Ohio has seen an uptick in unemployment but it isn’t cause for worry, experts say

UT graduate student Sereen Jarouche shakes hands with Rick Mattingly of Marathon during the University of Toledo College of Business and Innovation fall job fair Friday. Economists say part of the reason for the higher unemployment rate is that more people are looking for work.

For nearly three years, Ohio’s unemployment rate was lower than the national rate, something many in the state pointed to as proof Ohio was outpacing the nation as a whole in its recovery from the great recession.

Last month that advantage disappeared.

Ohio’s unemployment rate in August was up ever-so-slightly to 7.3 percent, matching the national rate and rising to the highest it has been since June, 2012.

Does that mean Ohio is falling behind other states?

“I hesitate to compare us to other states,” said Benjamin Johnson, a spokesman for the Ohio Department of Job and Family Services. “For one thing, each state is unique, and some of the characteristics that allowed Ohio to recover quickly in 2011 may have helped another state recover quickly in 2012.”

What helped Ohio in 2011 was manufacturing.

A quick and unexpectedly strong turnaround for the U.S. auto industry was one of the primary catalysts for that. The industry helped lift the whole state, but it was especially beneficial to northern Ohio, where auto and auto parts manufacturing has long been a core of the economy.

The state saw gains in other manufacturing sectors, too. According to data from from Cincinnati-based Fifth Third Bank, Ohio’s overall durable goods manufacturing output increased from roughly $35 billion in 2009 to $48 billion in 2012.

With the help of that tailwind, Ohio’s unemployment rate dropped below the U.S. rate in November, 2010. It stayed there for 33 consecutive months.

At its lowest point, when the rate dropped to 6.7 percent in December, the state’s unemployment rate was more than a full percentage point lower than the national rate.

But the gap quickly began to shrink, leading up to the parity seen in August.

“What’s happened is we accelerated as fast as we can, and now we’re just dependent on the innate growth of the U.S. economy as a whole. It’s no big surprise we’re at or above the national average. The success of Ohio really depends on the U.S. consumer becoming more robust in their spending,” said Ned Hill, an economist at Cleveland State University.

State officials and several economists say there is continuing recovery in Ohio — just not as robust as it was.

“The manufacturing base played a large role in the rapid recovery in 2011 and the fact that sector is not adding jobs as quickly in recent months is certainly one primary reason the job growth has slowed,” Mr. Johnson said.

At its core, the unemployment rate is fairly simple. It’s is a measure of the percentage of people looking for work who are not currently working.

There are two ways, then, that the rate can go down. People can find jobs, or they can stop looking.

From a statistical standpoint, there’s no difference. Both count the same. From a practical one, it’s a huge difference.

“Part of the decline in the unemployment rate in Ohio — much like the rest of the nation — is for what you might consider the wrong reasons,” said William Even, an economics professor at Miami University in Oxford, Ohio.

Indeed, Ohio’s labor force has shrunk from more than 5.96 million in mid-2009 to 5.73 million late last year. In one stretch, the labor force contracted in 32 straight months.

There’s no way of knowing exactly why people left the labor force, though economists believe many people became frustrated by the poor job market and gave up looking for work.

However, there have been some signs of life this year. Since hitting that low point in November the labor force has grown, though it did stumble in August.

Even so, some economists are encouraged by what they see.

“Our labor force is actually trying to start to grow again, which is something relatively new for Ohio. Our labor force is up to 5.7 million and it’s been trying to grow this year,” said John Augustine, chief market strategist for Fifth Third.

PNC Bank economist Mekael Teshome also noted the uptick in Ohio’s labor force since the end of last year as an indication that there may be increased confidence among Ohio’s residents. As those people re-enter the labor force, it can cause the unemployment rate to increase.

“It’s not an indication of a worsening economy. It’s actually formerly discouraged workers coming back in,” he said. “When employment prospects improve, they’re starting to search for work.”

Both say a big challenge moving forward for Ohio is finding a way to entice young people to stay and work in Ohio, rather than leaving for perceived greener pastures elsewhere. Also, getting people trained for skilled work.

“That’s what we have a shortage of in the country, skilled blue-collar labor,” Mr. Augustine said.

And there is still job growth in Ohio, albeit slow. State officials said Ohio employers had 32,500 more jobs in August than they had a year ago, even though employers shed 8,200 jobs last month.

“When you look just at the jobs numbers, the state has not stopped adding jobs. The state is still adding jobs, but it’s adding jobs at a slower pace than it was in, say, 2011,” said Mr. Johnson, the Ohio Department of Job and Family Services spokesman.

Mr. Johnson said the numbers show essentially what the agency has cautioned all along: That Ohio’s recovery will be slow and with starts and stutters. More specifically, the recovery from the 2007-09 recession started slow, picked up in 2011 and early 2012, and has slowed again.

While some states are enjoying booming job markets — in North Dakota an oil boom has helped reduce the unemployment rate to 3 percent — the lethargic growth happening in Ohio is somewhat emblematic of how this recovery has played out across the United States.

“Employment is still going up,” Mr. Even said. “It’s not nearly as quickly as most of us would like. In most recoveries, job growth is a little more rapid than we’ve seen it in this recovery, but Ohio is not unique in experiencing that.”

In Toledo, the unemployment rate for August was an estimated 8.7 percent, down from 9.3 percent in July, the state said. In Lucas County, the rate also fell, dropping from 8.5 percent in July to 8.1 percent in August.

Those figures are not seasonally adjusted, however, making comparisons to the statewide rate difficult.

Based on anecdotal evidence, Mike Veh, work force development manager at The Source of Northwest Ohio, Lucas County’s one-stop shop for unemployment services, thinks more people are resuming their job hunt. He also said there seem to be more opportunities.

“We’re seeing more and more jobs coming in. We’re getting an incredibly broad selection of jobs coming through the door. Everything from skilled labor to health-care jobs to basic, entry-level positions.”

Whether the economy returns to peak levels in Ohio depends a lot on what part of Ohio one looks at. Some metro areas, such as Columbus, are already there. Others, such as Dayton, seem significantly hampered.

Overall, though, both Fifth Third’s Mr. Augustine and PNC’s Mr. Teshome say Ohio should be well positioned going forward.

Mr. Augustine expects more gains in manufacturing, and said the biggest benefits from the shale gas in the state are yet to come.

“Ohio by no means is handicapped for future growth,” he said.

Contact Tyrel Linkhorn at: tlinkhorn@theblade.com or 419-724-6134.