The significant drop in Florida’s unemployment rate is a good economic sign.
Rick Scott on Thursday, September 13th, 2012 in an Enterprise Florida meeting
Rick Scott brags about Florida's declining unemployment rate
The competitive businessman in Gov. Rick Scott wants Florida to be No. 1 for jobs.
By most measures it’s not, and in at least one area it’s dead last.
But what about its declining unemployment rate?
Scott often points to this measure as evidence the state is headed in the right direction. In August, when monthly jobs numbers showed the state lost 3,300 jobs and the unemployment rate ticked up to 8.8 percent, Scott’s office found something nice to trumpet: Over the past 20 months (when Scott took office), the unemployment rate fell faster in Florida than in any other state.
Scott repeated the claim a month later at a Sept. 13, 2012, board meeting of Enterprise Florida, the official economic development organization of the state of Florida.
"We have every reason to brag about what’s going on in our state," he said. "If you look at the fastest drop in unemployment, it’s down 2.3 (percentage points) in the last 20 months."
We’ve heard conflicting reports about Florida’s job creation record, so Scott’s argument that the state’s falling unemployment rate is brag-worthy piqued our interest.
His math is right. Since December 2010, the month before he took office, it has fallen 2.3 points to 8.8 percent in July, which is still above the national August unemployment rate of 8.1 percent.
Is such a feat really good for Florida, though?
Economists don’t share Scott’s sunny perspective. Cheering the decline overlooks the real reason for it: a labor force contracted by the departure of thousands of workers, many of whom simply gave up looking for work.
"What we’re seeing is that our participation in the labor force is declining," said Amy Baker, the Florida Legislature’s top economist, at a Sept. 12, 2012, meeting. "And because it’s declining, that’s really leading to much of the improvement -- in the month of July, about 91 percent of the improvement -- in the unemployment rate."
A September 2012 report by Baker’s team at the Office of Economic and Demographic Research, highlighted the same trend: dropping unemployment rate caused not by job creation, but almost exclusively by a shrinking workforce. People tend to leave the labor force when they become discouraged with the process of trying to find work.
Florida ranks last in the nation when it comes to long-term unemployment, so economists say the shrinking labor force is a natural result. More than half of the 816,000 jobless people in Florida have been looking for work for six months or more, a new national record, according to a recent Florida International University study.
"The conditions of the labor market have been dire for so long that many people have dropped out of the labor force," reads the FIU report, which highlights several areas where Florida’s recovery is lagging the national pace. "Labor force participation rates keep plummeting even though we are three years into the recovery."
Absent the labor pool’s contraction, the unemployment rate would be 9.8 percent, Baker’s report found. A report from Scott's Department of Economic Opportunity found that if the state's 94,100 discouraged workers were added to the unemployment rolls, the jobless rate would be 9.7 percent.
That’s because Florida’s job growth rate has been mediocre when compared to other states. The state has added 69,900 jobs in the last 12 months, a growth rate of less than 1 percent. This growth is slower than the national pace; Florida ranks 28th in the nation.
For comparison, high-growth states like California and Texas have created 365,000 jobs and 222,500 jobs, respectively, over the same period. California and Texas are two of 13 states currently growing jobs twice as fast as Florida.
It's not always a good sign when a state sees a rapid decline in the unemployment rate, said Sean Snaith, an economist with the University of Central Florida.
"You need strong economic growth to bring down rapidly the unemployment rate in the way we want to see it decline, and we haven’t seen that strong economic growth," he said. "This is the contradiction in the unemployment rate: Just because it’s going down, doesn’t mean it’s good news."
We reached out to Scott’s press office and a spokesperson referred us to the Department of Economic Opportunity. A DEO spokesperson said the workforce is shrinking due to a high population of retirees and a large number of seasonal workers. When pressed for more specific figures to back up those claims, the spokesperson declined to answer and ultimately referred us to the U.S. Bureau of Labor Statistics.
Scott reassured Florida’s economic development leaders, "We have every reason to brag about what’s going on in our state."
We found his example of the plummeting unemployment rate over 20 months is not something to tout.
Experts say the reasons behind the drop are mostly grim: Thousands of discouraged workers have given up on finding work in Florida.
The shrinking workforce can be attributed to a number of factors, but the fact that Florida is last in the nation when it comes to long-term unemployment can’t be ignored. A major factor in the drop in unemployment is the exodus of people who have simply given up looking for work. Job creation, meanwhile, has been below-average.
So is the unemployment rate decline a positive economic sign for Florida? We say Mostly False.
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