MS unemployment rate may not indicate economic health. See why

Mississippi’s unemployment rate ticked up to 3.2% for August.

Up from the historically low 3.0% in July, Mississippi’s employment rate continues the positive trend it has been on for nearly a decade. Other than a year-long span during the pandemic, Mississippi’s unemployment rate has been on the decline from 8.7% since July of 2013.

Gov. Tate Reeves in July touted the historic 3.0% as a referendum on his time in office.

“For five months in a row, Mississippi has made history with our vibrant economy,” Reeves said of the July numbers. “More Mississippians are working, they’re making higher wages, and they’re better able to provide for their families. At the end of the day, that’s what it’s all about.”

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However, Millsaps College assistant professor of economics Maximillian Littlejohn said that while numbers like 3.2% are good, there is more to look at as far as Mississippi’s economy is concerned.

“The main areas to pay attention to are labor force participation and job composition trends.

“The Mississippi labor force participation rate has consistently been low and trending downward for years,” said Littlejohn, who joined the faculty of the Else School of Management in the fall of 2021. He holds a bachelor’s degree in economics from the University of California, Santa Cruz, and a master’s degree and Ph.D. in economics from the University of California, Irvine.

The labor force participation rate for Mississippi is at 54.3%, which is the lowest it has been in more than a decade. Even during the pandemic, the labor force participation was, at times, more than a percentage point higher than it is now.

“While this could easily lead to higher unemployment rates due to a smaller labor force pool, it can also lead to low u(nemployment)-rates from the unemployed leaving the pool for reasons such as discouragement, marginal attachment and poor economic outlook (continuing unemployment claims have been falling the last couple months),” Littlejohn said. “Combining this with lower job numbers coming out of the public/manufacturing sectors and employers reporting difficulty finding qualified candidates for higher-skilled jobs, it would suggest there could be some serious skill gaps and frictions in the search/match process.”

Littlejohn said the ideal situation would be to see low unemployment rates accompanied with growing job numbers and increased labor force participation, especially for job growth among the higher skilled industries.

That would not be the case for the gig economy or leisure/hospitality where tips are critical.

“(Traditional) incomes have been falling for a couple years now with inflation, and this can contribute to not only more discouraged workers exiting the labor force, but also more taking second and third part- or full-time jobs to make ends meet,” Littlejohn said. “The country has been witnessing record-high levels of multiple job holders and I would expect this trend to continue as the Fed’s inflation fight clearly isn’t over.”

To put Mississippi’s numbers more in perspective, Littlejohn said it is important to note that when workers become discouraged, they drop out of the unemployment pool putting downward pressure on the unemployment rate. So, in Mississippi, if people aren’t even filing for unemployment, they aren’t being counted as looking for a job.

“For many of those who are employed in the labor force, they may be settling for part-time work or as an independent contractor even though they would prefer a full-time position,” Littlejohn said. “Once again, this puts downward pressure on the u-rate but would not be indicative of a vibrant, growing economy.”

Ross Reily can be reached by email at rreily@gannett.com or 601-573-2952. You can follow him on Twitter @GreenOkra1.