Rhode Island’s December unemployment rate would have been 14.2% – more than three percentage points above the official 10.8% rate – if residents hadn’t dropped out of the work force in droves over the last half-decade.
In December 2006, 69% of the state’s civilian noninstitutional population was in the labor force: 577,158 residents out of 837,598, a statistic also known as the participation rate. Only 28,272 of those residents didn’t have a job that month, giving Rhode Island an unemployment rate of 4.9%.
Over the next five years, the civilian noninstitutional population grew to 851,122 – but the percentage of the population in the labor force dropped from 69% to 66.3%. (Put another way, 586,546 Rhode Islanders out of 851,122 were either working or looking for work as of December.)
If the participation rate in December had been 69% instead of 66.3%, the number of workers – and therefore the number of people classified as unemployed, since by definition those people didn’t have a job – would have been significantly higher, pushing December’s unemployment rate to a whopping 14.2%.
That’s not to say Rhode Island’s unemployment rate is “actually” 14.2%. Those 22,310 people really aren’t in the labor force, whatever their reasons, so they don’t get counted. (As a comparison, the state’s “underemployment” rate, which also counts underemployed and discouraged workers, averaged 18.6% in 2011.)
It’s a reminder, though, that the official unemployment rate only shows part of the jobs picture – and statistics like this may help explain why Rhode Islanders were the gloomiest in the country about the economy last year.
For what it’s worth, the hope among economists and other analysts is that when the Labor Department does its annual revisions to the employment data in March, it will show Rhode Island’s situation in 2011 wasn’t as dire as it looks using the current numbers. Time will tell.
Update: Bloomberg News has a story about the same phenomenon happening at the national level.