Nationally and on Guam labor statistics show a recent decline in unemployment rates. Does this mean that our economies are improving with more jobs and more workers to fill them? Not necessarily.
Interpretation of unemployment rates relies on other factors which affect unemployment such as the general economic condition the demographics of the labor force the business cycle and the personal preferences of individuals to seek employment or not. Unemployment rates are just one indicator of an economy’s condition and outlook.
The Unemployment Situation on Guam: March 2012 released in August provides data from a survey of civilian households on Guam. It summarizes the definitions used in the survey reports rates of unemployment by various demographic categories and tabulates reasons reported by those who want a job but did not look for work during the survey period.
The report shows the total number of unemployed persons on Guam in March 2012 as 8 060 compared to 9 970 unemployed persons in March 2011. Which means simply this: in March 2012 there were 1 190 fewer persons than in March 2011 who had made “specific efforts to find a job within the past four weeks”” who reported that they did not work during the survey week. The report of a decrease in the unemployment rate from 13.3% to 11.8% is technically correct but can we infer that Guam’s economy or job prospects are improving? More is needed.
There are other numbers in the report worth considering. In March 2012 the total number in Guam’s civilian labor force (68 400) declined by 6 550 persons from March 2011 when the total was reported as 74 950 persons. Fewer eligible workers in Guam’s labor force tempers forecasts for economic growth. While the unemployment rate at 11.8% is still high relative to what economists look to as a lower natural rate of unemployment a reduction in the number of eligible workers on Guam may signal other factors influencing its economic outlook and prospects for workers.
The number of persons not in Guam’s labor force who stated that they wanted a job but did not look for work during the survey period increased to 10 450 in March 2012 from 9 320 in March 2011. If we consider the reasons why nearly half (5 200) report “”school attendance.”” This is an important finding. In the trade-off between work and school choosing school often indicates that persons not in the workforce are opting to prepare for better opportunities in future job markets. And future jobs appear to changing as business firms seek greater efficiencies and profits.
In September Guam’s largest private employer United Airlines announced “”The company will close its Guam Contact Center outsource its local cargo functions and reduce the number of local airport operations employees.”” The company may absorb some job losses through negotiated displacement rights. Others may find employment with an outsourced contractor. The net loss to Guam and its impact on its unemployment rate may be modest under these conditions.
Some argue that the impact is greater on the affected workers especially those filling outsourced jobs of similar service. In the short-term workers tend to experience salary and benefit reductions. But outsourcing has been credited in the past for improving the overall economy in the longer term. The spin off of work to smaller firms provides some opportunity for economic growth – more firms more jobs. The growth of Taiwan’s semiconductor industry for example has been a model of specialization and trade within industries. Firms benefitted from improved efficiencies and realized greater profits. This may have been an outgrowth of opportunity unique to this industry in past decades. But how likely is this today and in other settings?
In Guam’s case of United Airlines reducing the number of workers may reflect efficiency gains but not theirs alone. It also accounts for greater efficiencies in consumers’ use of technology for example by booking reservations online or by using their phones to download and display boarding passes. And this is just the beginning.
Future unemployment reports may show jobs once performed by hired labor being outsourced to consumer technology. And this is not simply a matter of impact for less-skilled workers. The recent Nobel Prize in Medicine was awarded to a team which has been able to map brain functions of patients diagnosed with depression. From their work computer models predict with 85% accuracy depression in patients from these brain scans without the assistance of medically trained personnel. It looks as though we are in the early phases of the next stage of economic development the transition from the industrial age to the technology age and the impacts on labor will again be transformative.
– Roseann M. Jones is a professor of economics at the University of Guam. She can be reached at murphy- [email protected]