The monthly report on employment and unemployment showed yet another decline in the Arkansas unemployment rate in May: the rate declined 0.1% to an all-time low of 3.8%. Over the past 12 months, the unemployment rate has fallen 1.6% — the second-largest decline in the country (next to Tennessee’s 1.7%).
The statistics underlying the falling unemployment rate were less dramatic than earlier in the year: The number of unemployed declined by 1,027 and the number employed increased by 1,073. As a result, the size of the labor force remained approximately unchanged. This stands in contrast to the first three months of the year, when employment and labor force growth exceeded 10,000 per month.
Although there is some reason to be skeptical about the magnitude of the employment gains underlying the unemployment rate decline, it is clear that unemployment is declining. The number of unemployed has fallen every single months since February 2011, when it stood at nearly 115,000. The number of unemployed in May was down to 51,773.
Yet even taking the 3.8% unemployment rate at face value, today’s low unemployment arises under different circumstances than previous episodes of low unemployment. In particular, labor force participation remains low. As shown in the chart below, the last time that unemployment declined to a cyclical low was just about 10 years ago (2006). Unemployment was down to 5.0%. At that time, however, the employment-population ratio was around 64%. In 2016, while the unemployment rate has fallen below 4%, we only have an employment-population ratio of just over 56%. So the percentage of Arkansans with jobs is presently 8 percentage points lower than it was a decade ago.
One important reason to question the statistics derived from the household survey is the conflicting information from the payroll survey. Nonfarm payroll employment rose by 1,200 in May–about in line with the increase in household employment. Over the past 5 months, however, the net change in payroll employment has been -800, compared to an increase of 36,778 reported in the household data. Payroll employment is 22,100 higher than it was in May 2015, but most of that increase took place in the latter months of 2015.
The monthly change in payroll employment was dominated by an increase of 2,200 jobs in Education and Health Services — all of which was accounted for by rising employment in the health care sector. Total employment in goods-producing sectors was down for the month, and changes in employment by service-providing sectors was mixed. Over the past year, the strongest sectors continue to be Education & Health Services, Professional & Business Services, and Retail Trade.
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*Seasonally adjusted data for Arkansas nonfarm payroll employment, reported in a format compatible with the monthly news release from the Arkansas Department of Workforce Services, can be found here: Table-Seasonally Adjusted NFPE.