September jobless rate rose, as more workers got back in labor force

Unemployment in Arizona rose in September, from 5.9% to 6.7%, one of only eight states to see an increase. But experts say the increase could be caused by people returning to the workforce, reversing a sudden exodus of workers in August. (Photo by Alachua County/Creative Commons)

WASHINGTON – Arizona’s unemployment rate bounced back up to 6.7% in September, but economists say there may actually be some positives behind what look like negative numbers at first glance.

At least one of the reasons for the increased jobless rate is that more than 150,000 people returned to the labor force, which suggests that they are increasingly optimistic about their chances of finding a job.

“We did see an increase in the number of people unemployed, but that means they are actively looking for work and not just sitting on the sidelines out of the labor force more disheartened about their opportunities,” said Doug Walls, labor market information director with the Arizona Office of Economic Opportunity.

“They’re actively engaged and looking for work,” Walls said.

Bureau of Labor Statistics data shows that while the number of unemployed workers in the state rose by 35,287 people in September, to 237,774, the number of people with jobs grew by 116,440 in that time, to more than 3.3 million.

The increase in joblessness follows one of the steepest unemployment drops in years, when Arizona’s unemployment rate fell from 10.7% in July to 5.9% in August. But economists say the August drop, like this month’s rise, could be attributed largely to changes in the size of the workforce, with an estimated 150,000 people dropping out of the labor pool that month.

“Last month we saw the unemployment rate cut nearly in half,” Walls said. “That was one of the largest drops on record, but almost entirely due to that mass exodus from the labor force.”

At the time experts like Lee McPheters questioned how it was possible that that many people suddenly vanished from the labor force without explanation. He questioned the accuracy of the month-to-month data again after the September numbers came out.

“It is hard to conduct surveys in the pandemic and there is confusion about whether people who are laid off are truly unemployed and out of the labor force, or are they on furlough and still in the labor force and not counted as unemployed,” said McPheters, an economist at Arizona State University’s W.P. Carey School of Business.

Other experts said the fluctuating numbers point to the “underlying volatility in the data.”

David Wells, research director for the Grand Canyon Institute, said that he would set aside August’s report altogether and instead compare September’s rate to a more typical month.

“We have no history of having 150,000 people just flat out disappear like that from the labor force,” said Wells.

And they reappeared just as suddenly – BLS numbers show a difference of just 507 workers in the labor force from July to September, with the chasm of August in between.

Experts say people may go back to work for a variety of reasons, from feeling better about their prospects to coming back from a work hiatus. Wells pointed to one other factor that may have had an effect – the mid-September end of expanded unemployment benefits from the federal government.

“This was also around the time that the $300 supplement ended,” Wells said. “So this could also include people who are back in the labor force because they are increasingly desperate.”

Walls said the biggest employment gains in September came in state and local government jobs, education and “above average gains” in the leisure and hospitality industry, which was hit hardest by COVID-19 closures.

Despite the shifting numbers, McPheters said it will take a few months to see just how Arizona employment is actually faring in the pandemic.

“The economy is slowly adding jobs, but as people return to the labor force this tends to keep upward pressure on the unemployment rate,” said McPheters, “We do not expect rates to decline in the next few months.”

News Broadcast Producer, Phoenix

MacKenzie Belley expects to graduate in May 2021 with a degree in journalism with a focus on broadcast production. Belley, who previously worked for Arizona PBS and as a reporter for Cronkite News in Washington, is a broadcast producer this spring.