Volume 8, No. 3
Fall 2002

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The Economy is Growing But The Labor Market Has Yet To Rebound

Non-Farm Employment Estimates for Small Areas (Part 2)

Personnel Supply Industry Suffers After Years of Prosperity

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The Economy Is Growing But The Labor Market Has Yet To Rebound:
Illinois Unemployed Struggle to Find Work In 2002

by Rich Reinhold

As has been widely reported in the media, the national economy began to recover from the last recession in late 2001, displaying steady growth through the latest quarter available, July - September 2002 (table cited throughout this article). However, despite this growth, fewer people are participating in the labor force and it is taking longer for the unemployed to find new jobs. In this article, we will briefly examine how the Illinois labor market performed just before, during and after the last economic recession.

The recession hits Illinois: jobs decline, unemployment rises

Illinois began to see the effects of the last recession as early as 4th quarter 2000, with total non-agricultural jobs falling about 11,000. During the next seven quarters, job losses totaled about 121,000, with the bulk reported during 3rd and 4th quarter 2001. The latter period was when most of the job losses resulting from the September 11 terrorist attacks occurred.

The unemployment rate has risen steadily since 3rd quarter 2000, reaching 6.4 percent in 3rd quarter 2002. While the unemployment rate reached its highest level in nearly a decade, mass layoffs and filings of initial claims for unemployment insurance benefits leveled off or declined as compared with one year earlier. However, job growth has continued to be weak, providing few opportunities for the unemployed.

Unemployed exit the labor force

One indicator of labor market strength is the percentage of the non-institutional civilian population (age 16 and older) who are in the labor force, otherwise known as the labor force participation rate. The labor force is defined as the sum of employed and unemployed. Generally, the higher the labor force participation rate, the stronger the labor market.

The labor force participation rate was at 70 percent in early 2000, the highest percentage on record. But in 2nd quarter 2001, the labor force participation rate began to fall steadily, dropping to just over 67 percent in 3rd quarter 2002, the lowest in 12 years. Part of this decline was due to job losses but a larger part was attributed to workers leaving the labor force - that is, no longer wanting to be employed or search for jobs. The number of people who were reported as not in the labor force and no longer wanting a job increased by 15 percent between 3rd quarters 2000 and 2002. Men, who comprise about one-third of all those counted as not in the labor force, saw more than a 20 percent increase in those not wanting a job, as compared with 11 percent for women. The Illinois civilian labor force has dropped 177,400 or 2.8 percent since its peak in 2000.

Average and long term duration of unemployment grows

The average duration of unemployment increased predictably throughout 2001, but continued to rise even as the economy grew. The median average duration of unemployment rose by more than 60 percent between 2000 and 2002, rising from 6.9 weeks in the 3rd quarter of 2000, to 8.0 weeks in 3rd quarter 2001 to 11.1 weeks in 3rd quarter 2002. Comparisons were made among the same quarter across years to minimize the effects of seasonal changes in the labor force. Readers should also be reminded that data for length of unemployment were not taken from the Unemployment Insurance (UI) benefits system but rather a survey of households (the CPS). One does not have to receive UI benefits to be counted as unemployed.

Men usually have longer periods of unemployment as compared to women, but during the last two years, this disparity increased. The duration of unemployment for men grew by more than 75 percent, rising from just over seven weeks in 3rd quarter 2000 to just under 13 weeks in 3rd quarter 2002. During this same period, the average duration of unemployment for women increased by 54 percent or from 7.5 weeks to 10 weeks.

Racial minorities typically have longer periods of unemployment as compared to Whites, even during good economic times. The average duration of unemployment for Blacks in Illinois rose by more than 50 percent or 4.6 weeks between 3rd quarter 2000 and 3rd quarter 2002. The average number of weeks unemployed for Whites increased at a higher percentage as compared with Blacks (67 percent versus 57 percent) but the average unemployment duration for Blacks continued to be the highest among all racial groups.

Long-term unemployment has also grown during the last two years. The percentage of unemployed who were out of work for more than 26 weeks nearly doubled, rising from 11 percent in 3rd quarter 2000 to 21.5 percent in 3rd quarter 2002. Furthermore, the percentage of unemployed out of work for at least a year (52 weeks and longer) grew from about 7 percent in 2000 to about 13 percent in 2002.

Outlook for the Illinois labor market

We cannot predict future labor market conditions, but we do know, based on past experience, that the unemployment rate tends to be a lagging indicator. For example, the Illinois unemployment rate reached double-digit levels in 1983, even as the economy was recovering from the 1982 recession. And again in 1992, the first complete year after the economic recession of 1990-1991, the unemployment rate in Illinois rose above eight percent. But for the many people who are currently unemployed in Illinois, job growth will be the best indicator of an economic recovery.