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Behind The Low Unemployment Rate


Mayor Michael Bloomberg and others are touting the city's low unemployment rate, which dropped to 4.3 percent in March, the latest data at this writing. When he released his Executive Budget on April 26, the mayor stated, “The unemployment rate is at historic lows in the city.” While it’s not clear if the March unemployment rate is indeed the “lowest level ever,” as the mayor’s budget press release claimed, it is the lowest in the Bureau of Labor Statistics series that began in January 1976.

In the 30-year span of recorded unemployment rates, the highest annual levels were 11.1 percent reached in 1976 and 1992. 2006 marked the first time that average rate for the year dropped below five percent (it was 4.9 percent).

For the past several decades, the unemployment rate has been one of the key indicators used to gauge the condition of the economy, particularly the state of the job market and whether it is favorable or unfavorable to workers and job seekers. But the number alone does not tell the entire story. Three main factors enter into the determination of the unemployment rate (see box), and several issues – including whether people are looking for work, racial and age differences and the length of time people remain unemployed – need to be considered to really make sense of what the unemployment rate is telling us.

The unemployment, considers simply whether or not a person has a job, not whether the job is a good one. (For more on changes in the city’s economy, including the job market, see related article.

UNEMPLOYMENT STORY IN A NUTSHELL

The quick takeaway on what today's relatively low New York City unemployment rate means is this:

UNEMPLOYMENT RATE:
THE BASICS

The unemployment rate is calculated as the share of the labor force that is unemployed. The federal government uses what is known as the Current Population Survey, a monthly survey of 60,000 households across the nation, to determine who is in the labor force and whether they are employed or unemployed. To be considered in the labor force, someone has to be employed, or available for work and has to have actively looked for work in the preceding four-week period. Those who may want to work but are so discouraged about their chances of finding a suitable job that they haven’t actively sought one in the preceding four weeks are not counted among the labor force. Consequently, they are not considered to be unemployed.

• Overall the 30-plus-year low New York City unemployment rate is good news although unemployment is much higher and employment rates much lower among blacks and young people.
• While it represents a huge improvement over the 1990s, the unemployment rate is low today mainly because of the continued growth in low-wage jobs. The unemployment rate considers simply whether or not a person has a job, not whether the job is a good one. (For more on changes in the city’s economy, including the job market, see related article.
• While unemployment may be less common than at other times in the past few decades, it still exacts a heavy toll since fewer unemployed workers receive unemployment insurance benefits than 20 or 30 years ago and many of the unemployed, particularly men, blacks and workers 45 and older, experience long spells without work.

The unemployment rate only measures people who either have jobs or are actively seeking work. Statistically, that means the unemployment rate for an area could decline because people leave the labor force. This could happen during an economic downturn if people decided their economic prospects were so grim that looking for work would be a waste of time. A variation of this has occurred in some upstate New York areas hard hit by the steep decline in manufacturing, long their economic backbone. In Buffalo, for example, the unemployment rate dropped from 9.5 percent in March 1999 to 5.4 percent this March. However, the number of people with jobs fell by 12 percent and the number of people in the Buffalo labor force declined by almost 16 percent over this period. Sustained, steep job decline has led people to leave the area for communities with brighter job prospects.

RECORD LABOR FORCE LEVELS

In New York City, the labor force has been growing and jobs are much more plentiful than upstate. In fact, at 3.8 million, the Big Apple's labor force has never been larger. While the city's population of 8.2 million is only slightly bigger than its previous peak of 7.9 million in 1970, many more women are in the workforce today, making the overall size of the city's labor force much greater. Women now constitute nearly 47 percent of the city’s workforce.

"The New York City unemployment rate applies to city residents. The number of unemployed used to calculate the rate is derived as the labor force minus an employment measure from the Current Population Survey called resident employment. Resident employment is different than the payroll employment concept that is usually the basis for reporting the number of jobs. Payroll employment for New York City reflects the number of employees, whether residents or commuters, working in New York City. Resident employment is the number of city residents working, whether in the city or elsewhere, and whether working as employees of someone else, or self-employed.

Because there are 700,000 to 800,000 commuters working in New York City and many fewer city residents working outside the city, the payroll employment count traditionally has been much greater than the resident employment figure. However, the two measures have been converging since the early 1990s. While payroll employment was 300,000 greater than resident employment in the mid-1990s, today the gap between the two has narrowed to 30,000.

MORE JOBS FOR NEW YORKERS

The main reason for the convergence is the steady upward climb in the number of health, education and social service jobs in New York City -- jobs typically held by city residents. Commuters tend to be highly concentrated in higher-paying financial, information and professional service jobs, which tend to be very cyclical, that is, there are more of them when the economy expands, fewer when it declines. Since the previous peak point for New York City payroll jobs in December 2000, these commuter-intensive jobs have registered a net decline of about 53,000 jobs. The number of jobs in health, education and social service has grown by 81,000 since 2000, after already having grown steadily throughout the 1990s.

Meanwhile, the number of self-employed New Yorkers has increased by about 50,000 since 2000, further boosting the resident employment numbers. However, some of the reported increase in “self-employment” may actually represent workers who are correctly or incorrectly considered “independent contractors.”

MORE WORKERS BUT EVEN MORE JOBS

The number of New Yorkers officially considered unemployed dropped to 175,000 in the early part of 2007. This is the lowest level since 1988 (when the labor force had a half million fewer people than it does today) and about 10 percent below the level reached at the previous peak of the business cycle. During the economic downturn early in this decade, New York City unemployment rose to 320,000 -- nearly two-thirds higher than it was before the downturn.

In the three and a half years since the economy’s low point in August 2003, the 214,000 resident employment gain has greatly exceeded the 68,000 increase in the labor force. The result is that 146,000 fewer New Yorkers are unemployed, dropping the unemployment rate by four percentage points to 4.3 percent.

BLACKS AND YOUNG ADULTS

Within this, though, the unemployment picture varies widely depending on race and ethnicity. While the overall unemployment rate was 4.9 percent in 2006, the rate among non-Hispanic blacks was 7.4 percent, more than double the rate for white non-Hispanics (3.4 percent). The unemployment rate for Hispanics was 6.0 percent, and for the “other non-Hispanic” category (which is mostly Asians) it was a very low 2.5 percent. (Blacks and Hispanics each account for nearly one-quarter of the city labor force, white non-Hispanics are 38 percent and “other” applies to about 13 percent.)

The drop in unemployment since 2000 has been most pronounced among Hispanics with a decline from 8.1 percent. In 2000, the female unemployment rate was higher than for males in the city. This pattern flipped by 2006 as unemployment fell more for women than for men.

For adults aged 16 to 24, unemployment was 14.5 percent in 2006, more than three times the rate for workers 25 and over. Also, while the unemployment rate had declined for most groups between 2000 and 2006, for young adults, it increased from 12.4 percent in 2000.

ALTERNATIVE WAYS TO LOOK AT THE JOB MARKET

Beyond the basics of labor force, employment, and unemployment, some other more technical measures reflect pretty basic notions about how working age adults (those aged 16 to 64) relate to the job market.

Labor Force Participation

As noted above, working age adults are considered part of the labor force if they are either employed or looking for work. There may be various reasons why someone is not looking for work and thus not counted as part of the labor force. Beyond giving up on finding a job, these include family responsibilities (caring for a child, parent or other family member), attending school, disability or retirement.

The labor force participation rate measures the portion of the working age population that is in the labor force. The overall labor force participation rate in the city was 59.3 percent in 2006, down slightly from 2000. It was highest for white non-Hispanics and lowest for black non-Hispanics. (See the table below.)

While the overall New York City labor force participation rate declined only slightly from 2000 to 2006, there were some striking differences among age groups. For young adults, ages 16 to 24, labor force participation fell from 50 percent to 40 percent. At the other end of the age spectrum, those 65 and older, labor force participation jumped from about 10 percent to 15 percent. And among those age 45 to 64, labor force participation rose from a little less that 66 percent to a little more than 69 percent.

Employment to Population Ratio

A related concept is the employment to population ratio, also known as E-POP. As the name suggests, this allows one to directly consider employment in relation to the entire working age population, including the employed, the unemployed and those who are not in the labor force. Many analysts consider the E-POP to be a more useful gauge of job market conditions than the unemployment rate.

As the table indicates, there is an even greater spread between the E-POP for non-Hispanic whites and non-Hispanic blacks than for the unemployment rate. The spread between white non-Hispanics and Hispanics is also considerable. The main reasons for the lower black and Hispanic E-POPs are that more adult blacks and Hispanics attend school, their disability rates are higher, and for Hispanics, more have family responsibilities that keep them out of the workforce. Retirement as a reason for being out of the labor force is less of a factor for blacks and Hispanics than for white non-Hispanics, while slightly more blacks and Hispanics cite discouragement as a reason for not looking for work.

For many years, the city’s labor force participation rate has trailed that of the nation. In looking at the reasons for this, family responsibilities stands out, followed by higher school attendance among adults and to a lesser extent, higher rates of disability and discouragement.

Underemployment

Another measure that can be used as a job market gauge is underemployment. This includes those working part time who would prefer full-time work and the discouraged. Since blacks and Hispanics are more likely to be working part-time when they would prefer full-time work, the gap between underemployment rates for blacks and Hispanics on the one hand, and white non-Hispanics on the other, is even greater than the gap in unemployment rates. For 2006, the black non-Hispanic underemployment rate was 12.6 percent, and the Hispanic underemployment rate was 10.8 percent while for white non-Hispanics the underemployment rate was 5.9 percent.

Long-Term Unemployment

While unemployment in the city has declined during the economic recovery and is slightly below where it was in 2000, a much greater proportion of those who are without jobs have been unemployed for a long period of time. Overall, the share of those unemployed who have been out of work for more than six months increased from 24 percent to 30 percent between 2000 and 2006. Long-term unemployment is particularly severe for males (nearly 35 percent of those unemployed are long-term unemployed), black non-Hispanics (34 percent), other non-Hispanics (36 percent), workers age 45-64 (39 percent) and those with less than a high school education (43 percent).

A TATTERED SAFETY NET

The unemployment insurance system provides a safety net for unemployed workers. New York was one of the pioneers among states when it instituted an unemployment insurance program in 1931 under then-Governor Franklin D. Roosevelt. It was intended to help families of workers who had lost their job to sustain themselves and to serve as an “automatic stabilizer” by injecting money into the economy during periods when layoffs rise and wage income falters. For example, during the aftermath of 9/11 and the downturn following it, unemployment insurance was the main source of compensation for workers dislocated by the World Trade Center attacks, far greater than the assistance to workers provided by post-9/11 federal funding.

However, the state’s system has not kept pace with changes in the economy. As a result, a smaller proportion of unemployed workers receive benefits now than in the 1970s and 1980s. In 2005, only 41 percent of New York’s unemployed received the payments compared to an average of 53 percent in surrounding states. New York’s maximum weekly benefit is also far lower than in neighboring states. The National Employment Law Project monitors state unemployment insurance programs and has documented changes needed to gear New York’s program more closely to today’s economic challenges.

 

Fiscal Impacts of PlaNYC 2030


The fiscal impact of Mayor Michael Bloomberg’s plaNYC 2030 could be huge in the long run, but judging from the mayor’s $59 billion executive budget for 2008, the short-term impact will be quite modest. Released a few day’s after Bloomberg’s Earth day speech, it includes only $200 million for programs called for in his plan for a sustainable city, and the $84 billion, 10-year capital budget plan has only $1.6 billion specifically targeted for plaNYC.

The long-term fiscal impact of the plan is unclear because its big-ticket investments, especially in the key transportation area, depend largely on the future political actions of officials from outside the city. To fund its grand vision, plaNYC will require a new state-authorized public financing authority, shared city/state authority on regional transportation issues, a multi-billion dollar revenue stream from congestion pricing, and a promise from the state to match billions of future city investment dollars. And the term-limited mayor has little more than two and a half years to get this done.

Who Pays What

Wasting no time, the mayor has bravely assumed early state cooperation and therefore targets $50 million of the $200 million in his expense budget for plaNYC initiatives to the so-called SMART fund, a joint city and state pool to be used to pay for currently unfunded transportation projects through 2030. The fund would be controlled by the proposed city/state SMART (Sustainable Mobility and Regional Transportation) Financing Authority. The executive budget assumes the SMART funding jumps to $220 million in 2009, $260 million in 2010, and then to $275 million in 2011.

The mayor hopes that the state will match those city SMART dollars every year – and beyond -- much as it currently does with capital costs for the city’s public school system. The third source of money for the fund would be congestion pricing fees, estimated to be $380 million in the first year of operation, and over $900 million a year by 2030. But the congestion pricing program itself would require an investment of $224 million. Together these thre funding sources would funds pay the debt service on bonds the new financing authority would issue to pay construction costs for the many transportation projects.

The SMART fund would raise and spend $31 billion from 2008 to 2030 on 21 unfunded or only partially funded “first priority projects,” including such capital programs as a 10th Avenue subway station for the extended Number 7 train on Manhattan’s West Side ($225 million), an express bus lane to the Lincoln Tunnel ($650 million), a major share of the rail link between the Long Island Railroad and Grand Central State ($2 billion), and the second phase of the Second Avenue Subway ($1.7 billion).

The total costs of these projects amounts to $50 billion – the balance would be funded by the Metropolitan Transportation Authority, the state, and the federal government – so the $31 billion SMART share is crucial.

Other items included in the 2008 expense budget commitment to PlaNYC are $81 million for energy conservation, $27.5 million for a brownfields fund

And related expenses and $8 million for tree pruning and maintenance. By 2011 total expense budget spending on plaNYC 2030 would reach $400 million a year.

On the city capital budget side, the modest $1.6 billion in PlaNYC investments (over 10 years) includes nearly $250 million for street trees (15,500 trees a year) and $118 million for trees in the city’s parks. Parks overall would get more than $950 million over 10 years and transportation initiatives about $250 million.

The Political Thicket

Because the big money in plaNYC is tied to future state legislative and state budget decisions around the proposed SMART authority, the basic questions here are political, not fiscal. The mayor wants the city to be an equal partner with the state on regional as well as city transportation matters. Today, the mayor lacks power over the agencies that could implement his large vision. He is often at the mercy of the governor, who controls the MTA and other state authorities and agencies, and the state legislature.

The mayor’s plan also makes an implicit case for creating and maintaining a Bloomberg legacy. In its proposal for the SMART authority, the administration asks that any legislation establishing the authority not only split its governance evenly between city and state, but it “should state that board members must not be government employees; that membership terms should be staggered; and that experience in finance, planning or transportation be a prerequisite for membership.” This would give the mayor appointment powers to help place supportive individuals who would remain on the authority’s board beyond the end of his term in 2009.

A fiscal plan that depends on as many political variables as does PlaNYC 2030 will require enormous good will and cooperation among state and city officials in order to push forward. One thing that the city has going for it is its solid, long-term experience and commitment to major capital projects. As the new 10-year, $84 billion capital plan dramatizes, the city is already thinking big.

Moreover, as a recent study by the Independent Budget Office of an earlier 10-year capital plan (the 2000-2009 plan, developed by former Mayor Rudy Guiliani and amended and implemented by Bloomberg) shows, the city has generally met or exceeded its ambitious capital goals.

For instance, between 2000 and 2006, the city committed nearly $42 billion in capital investments, $4.6 billion more (12 percent) than originally planned in 2000. Economic development projects totaled $1.3 billion, 85 percent more than planned, largely because of Bloomberg additions. (Interestingly, one area in which commitments fell well behind plan during the six years was transportation, where state-of-good-repair commitments for bridges and highways were about $2 billion less than originally planned.)

Thus a case could be made that the city has the track record and capacity to contribute much more to the long-term funding for PlaNYC. City government is certainly flush with cash. The executive budget reports nearly $5 billion of unexpected revenues in the current fiscal year (plus nearly $700 million of savings on the expense side). Tax revenues – mostly from business income and real estate transaction taxes – rose $1.5 billion just since January’s preliminary budget. With several weeks left, the 2007 budget could approach the $6.4 billion of unanticipated resources realized in 2006.

The mayor continues to use these resources in very conservative ways: the Retiree Health Benefits Trust Fund gets another $500 million in 2008, and now totals $2.5 billion; much of the other revenues and savings go to prepayments of future costs, particularly debt service. Some $350 million will go to debt service otherwise due in 2010. A new wrinkle in the executive budget is that $1.25 billion of excess dollars in 2007 will be used to retire debt, which will save about $650 million of expenses in both 2009 and 2010.

One mayoral argument for these conservative uses of extra revenues is the prospect of $3.3 billion and $4.3 billion deficits facing the city in 2010 and 2011. Yet the four-year city plan continues to include four years of a new tax reduction program that will cost the city $1.3 billion in 2008 in lost revenues, rising to $1.85 billion in 2011.

So, as the mayor enters the thickets of state politics in search of the authority and non-city money to implement PlaNYC 2030, he and the city council might want to consider using more of the city’s extraordinary resources to better insure its development.

 

Stated Meeting - Bicycle Taxis, Baseball Bats, and Budget Boom


On April 23, the New York City Council overrode two mayoral vetoes and so instituted new restrictions on pedicabs and banned metal baseball bats from high school sports leagues. In addition to these somewhat contentious votes, the council had the pleasure of doing what some say it does best: spend money. The members voted unanimously to approve an additional $1.8 billion in spending in this year’s budget. They also passed resolutions on the 9/11 cleanup, school funding and the Virginia Tech massacre.

REGULATING PEDICABS

Last month, the City Council approved a series of regulations for pedicabs - bicycle taxis that have become increasingly popular. Mayor Michael Bloomberg had been expected to approve the bill as well, but at a signing ceremony at the end of March, the mayor talked to pedicab drivers who said they feared they would loose their jobs if the bill became law, and he decided to veto it instead.

At the urging of the business in theater and midtown areas in her district, City Council Speaker Christine Quinn praised the regulation in Intro 331, saying it was something she had wanted to do for years. Quinn emphasized that the use of city streets to make money is a privilege, not a right, and that the city must set standards for the developing pedicab industry.

The new regulations:
-require operating licenses for pedicab drivers
-mandate that owners have insurance for up to $2 million
-require that bikes have rain-proof brakes, headlights, taillights and turn signals
-prohibit motorized pedaling equipment
-ban pedicabs from bridges, tunnels and bike lanes
-and limit the number of pedicabs in the city to 325.

Speaker Quinn said she did not know how many pedicabs are currently on the streets, but some council members estimated between 500 and 600. The 325 licenses will be distributed through a lottery run by the Department of Consumer Affairs, a process which has been criticized by some because it gives preference to current pedicab drivers.

Councilmembers Charles Barron, Tony Avella and Alan Gerson (as well as Bronx Borough President Adolfo Carrion) said the rules would mean that many drivers would lose their jobs and that the cap on pedicaps would effectively kill efforts to spread the taxi service to the outer boroughs.

The override vote passed by a 35 to 6 margin, with Tony Avella, Charles Barron, Helen Foster, Alan Gerson, Hiram Monserrate and Albert Vann siding with the mayor. Gale Brewer and Darlene Mealy “abstained.”

Leroy Comrie, one of the bill’s sponsors, said that the regulations had been discussed and negotiated “to the point that everyone could be comfortable that no one was happy with it” and in his opinion, “that makes a good bill.”

Pedicab drivers say they will sue to overturn the regulations.

METAL BAT BAN

The City Council also overrode a mayoral veto on legislation that bans the use of aluminum and metal bats in high school baseball leagues.

The aim of Intro 341 is to reduce the risk of accidents; proponents of the ban say that baseballs hit with a metal bat travel 8 miles per hour faster than balls hit from wooden ones.

Responding to critics who consider the bill an unnecessary intrusion by the government, Councilmember James Oddo, the bill’s author, said, “I am going to ponder that notion as I sit in my local tavern, as I attempt to order a tall glass of grain alcohol, as I attempt to smoke my Marlboro cigarettes, as I stare down at the condom that was handed to me at the entrance of the subway, as I wait for that hamburger with that partially hydrogenated oil dripping from it,” adding that, “government gets involved when we know the status quo is unacceptable.”

The council voted 41 to 4 to overturn the veto; Tony Avella, Erik Dilan, Dan Garodnick and David Weprin sided with the mayor.

Other jurisdictions with similar bans include the Nassau Suffolk Catholic High School Athletic Association, the North Dakota High School Association, the Prospect Park Baseball Association of Brooklyn and the Garden City Athletic Association. Also, the state legislatures of Montana and New Jersey are considering similar measures.

Bat manufacturers are promise to bring lawsuits against the city to overturn the legislation.

MODIFYING A HEALTHY BUDGET

The city’s economy is doing well thanks in large part to Wall Street profits and a lively real estate market. As a result, the city government has an additional $1.8 billion more than it projected earlier in the year.

The City Council voted unanimously on Resolutions 827 and 828 to modify the current budget (something it does routinely four times a year).

The budget modification will prepay 2008 expenses such as:
-debt service cost
-$208 million in transit subsidies
-$225 million for libraries
-$91 million in Heath and Hospitals Corporation operating costs
-$227 million to leverage federal Medicaid reimbursements

It will also fund new and existing initiatives including:
-$15 million for the city’s poverty commission programs
-$92 million for additional resources for the Administration for Child Services
-$71 million for collective bargaining (including the United Federation of Teachers contract agreement).

Described by Speaker Quinn as a “good news budget modification,” the proposal passed the finance committee and full council unanimously and prompted little discussion in the council chambers.

RESOLUTIONS FOR 9/11 CLEANUP, SCHOOL FUNDING, AND VIRGINIA TECH

The day after Earth Day, more than a half a dozen council members - Alan Gerson, Lew Fidler, Helen Foster, G. Oliver Koppell, Michael Nelson, James Sanders Jr. and David Weprin introduced Resolution 747 calling upon the Environmental Protection Agency to revamp its Test and Clean Program, set up to address the environmental impacts of the 9/11 disaster and published its report for the final phase of the project in December of last year.

At a January hearing before the New York City Council’s Lower Manhattan Redevelopment Committee, critics urged the EPA to include portions of Brooklyn and additional areas of Manhattan in its program and work in concert with local businesses, residents and other affected parties. Experts appointed by the EPA itself to review the current initiative have called it “scientifically unsound.”

The City Council passed Resolution 742 urging the U.S. Congress, the governor and the State Legislature to address the emerging funding gap for 21st Century Community Learning Centers created by the 2001 No Child Left Behind Act. The funding for the programs, which 20,000 New York City kids participate in, will end in June 2007.

The city council also passed Resolution 822 denouncing the Virginia Tech murders.

 



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