|THE JOBLESS IMPROVEMENT (JI)
I devised the JI Index after revising the 1998 economic data for Rhode Island. The picture the revised data painted of this state was disappointing. In frustration, but not disbelief, I decided to construct an index that at the time I developed it was as friendly as possible to Rhode Island, based on the single statistic that people feel comfortable discussing: the monthly rate of unemployment.
In evaluating unemployment, it is important to consider more than just the rate of unemployment for each state, since that particular focus excludes any consideration of the momentum a state might have in terms of changes in its rate. To make this indicator two dimensional, I have included not only the rate of unemployment but year-over-year changes in each state's rate to capture "momentum."
After experimenting with various weightings, and considering whether to "standardize" components, I quickly came to realize that the greater the mathematical elegance of this index, the less comprehensible it would be to the people who would get the most use from it. I therefore formulated it in as simple a way as possible.
The idea behind the JI Index is very simple: reward both below-average rates of unemployment and substantial improvements in the overall rate. The JI Index score for a state is thus the sum of two components -- the difference between that state's unemployment rate and the national rate plus the difference between that state's unemployment rate change and the national change. Since below-average rates of unemployment are preferable (a negative first component), and we prefer large declines in our rate (a negative second portion), large negative values of the JI Index are consistent with either very low unemployment rates, a rapid decline in a state's rate of unemployment, or both.
The value of the JI Index for a state denotes the number of percentage points that their unemployment rate and its change in total differed from the corresponding national averages. For example, a JI Index of -1.0 indicates that the state's unemployment rate and its change for that month in total were one percentage point (100 basis points) below the national averages for these measures.
Improvement Index (JI Index) by State:
Copyright © 2001 Leonard Lardaro, Ph.D. All rights reserved.