaii is not subject to some of the ups and downs associated with manufacturing industries in other states.
“In Hawaii, you have virtually zero manufacturing,” said Todd Johnson, an economist at the U.S. Bureau of Labor and Statistics. “So in these other states where that is a large proportion of the workforce, when manufacturing is down, they’re going to be having these much higher unemployment rates.”
In Hawaii, the government is the biggest employer in the state. (This includes local, state, federal and military jobs.) The federal government shed 12,000 jobs in January, so it remains to be seen whether the impact of those most recent losses to Hawaii will lower the state’s unemployment rate. (Hawaii’s unemployment numbers for January are expected later this month.)
Federal data shows Hawaii has lost federal jobs every month for the past sixth months. Because this measure is seasonally adjusted, recent months in which federal jobs appear to have been added amount to a loss when compared with the same period the year before.
The second-largest industry in Hawaii is hospitality. “And hospitality has done quite well compared with several other industries,” state labor spokesman Kunstman said. “The other big one is trade, transportation and utilities, and that’s been kind of up and down but I believe it’s been doing better.”
The strength of leading industries is only one more element in Hawaii’s employment situation.
Kunstman points to concern over the shortened duration of unemployment benefits during this recession compared with previous economic downturns. Such benefits historically have helped keep the economy afloat in periods of sluggishness.
“Macroeconomically, it’s going to be a problem because unemployment benefits are meant to be a stimulative,” he said.
The many unemployed people whose benefits have come to an end no longer have that money to spend. President Barack Obama said at the White House last month that there are nearly 4 million long-term unemployed Americans.
For economic recovery to become palpable to the people of Hawaii, job growth will likely need to continue.
On the national level, more people were looking for jobs last month than were searching the month before — a likely sign of restored optimism about job availability. Hawaii, too, has seen its labor force grow slightly for four straight months. As UH’s Bonham points out, the size of the labor force directly affects the unemployment rate, which means looking at the labor force is just as important as tracking the jobless rate.
“The unemployment rate is a difficult statistic to use to gauge how well an economy is really doing,” Bonham said. “If Hawaii’s unemployment is kicking up because people are entering the labor force, that could be good news because they are finding the prospects for jobs are better. And yet when you look at a lot of measures, Hawaii still does look like it’s doing a little bit better than the nation as a whole. Not tremendously better. So you get a picture of Hawaii, yes, recovering, but still having a ways to go.”