Thursday, June 16, 2011

Worse than we thought

Welcome to my new blog focusing on the economy of the St. Louis metro area. I had hoped that my first post would point out the silver lining on the economy’s gray cloud, but I was unable to find one. Instead, my inaugural post is about how the local economy is doing even worse than we thought.

According to the most-current payroll employment data, St. Louis job losses during the Great Recession were more or less in line with those of the country as a whole, although St. Louis was hit a little less hard and is now slightly ahead of the rest of the country in its recovery of lost employment. This story is illustrated by Figure 1, which uses payroll employment data from the Current Employment Statistics (CES) and measures U.S. and St. Louis employment relative to their January 2008 levels.

According to these data, U.S. employment bottomed out in February 2010, 6.3 percent below its January 2008 level. For the St. Louis MSA, the bottom had been reached two months earlier, with a net employment loss of about 6.1 percent (83,900 jobs). For the most recent month available, April 2011, U.S. and St. Louis employment were, respectively, 5.1 percent and 4.5 percent (61,900 jobs) below their January 2008 levels. Thus, by April 2011, St. Louis had recovered about 26 percent (22,000) of its job losses, while the U.S. had recovered about 20 percent of its losses.

The picture painted by Figure 1 is by no means rosy, but perhaps there is grim solace in seeing that the local experience has not been quite as bad as the national one. More-accurate employment data show, however, that the actual picture is even less rosy than the one painted by Figure 1. According to the Quarterly Census of Employment and Wages (QCEW), St. Louis employment bottomed out in December 2009 at 7.3 percent below its January 2008 level. In other words, the QCEW data show that St. Louis had a net loss of 96,300 jobs at the bottom of the recession, 12,400 more than CES data suggest. On the other hand, the picture for U.S. employment over the period is roughly the same whether one looks at the CES or the QCEW data.

The QCEW data are more accurate than the CES data because of the ways they are constructed. The CES data are from a survey of about 140,000 non-farm businesses and government agencies across the country, while the QCEW is an actual count of employment at all establishments in the country whose employees are covered by unemployment insurance (of which there are about 9 million). The CES data are compiled relatively quickly, which is why we currently have CES data through April 2011, but QCEW data only through September 2010.

Figure 2 compares the U.S. and St. Louis employment experiences through April 2011 using the QCEW data.

The solid portions of the lines are the actual data. The dashed portions are projections applying trends from the CES data to the QCEW data. According to these projections, St. Louis employment in April 2011 was about 6.3 percent (83,000) below its January 2008 level, meaning that only about 13.8 percent (13,300) of the recession-induced job loss had been recovered. So, not only was the recession in St. Louis deeper than previously thought, but the recovery has been even weaker than the CES data indicate.