Haslam Questions High Unemployment Rate Amid Growing Economy

Gov. Bill Haslam has said he’s not exactly sure why Tennessee’s unemployment rate remains well above the national average despite what he perceives as a continuing improvement in the state’s jobs picture.

In particular, Haslam doesn’t understand why his success at attracting a slew of business expansions and openings to Tennessee hasn’t translated to a better employment outlook overall. He’s touted Under Armour opening in  Mt. Juliet and hiring 1,500 jobs over the next few years as a recent example.

The governor told the Associated Press both the number of Tennessee unemployment claims filed and the number of newly created jobs appear to be moving in the right direction.

By the most recent measurement, though, the state’s unemployment was 7.4 percent, which is among the highest jobless rates in the country. The national average is 5.9 percent.

One explanation the state’s overall employment portrait might not look as rosy as Haslam would like is that he’s looking at the situation in too limited a scope — and perhaps to some degree also through the rose-tinted glasses of his administration’s press releases.

Murat Arik, who’s serving as interim director of the Business and Economic Research Center at MTSU, said that despite the appearance of success at attracting companies to the state, the performance of the economy is “uneven” across the state, with some parts doing a lot better than others.

For example, while the Middle Tennessee economy continues to improve, driven by the Nashville-Davidson County area –which in 2013 was named one of the fastest-growing economies in the the country — West Tennessee, specifically around Memphis whose unemployment rate is “significantly high” at 8.5 percent, has been in more of a decline, Arik said.

Another problem is that while bringing new businesses to the state might look good on paper, a lot of of those businesses may be bringing their own people with them to the state, Arik said. Sometimes “60 or 70 percent of those employed there come from other states,” and therefore the unemployment ranks aren’t diminishing as fast as would seem.

And, while any increased economic activity in a region will create more jobs on the margins as demand for goods and services rises, so too will more workers migrate to an area looking for work, Arik added. Economic migration has “both advantages and disadvantages” for the state, he said.

Education level is an important factor too. “The more people you have at the lower end of educational attainment, the higher the unemployment rate — that’s a new trend,” Arik said.

But while Arik said he hopes Haslam’s plan to offer free community college and technical school education to the state’s high school students — the “Tennessee Promise” — will help improve the skill sets of the Volunteer State’s workforce, others have criticized some of the governor’s policies as a possible cause of the poor unemployment rate.

Tennessee Democratic Party Chairman Roy Herron said in a press release earlier this week that Haslam ought to take a look at his own policies for an answer to why the jobless rate was in a sluggish recovery. Haslam’s inaction on expanding Medicaid had caused several rural hospitals to close and urban hospitals to lay workers off, Herron said in the release. He added that Haslam is focused on cutting taxes for the wealthy, instead of providing more higher education options for Tennesseans, and he was planning cuts to the state budget that would cause more lost jobs.

A few weeks ago, a Memphis Business Journal blog post considered what industries in Tennesseee had experienced job losses.  According to the article, the only sectors of the economy to actually shed jobs were information, government and education services.

And, at an economic conference about a year ago at Middle Tennessee State University, one of the school’s economists, Dr. David Penn, looked at the relationship between the improving economy and the poor unemployment picture.

According to Penn, the faculty adviser for the BERC, the unemployment number is the last number to change because former workers are rejoining the labor force at a faster rate than jobs are being created. The unemployment rate shouldn’t be considered an indicator of economic improvement, or the lack thereof.

“[The] labor force [number] has hardly changed over the year,” Penn said in October 2013, when the unemployment rate was 8.1 percent. “What’s happening here is that folks are jumping back into the labor force after jumping out in 2010, when the participation rates dropped fairly significantly. They’re jumping back in, [and] the number of jobs is just barely growing enough to absorb them, keeping the unemployment rate almost unchanged over the year.”