Jobless Improvement Index

THE JOBLESS IMPROVEMENT (JI) INDEX

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.

THE JOBLESS IMPROVEMENT (JI) INDEX THIS MONTH

The value of the JI Index for a state denotes the number of percentage points that its unemployment rate and its change in total differed from the corresponding national averages. Negative values are preferable to positive values since negative changes relative to the national unemployment rate indicate either a below-average level or a larger-than-average decline. 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.

HISTORICAL VALUES OF JI INDEX FOR RHODE ISLAND*
	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
1997	-0.6	-0.5	+0.4	+1.0	+1.8	+1.4	+1.6	+0.8	+1.1	+1.6	+1.7	+1.5
1998	+1.1	+1.3	+0.9	+1.2	+0.3	-0.1	-0.1	+0.4	+0.5	+0.3	0.0	-0.3
1999	-0.4	-1.4	-1.2	-1.8	-0.9	-0.6	-0.4	-0.3	-0.3	-0.1	+0.1	+0.5
2000	+0.5	+1.0	+0.7	+0.7	+0.6	+0.6	+0.5	+0.2	0.0	-0.5	-0.7	-1.0
2001	-1.3	-1.7	-0.8	-0.4	0.0	+0.2	+1.4

* The JI Index values given in the available PDF reports are based on data available at the time these reports were written. In light of subsequent data revisions, the most up-to-date values, which are given in the table above, will sometimes differ from those given in the originally released reports .

MONTHLY REPORT: JULY 2001

For persons concerned about the accuracy of Rhode Island’s monthly unemployment rate figures, your prayers have been answered: starting with this month’s (July) jobless rate figure, the sample size used to derive each monthly estimate has been doubled. But, this is Rhode Island, and behind almost every silver (economic) cloud lies a gray lining. In this case, the larger sample size brought about a higher unemployment rate. What I find frustrating is that while the prior month’s rate was revised up, consistent with the new sample, we will have to wait until February to find out how the earlier months’ figures have changed. So, while we once thought our unemployment rate had fallen all the way to 3 percent in this recovery, only to have our confidence dashed by revisions indicating that the lowest rate was 3.6 percent, now its not even clear whether Rhode Island’s unemployment rate has fallen below 4 percent at any time in this entire recovery!!

Rhode Island’s July unemployment rate was 5.3 percent, well above the national rate and that of every other New England state. Even if the national economy does begin a growth spurt (which might be a wish at this point), Rhode Island’s rate is poised to remain relatively high,

the result of continued layoffs and a substantial proportion of “high maintenance” unemployed. Note (table above) that layoffs, in terms of New Claims, fell slightly compared to last July, but by a large 13.9% relative to June. But, while the “early” end of the jobless spectrum is showing improvement, the middle and long-term portions are not: Additional Claims (repeat layoffs) grew at double-digit rates relative to both last July and last month; Continued Claims (ongoing joblessness) is up significantly compared to last year and last month, and long-term unemployment (Benefit Exhaustions) rose 12.5% relative to last month, even though it declined by 6 percent compared to last July.

Rhode Island’s July Jobless Improvement Index, +1.4, resulted from an unemployment rate that was 0.8 percentage points above the national rate for June (+0.8) and a rate change that was 0.6 percentage points above the national change relative to a year ago (+0.6):

JI Index = +0.8 + 0.6 = +1.4

The adverse effect of July’s above-average unemployment rate was thus exacerbated by a larger than average change relative to the national rate, making Rhode Island’s JI Index performance among the worst in the nation (note: a negative JI Index is preferred, since we wish to be below the US average for the jobless rate and have a larger decrease as our change). Rhode Island’s June national JI Index ranking declined from #40 last month to #47 in July. Keep in mind though, the actual change in RI’s rate was likely smaller than the one reported this month due to our enlarged monthly survey sample.

	July	July
	2000	2001	RANK	Change	RANK	JI Index	RANK
Vermont	3.0	3.3	8	0.3	22	-1.4	12
New Hampshire	3.0	3.4	11	0.4	26	-1.2	16
Maine	3.4	3.8	16	0.4	26	-0.8	19
Connecticut	2.2	3.2	7	1.0	42	-0.8	19
Massachusetts	2.7	3.8	16	1.1	45	-0.1	35
Rhode Island	4.2	5.3	44	1.1	45	1.4	47

Jobless Improvement Index (JI Index) by State:
July 2001

	July	July
	2000	2001	RANK	Change	RANK	JI Index	RANK
North Dakota	2.9	2.6	1	-0.3	7	-2.7	1
Delaware	4.1	3.3	8	-0.8	3	-2.5	2
Nebraska	3.0	2.9	4	-0.1	10	-2.2	3
Oklahoma	3.1	3.1	5	0.0	14	-1.9	4
Montana	5.0	4.1	24	-0.9	2	-1.8	5
Maryland	4.0	3.6	13	-0.4	5	-1.8	5
Mississippi	5.7	4.5	30	-1.2	1	-1.7	7
South Dakota	2.2	2.8	2	0.6	35	-1.6	8
Virginia	2.2	2.8	2	0.6	35	-1.6	8
Georgia	3.7	3.6	13	-0.1	10	-1.5	10
Kansas	3.9	3.7	15	-0.2	9	-1.5	10
Vermont	3.0	3.3	8	0.3	22	-1.4	12
Iowa	2.6	3.1	5	0.5	31	-1.4	12
Wyoming	3.9	3.8	16	-0.1	10	-1.3	14
Minnesota	3.3	3.5	12	0.2	21	-1.3	14
Colorado	2.8	3.3	8	0.5	31	-1.2	16
New Hampshire	3.0	3.4	11	0.4	26	-1.2	16
Arizona	3.9	3.9	19	0.0	14	-1.1	18
Maine	3.4	3.8	16	0.4	26	-0.8	19
Connecticut	2.2	3.2	7	1.0	42	-0.8	19
Indiana	3.5	3.9	19	0.4	26	-0.7	21
New Jersey	3.7	4.0	23	0.3	22	-0.7	21
Ohio	4.1	4.2	27	0.1	18	-0.7	21
Tennessee	3.8	4.1	24	0.3	22	-0.6	24
Missouri	3.4	3.9	19	0.5	31	-0.6	24
New York	4.4	4.4	28	0.0	14	-0.6	24
Alabama	4.5	4.5	30	0.0	14	-0.5	27
West Virginia	5.5	5.0	39	-0.5	4	-0.5	27
Utah	3.2	3.9	19	0.7	38	-0.4	29
Arkansas	4.5	4.6	34	0.1	18	-0.3	30
Florida	3.5	4.1	24	0.6	35	-0.3	30
Louisiana	5.5	5.1	42	-0.4	5	-0.3	30
Pennsylvania	4.2	4.5	30	0.3	22	-0.2	33
California	5.0	4.9	38	-0.1	10	-0.2	33
Massachusetts	2.7	3.8	16	1.1	45	-0.1	35
Hawaii	4.1	4.5	30	0.4	26	-0.1	35
Idaho	4.9	5.0	39	0.1	18	0.1	37
Wisconsin	3.7	4.4	28	0.7	38	0.1	37
Texas	4.2	4.7	36	0.5	31	0.2	39
Michigan	3.6	4.6	34	1.0	42	0.6	40
Nevada	3.8	4.7	36	0.9	40	0.6	40
Alaska	6.5	6.2	50	-0.3	7	0.9	42
South Carolina	3.9	5.0	39	1.1	45	1.1	43
Washington	5.3	5.7	48	0.4	26	1.1	43
Illinois	4.3	5.3	44	1.0	42	1.3	45
Kentucky	4.1	5.2	43	1.1	45	1.3	45
Rhode Island	4.2	5.3	44	1.1	45	1.4	47
New Mexico	4.7	5.6	47	0.9	40	1.5	48
North Carolina	3.6	5.3	44	1.7	50	2.0	49
Oregon	4.9	6.1	49	1.2	49	2.3	50
US	4.0	4.5		0.5		0.0