5 Unemployed Workers for Each Available Job in US

As of June 2010, there are five people competing for every available job in America.  There are about three million job openings while there are approximately 15 million people unemployed. 

The data for the national estimates were provided by the US Bureau of Labor Statistics.  Due to small sampling size, there is no federal or state source of data available to estimate the number of job openings at the state level.


The number of unemployed workers looking for a job would actually be more than five if you counted those workers who’ve given up looking for a job.  Furthermore, there are millions of part-time workers who are not technically counted in the above total, but if a full-time job were available, they would take it. 


The US unemployment rate is 9.5 percent, but the total unemployment rate including discouraged workers and part-time workers who would prefer full time work is 16.5 percent.  


Workforce West Virginia released their unemployment figures for July 2010 and has reported a one-tenth increase in the seasonally-adjusted unemployment rate.  It now stands at 8.6 percent. 


The Historical and Future Decline of the Coal Economy

A few blogs posts ago, I showed a chart that illustrated the historical decline in coal employment and production in West Virginia. In 1975, the coal industry directly employed 55,000 workers and accounted for about 20 percent of our state’s economy (GrossState Product).  Today, the coal industry directly employs 19,000 workers and makes up just six percent of our state’s economy.

So, what does the future hold for the coal economy in the Mountain State? Both West Virginia University  and the U.S. Energy Information Administration are forecasting a decline in coal production over the next 20 years. However, there’s a sizable gap between there respective forecasts. EIA is projecting a decline of 35% (164m tons to 107m in 2030) and WVU is expecting a 17% decline in production (158m tons to 130m in 2030). Either way, the trend is downward. 

It’s important to note that both forecasts are based on 2009 state and federal laws; so neither takes into consideration MTR regulations or pending climate change legislation. The projected decline is based primarily on economic forces out of the state’s control, such as lower labor productivity (short ton per worker), thinner seams, and competition from other coal producing regions (e.g. Powder River Basin) and for other energy sources like natural gas (DOE predicts that 90% of new power plants built in the next 20 years will burn natural gas). 

In the face of further erosion of coal-related jobs, you’d think West Virginia’s Congressional delegation would be trying to develop new strategies to diversity and transition our state economy. One great place to start would be heed the call of the late Senator Byrd to join others in passing a comprehensive clean energy and climate change bill that protects our workers and communities. As the ole political saying goes, you’re either at the table or on the table. 



Making economic projections isn’t always easy.

Economic projections play an important role in the budget process in West Virginia. Each year, the West Virginia State Budget Office publishes the Executive Budget, which includes an economic forecast. The economic forecast projects employment numbers, population growth, the unemployment rate and many other important economic indicators for the next several years. These projections help estimate future revenues and can be used to set the state’s budgetary priorities. The past few years the economic forecast has been made by Dr. George W. Hammond, the Associate Director of the Bureau of Business and Economic Research at West Virginia University.

Dr. Hammond isn’t the only one making economic projections for West Virginia, plenty of other groups do as well. Moody’s Analytics also makes similar projections. The following chart compares projected unemployment rates for West Virginia made by the BBER at WVU for the Executive Budget and those made by Moody’s Analytics.
Source: FY 2011 WV Executive Budget and Moody’s Analytics
As you can see, the two projections are a little different, but even small differences can have a big impact when we are deciding our state’s future. And it also goes to show that even experts, using the same information, can disagree.
And even experts can get it wrong. This next chart shows the projections made by Dr. Hammond and the BBER in November of 2008 and again in November of 2009.
Source: FY 2011 WV Executive Budget and FY2010 WV Executive Budget
This time there is a pretty significant 2-3 point difference in the projections, even though it’s the same people making the projections. It just goes to show that all attempts to predict the economic future should be taken with a grain of salt. Even as late as November 2008, as the financial system system came crashing down and the housing bubble had completely burst, WVU predicted that the state’s unemployment rate would be below 6 percent, which is a far cry from 8.6% (July-2010).

Jobs bill reduces deficit, not the other way around

As one of her reasons for voting against The Education Jobs and Medicaid Assistance Act (a.k.a. jobs bill), Congresswomen Capito stated in the Gazette this morning that “this bill [would] add to our already bloated deficit.” Leaving aside for a moment that Capito bears significant responsibility for our large budget deficits, the assertion that the jobs bill adds to the deficit is unsubstantiated and wrong according to the CBO, which says the bill would reduce the deficit by $1.4 billion over the next 10 years.

 Gazette reporter Alison Knezevich did a great job by including this fact in the article. Alison avoided the classic journalism fallacy of  “He Said, She Said” that often gives equal weight to both sides even if one person is wildly off the mark. 

Job Killing Taxes and Bad Arguments: Should West Virginia Get Rid of the Business Personal Property Tax?

Here is an opinion piece in the State Journal discussing the business personal property tax that makes many of the same mistakes others make when arguing for business tax cuts. West Virginia taxes business personal property which includes manufacturing equipment and machinery. While West Virginia isn’t the only state with the tax, several states do not. The tax is a popular target for attack, and this article is no different. The tax is described as a”destructive” and “horrid policy” that anyone with common sense knows is a “job killer.” The argument goes that since West Virginia taxes business capital, capital intensive businesses will choose to locate outside of West Virginia in order to avoid the tax. The argument seems to be sound and is easy to understand, but it makes the same mistakes that “business climate” indices make.

First, it doesn’t make any sense to look at one tax, or in this case, one part of one tax, as the driving force behind job creation and business location. The marginal tax rate on new business investment, not the average tax rate on existing business capital, is what can have an effect on business investment. With the availability of deductions and credits, it’s possible to have low or even zero marginal tax rates on new investments, while having a sizeable average tax rate on existing business capital. 

Second, any one particular business tax is typically only a small proportion of total business taxes. When businesses do consider taxes, they look at all their taxes, not just their personal property taxes. And if they do look at property taxes, they’ll see in West Virginia, despite taxing real and personal property, property taxes are pretty low. According to the Council on State Taxationboth real and personal business taxes made up about 29 percent of the total business taxes paid to state and local governments in West Virginia. This is below the national average of 36 percent and below that of nearly all our neighboring states. So a business that stays out of West Virginia to avoid to the personal property tax, would likely end up paying even more in real property taxes. 

Third, while any one tax is a small proportion of total business taxes, business taxes are an even smaller proportion of the costs of doing business. State and local business taxes are typically 1-2% of the total cost of doing business. The costs of utilities, occupancy, transportation, and labor are all more significant. Variations in taxes among states can be easily made up for by variations in these other, more significant costs. For example, West Virginia’s average hourly wages are significantly lower than any of its border states. Kentucky’s average hourly wage is $1.27 higher than West Virginia while Maryland ranks highest at $22.01 per hour. This means that the differential in wages between West Virginia and its border states would far exceed the savings from the proposed elimination of the business personal property tax.

In fact, West Virginia has one of the lowest costs of doing business in the country. The low costs of labor and utilities more than offset differences in taxation.

Fourth, we know that businesses look at more than just taxes when deciding where to locate. In fact, taxes are the least significant cost factor in business location decisions. The costs of labor, transportation, utilities and occupancy all outweigh taxes by far when businesses are deciding where to locate.

Finally, public services play just as an important role in business location decisions as the cost of doing business. Education is the most important public service business look at when making location decisions. The State Journal says that the any economist would call the business personal property tax a job killer. Economist Timothy Bartik, of the Upjohn Institute, has stated*,”Business tax reductions financed by cutting education or infrastructure spending will probably destroy jobs.” And according to our analysis and the State Tax Department, the business personal property tax contributed about $160 million to the public school system in 2009. Exempting business personal property would costs schools about $85 million each year, not to mention the millions that county and municipal governments would lose.

And don’t think that by cutting taxes, economic activity will increase enough to offset revenue losses. We have been down this road before. Our analysis, detailed in a forthcoming report, shows that cutting the business personal property tax would result in a net tax revenue loss. And, any increase in economic activity would be lost if public services were cut. I don’t see schools in the state improving their quality with an $85 million budget cut. It’s very possible that the results of a tax exemption for business personal property would make the state less attractive to businesses.

The tax itself may not be a job killer, but exempting it certainly could be.

*Bartik, Timothy J.1992. “The Effects of State and Local Taxes on Economic Development: A Review of Recent Research.” Economic Development Quarterly. p.109.

Has the recession changed West Virginia’s economy?

Most agree that the Great Recession began in late 2007, but we’re a little behind in West Virginia. When it comes to jobs, the recession began to affect West Virginia in October of 2008. Between October 2008 and January 2010, West Virginia’s economy lost 32,400 jobs. Since then, the state has slowly added 11,600 jobs. So, at least when it comes job creation, things seem to be improving, albeit not enough to have an effect the unemployment rate.

Total non farm employment, WV – Source BLS
Off all the industries in the state, manufacturing and construction suffered the most. Construction saw a loss of 7,800 jobs, representing almost a quarter of all jobs lost. Manufacturing lost 7,200 jobs, over 22 percent of all jobs lost.
Total Construction Employment, WV – Source BLS
Since bottoming out earlier this year, about 2,000 construction jobs have been added to the economy. The same is not true however, for manufacturing jobs.
Total manufacturing employment, WV – Source BLS
Manufacturing jobs were already on the decline, the recession only accelerated the loss. A similar graph can be made with employment in non durable goods. 1,400 non durable goods producing jobs were lost between October 2008 and January 2010, but it was really just a continuation of a long trend.
So what does this all mean? Many of the jobs West Virginia lost in the recession may not be coming back. Manufacturing and non durable goods production represented over a quarter of the jobs lost in the recession. But both these sectors have been steadily losing jobs for over a decade.  They are probably not ever going to recover to pre-recession levels. And since a quarter of the jobs lost aren’t likely to bounce back, this means we are in for a long, slow recovery. And in order for that recovery to happen, we will need a fundamental change in the structure of the state’s economy.

Social Security Prevents Poverty for 120,000 of West Virginia Elderly

According to the national Center on Budget and Policy Priorities , many of West Virginia’s elderly would be living in poverty, if not for Social Security. According our recent report, about 30 percent of West Virginia seniors rely solely on Social Security in retirement.

What’s particularly surprising is the significant number of children who receive social security benefits in West Virginia. 
CBPP estimates that Social Security lifts more than one million children out of poverty nationwide, along with 13.2 million elderly Americans.

Renewing Bush’s Tax Cuts For The Rich: Bad Economic Policy, Especially For West Virginia

The evidence that renewing Bush’s tax cuts for the wealthiest Americans would work against the interest of average Americans is overwhelming. First, renewing breaks for the wealthy would reduce revenues by anywhere from $80 billion to $90 billion over the next two years. Revenue projections in the long-term look bleak, as well, with an estimated revenue loss of almost $830 billion over the next decade.

What’s more, extending special treatment for households with incomes over $250,000 and single filers with incomes over $200,000 would result in deficits and debt $1 trillion higher over the next decade than allowing the high-income tax cuts to expire. As this study from the national Center on Budget and Policy Priorities shows, Bush’s special treatment for the wealthy will be the single biggest contributor to our national debt if we don’t act soon.
Some policymakers and pundits have recommended the “compromise” of renewing the Bush breaks for the wealthy for “just” two more years. This is a transparent political calculation. 
Republicans are expected to gain seats in Congress after November’s midterm elections, so “compromising” to temporarily extend high-income tax cuts would merely buy time for more conservative representatives to take office, increasing the chances that special treatment for the rich will be made permanent.
The Daily Mail ran an editorial on Monday, dismissing restoration of Clinton-era tax rates on the rich as “dumb.” It repeatedly refers to the wealthiest two percent of Americans as “the rich,” in quotation marks, as if a couple making $250,000 per year isn’t extremely rich by West Virginia’s standards. Even their first editorial on the subject, which uses $80,000 as a benchmark — misleadingly, since Obama doesn’t want to raise taxes on any but the wealthiest Americans —  misses the mark by quite a bit.
The fact is that 89 percent of full-time workers in West Virginia earn less than $75,000 and the state median income is less than $38,000, according to U.S. Census data. If Bush’s tax cuts are made permanent, the bottom 60 percent of West Virginian tax payers will pay $117 more, while the richest one percent will pay $18,069 less, on average, compared to Obama’s alternative. According to the IRS, less than one percent of taxpayers in the state earn the $250,000 necessary to receive a tax increase under Obama’s plan.
Trying to persuade an impoverished state like West Virginia to support such plutocratic tax policy is certainly ambitious, to say the least.

Repealing tax cuts for the wealthy and using the new revenue to fund any of the following would yield more economic “bang” for the taxpayer “buck,” according to a recent report by the nonpartisan Congressional Budget Office:
  • A jobs tax credit to reduce payroll taxes on new hires
  • Increased state fiscal assistance to cover budget shortfalls or invest in infrastructure
  • Extension of unemployment benefits
Increasing taxes for most of West Virginia while trimming taxes for a select, wealthy few is ineffective economic policy, especially during a recession, since the working class is more likely to spend their tax cuts immediately, while the wealthiest one percent is more likely to save theirs.
Renewing the tax cuts for less than one percent of the state will exacerbate the income gap, inflate the national debt, and fail to maximize economic stimulation. West Virginia needs tax policies that promote economic growth by looking out for working class people.
Abolishing Bush’s tax breaks for the rich is a step in the right direction.

US Senate Approves $136 million for State Budget

On a vote of 61-30, the US Senate approved $25 billion in state fiscal relief. This includes $15 billion in Medicaid support and $10 billion in education support. For West Virginia, this amounts to $136 million, with an estimated $81 million in Medicaid funds and $55 million in education funds. Both Goodwin and Rockefeller voted in favor of the bill.

This is great news for the state, if the House approves the measure on Tuesday. The State Budget Office estimates a FY2012 budget deficit of $150 million and these funds, along with the *$45 million in surplus revenues from FY2011, are more than enough to plug the budget hole.

*Of the $90 million in surplus revenues, half is transferred to the Rainy Day Fund.

Private Sector Gains Jobs in July

The US Bureau of Labor Statistics  issued a statement that shows total nonfarm payroll employment declining by 131,000 in July 2010, and the unemployment rate remaining unchanged at 9.5 percent.  The decline in employment is the result of federal government census workers wrapping up their work. 

However, a bright spot in the report exists as private-sector payroll employment increased by 71,000.  This is welcome news given the country was shedding over 750,000 jobs per month as the Obama administration took office in early 2009.  US House Speaker Nancy Pelosi’s office recently highlighted, in what has become affectionately known as the “bikini graph,” the dramatic difference in the economic output between the Bush and the Obama administrations. 

The graph below (which the Speaker’s Office hasn’t updated to reflect July, 2010 data) shows that since December 2009, 671,000 private sector jobs have been created over 7 straight months, a distinct improvement since December 2008, the beginning of the US recession. 

The rise in private sector employment also coincides with increasing levels of private investment.   The US Bureau of Economic Analysis recently reported that real GDP grew by 2.4 percent during the 2nd quarter of 2010. 

While both of these signs suggest that the US economy appears to be gaining some traction there is discouraging news in the labor department’s report as well; the percent of unemployed remains high and the number and percent of the long term unemployed gets worse.  I’ll discuss these two issues in my next blog.