Ken Hare In Depth: Bentley, Obama share at least one economic viewpoint

Ken Hare In Depth: Bentley, Obama share at least one economic viewpoint

MONTGOMERY, AL (WSFA) - Democratic President Barack Obama and Republican Gov. Robert Bentley are very different political creatures, but they share at least one economic fault: An overemphasis on the unemployment rate as a measure of economic health.

As Obama and Bentley start their second terms in office, both have touted declining unemployment as a sign of an economic turnaround.

In his State of the Union address, Obama went so far as to claim the nation has turned the page on the economic recession that it faced when he came into office.

Bentley focused the state's attention on the unemployment rate when he was running for his first term as governor by promising that he would not take a salary until the state reaches "full employment," which he defines as 5.2 percent.

He's into his second term and still not drawing a salary, but the recent trend in the unemployment rate indicates that it is likely to happen.

On Friday, Bentley announced that Alabama's preliminary, seasonally adjusted December unemployment rate was 5.7 percent, down from November's rate of 6.0 percent. The national rate was 5.6 percent.

In announcing the new jobless rate, Bentley said: "Alabama's unemployment rate is at a level this state has not experienced in more than six years."

That's good news, of course. But it should be tempered by the fact that the declining unemployment rate is affected not just by people who find jobs, but by people who drop out of the labor force altogether.

When Bentley took office in January 2011, there were 1,995,143 employed persons in Alabama. Figures released Friday showed December 2014 employment was 1,982,424, using seasonally adjusted numbers. That's a small decrease in the number of employed Alabamians since Bentley started his first term as governor, even though the state's population has grown over that span.

Recently, as President Obama has taken credit for improvements in the economy, critics have turned to another measure of job health in an attempt to undermine his claims. They point to the labor force participation rate, which has fallen both for the nation and for Alabama.

Some economists believe the labor force participation rate is a better measure of economic health than the unemployment rate. But I believe that looking at either rate by itself is a problem, because both have flaws.

For instance, the labor force participation rate includes everyone 16 and older. That measures lots of young people and lots of older people who do not want work.

Still, it would be foolish to ignore the decline in the percentage of adult Americans -- and Alabamians -- who are working or attempting to work.

Last year, the national labor force participation rate was 62.7 percent -- the lowest rate since 1978. In Alabama, the labor force participation rate in 2014 was about 56 percent.

Some of the decline in labor force participation is going to continue to happen regardless of the economy and public policy, as the U.S. population ages and a greater percentage of people retire.

To better measure the participation rate, economists from Pew Charitable Trusts recently tried to factor out those under 25 and over 54. When measured that way, most states still showed a decline in the labor participation rate, with Alabama among the leaders in the decline.

Another factor not measured by either the unemployment or labor force participation rates is pay. Lots of the jobs being created nationally and locally are low-paying jobs. That coupled with relatively slow salary growth even for those who have jobs is troubling.

As I have noted in this column many times before, the bottom line is that no one economic statistic can truly measure economic health. For the public to get a real picture of the economic well-being of the nation and of their state, they need to look at not only the unemployment rate, but the actual number of people employed, wage trends and the percentage of the population that is working.

Blend those all together and it is clear that the national and Alabama economies are improving. But it should be equally clear that the nation and the state have a long way to go before we can truly "turn the page" on the economic downturn of the past few years.


Ken Hare is a former newspaper editorial writer and editorial page editor who now writes a regular column for

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