Growing Work Force Accounts for High Jobless Rate, Study Says

It has been one of the economic mysteries of post-recession New York: If the city is creating so many jobs, why has the unemployment rate stayed so high?

That question has confounded city officials and economists alike for the last two years. While Mayor Michael R. Bloomberg has been taking credit for healthy gains in employment, the city’s official unemployment rate has remained higher than the nation’s.

At the end of 2012, the city’s unemployment rate was 8.8 percent, a full percentage point higher than the national rate, according to the federal Labor Department. City officials have dismissed the unemployment figures as flawed and emphasized a different survey by the department that has found the number of private-sector jobs to be growing significantly faster in the city than across the rest of the country.

In a study released on Thursday (see also below), the Independent Budget Office tested a few explanations for the divergent data and concluded that the job gains have indeed been robust, but the unemployment rate is not exaggerated.

How can that be? After analyzing census data, the budget office found that the unemployment rate was rising because the city’s labor force was growing just as fast as jobs were being added. That finding supports Mr. Bloomberg’s oft-stated claim that the city’s relatively strong recovery has attracted new residents seeking work.

In 2011, census data showed, the number of city residents with jobs rose by 57,000, or more than 10 times as many as reported by the Bureau of Labor Statistics. During that year, the number of unemployed city residents declined slightly to 368,200 from 371,400, the study found. That decline would have reduced the city’s unemployment rate very little over the year, to 8.9 percent from 9.1 percent.

The study, which was prepared by Julie Anna M. Golebiewski, also gave little credence to some theories that economists had offered for the discrepancies in the jobs and unemployment statistics. One of those explanations was that most of new jobs in the city were taken by commuters who lived in the surrounding suburbs. Others included a shift from self-employment to working for bigger companies and an increase in the number of New Yorkers holding more than one job.

But the study concluded that “none of the three explanations explain more than a small share of the discrepancy” between the two sets of data. Its conclusion that employment was growing fast but barely fast enough to absorb all the new job seekers is good news for city officials because a growing work force is usually a harbinger of a recovery in employment.

IBO Job Data Analysis (PDF)

IBO Job Data Analysis (Text)

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