The Coronavirus pandemic has caused massive numbers of people to lose their jobs. Georgia’s official unemployment rate is 9.7%. However, as we reported last week , many others are not employed but do not appear in the common reported unemployment number. 

 

A top goal of policy makers, and indeed all Georgians, should be to see people return to work as quickly as possible. Work is the best path to financial independence and a flourishing life.  

 

As we endeavor to rebuild our economy, we must look to remove barriers people face in returning to work. One significant barrier many people face is a criminal record. For those with a criminal record who lost jobs due to the pandemic shutdown, finding work again could be difficult. For ex-offenders who didn’t have a job, the task of finding one just became even more difficult. Our research estimates that approximately 250,000 healthy working age men had no job prior to the pandemic. The reasons for their lack of employment vary, but for many, a criminal record is the barrier keeping them out of the job market.  

 

What can be done to address this significant problem? In recent years, Georgia has focused on prison reentry programs meant to assist folks as they transition back into society. This work is important and must continue. But for those already back in society, other assistance is needed.

 

With Senate Bill 288, the Georgia Legislature has the chance to aid ex-offenders looking for work. The bill would allow an ex-offender, who has served his or her time and stayed out of trouble for a period of time, the opportunity to have certain non-violent misdemeanors expunged from the record. This will allow for an easier transition back into the workforce for a segment of Georgia’s population, who have paid their debt to society and stayed on the straight and narrow.

 

The benefit to our state in passing this legislation comes in several ways: Ex-offenders with jobs are less likely to recidivate. People who don’t get in trouble again cost the taxpayers less money and actually join the ranks of taxpaying citizens.

 

Ex-offenders with jobs are able to support their families, reducing poverty and lifting up the communities in which they live. If we want to break the cycle of poverty in our state, we must provide a path out for families. A job is the first step on the path to self-sufficiency and a flourishing life. 

 

We are in the final week of the 2020 Georgia legislative session. There are many important issues being debated and policies being discussed to make our state better. At the top of the list should be providing a path forward for folks who need our help. SB 288 is an excellent step in the right direction.

Don’t be fooled by Georgia’s unemployment rate. While many are breathing a sigh of relief that barely one in ten Georgian’s are out of work, the reality is much worse.

Georgia’s unemployment rate (U-3) dropped to 9.7% last month—according to official numbers from the U.S. Bureau of Labor Statistics released today.  

This number is adjusted for seasonal fluctuations, if that still makes sense given the current conditions. Otherwise, Georgia’s rate would be 9.5%, relatively close due to the time of the year. The Bureau of Labor Statistics regularly makes adjustments to smooth out the data from the impact of seasonal employment, such as temporary employment during the Christmas season, teenagers working as summer camp counselors, or landscaping jobs dependent on the growing season. The smoothing out of data is intended to help economists detect trends more easily. 

The sense of relief comes from more dismal expectations that the unemployment rate itself could have been much worse—especially considering the unprecedented havoc on the economy from COVID-19—and from the encouraging news that Georgia is among the 38 states where the rates are coming down. 

 Georgia’s unemployment rate is among the lowest of the states. The nation’s rate was 13.3% (adjusted). Three states—Nevada, Michigan, and Hawaii—had seasonally adjusted rates of 25.3%, 22.6%, and 21.2%, respectively. 

However, one in ten workers unemployed is still very high. There were 475,338 unemployed Georgians last month (seasonally adjusted). That number was 161,147 in February. The state went from a historic low unemployment rate of 3.1% (adjusted) to a record high of 12.6% (adjusted) in just two months. 

 

 

The Loose Link

The situation is actually worse than what the unemployment numbers show. First, there is a loose relationship between employment and the labor force. The Bureau counts only those who are employed or actively looking for work as part of the labor force. 

When the economy does well and jobs are more plentiful, the labor force grows in size because more people decide to enter or reenter the labor force. However, when the economy grows sluggish and jobs become harder to find, the opposite happens: the labor force shrinks.

The labor force participation rate demonstrates this well-known phenomenon. The chart below illustrates this relationship in Georgia. By definition, the labor force participation rate shows the percentage of workers in the labor force to the potential population of those who could be in the labor force, defined as all individuals age 16 and older who are not institutionalized, such as in prison, and—as the Bureau of Labor Statistics defines it—not in the military. 

Of course, there are other factors at work. The aging population is pushing down the participation rate. An issue of great concern is the increasing proportion of individuals in their prime working age who have dropped out of the labor force altogether. This has been a topic of study from across the political spectrum, and recessions seem to only aggravate the trend. 

The size of the recent labor force loss is astounding. A record number of 262,577 Georgians dropped out of the labor force in April. This is the seasonally adjusted number. The unadjusted number is 286,733. 

The labor force bounced back just 0.1% in May, but still the net effect is that 256,208 individuals dropped out since February. 

What this all means is that 570,399 Georgians either lost employment or dropped out of the labor force since February. If you add back in the 161,147 who were unemployed in February, there are at least 731,546 workers either unemployed or who dropped out, and 751,116 workers if we use unadjusted numbers. 

 

 

However, we are still missing one part of the analysis. Prior to February, the labor force was growing and grew at a rate of 1.6% from the prior year (unadjusted). This implies that the labor force number should have grown over the last three months, perhaps to 5,208,019 in May (adjusted). This would make the combined unemployment/labor force problem closer to 15.0% (adjusted), or 14.8% (unadjusted).

It Gets Even Worse

The official unemployment rate does not capture everyone, including those who are working part-time but want to work full-time. For this, we must turn to the alternative measurement of labor underutilization known as U-6, the U.S. Bureau of Labor Statistics’ broadest metric. The national number jumped from 7.4% in February to 22.4% in April, and back down to 20.7% in May. 

Unfortunately, the Bureau does not publish U-6 on a monthly basis for the states. For statistical reliability reasons, they only provide annual rolling averages each quarter year. 

Most recently, Georgia’s annual rolling average U-6, ending the first quarter of 2020, was 6.7% compared to the national rolling average of 7.2%. This implies that Georgia’s U-6 is probably around 19.3%. Combining this number with those who dropped out of the labor force yields an impact well above 20%, probably around 25%, or one-in-four Georgians adversely affected, instead of just one in ten.

 

Note on Sources: All data came from the U.S. Bureau of Labor Statistics, except for the identification of the recessions that came from the Business Cycle Dating Committee of the National Bureau of Economic Research.  

Erik Randolph is Director of Research at the Georgia Center for Opportunity. This article reflects his calculations, analysis and opinion and does not necessarily reflect that of the Georgia Center for Opportunity.