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Today the Maine Department of Labor released December's unemployment rate.  The unemployment rate increased by 0.3 percentage points to 8.3 percent in December from 8 percent in November.  The increase in the rate points to some interesting dynamics.

First, after four straight months of gains, the employment level fell by 1,333 jobs in December which is not a good sign--although some of this may just be post-Christmas losses in retail.  Second, thanks to the previous gains in employment, folks that had dropped out of the labor force were lured back in--711 folks rejoined the labor force in December.

Unfortunately, the new entrants to the labor force simply rejoined the ranks of the unemployed along with the 1,333 who lost their job.  This double-whammy lead to the 0.3 percentage point jump in the unemployment rate.

I bring this up because this will be an important dynamic that plays out in Maine's labor force over the next 6 to 12 months.  Many folks who dropped out of the labor force will be tempted to jump right back in at any hint of economic improvement.  Yet, as December shows, the economy will be up-and-down all year long--with a better than 70 percent chance for a double-dip recession nationally (assuming no new federal stimulus).

As such, predicting Maine's unemployment rate will be very tricky.  Even if job growth picks up, new entrants into the labor force could swamp the gains in employment and lead to higher unemployment rates.  On the other hand, job losses could be more than offset by folks leaving the labor force leading to lower unemployment rates.  So as I've been saying in previous blogs, solely watching the unemployment rate is not enough in understanding the future state of Maine's labor force.

Another issue that folks have been following is the population race between Maine and New Hampshire.  Last year it appeared that New Hampshire's population would exceed Maine's sometime early in 2009.

The revised data shows that New Hampshire's population actually exceeded  Maine's in 2007.  The attached chart shows the growth in population for the two states since 1991 (click "continue reading" to view chart).  In 2007, Maine's population was 1,317,308 and New Hampshire's was 1,317,343.

Accelerated by Maine's recent population decline, the gap has grown to 6,274 people with Maine's population in 2009 at 1,318,301 to New Hampshire's 1,324,575.

Like Maine, New Hampshire also saw net out-migration in 2009 with 2,602 more folks leaving than coming into the state.  However, New Hampshire's net natural increase was significantly higher at 3,587.  Interestingly, this gap is due to a lower death rate with New Hampshire reporting 10,449 deaths to Maine's 12,894.

Also of interest is how quickly New Hampshire's population has grown since 1991 relative to Maine's.  Between 1991 to 2009, Maine's population grew by 85,582 people while New Hampshire grew by 212,191. 

As shown in my previous blog, Maine's population shrank for the first time in decades.  But what is the cause of this decline?

The first chart shows Maine's "net domestic migration" which is the net flow of folks to and from other states (click "continue reading" to view chart).  The chart shows that Maine has entered another period of net out-migration with 2,937 more people leaving than coming into the state.  The previous out-migration episode was in the early 1990s.

However, note that out-migration in the early 1990s was higher than it is today.  Why didn't total population shrink back then as well?

The answer lies in the rapid drop in the "net natural increase" which is the net change in births minus deaths as shown in the next chart.  In 1991, there were 5,873 more births than deaths.  By 2009, the natural increase had plunged to only 789.  The main cause of this decline was in births which fell from from 17,070 in 1991 to 13,683 in 2009.

As a result of lower natural increases, it takes smaller levels of net out-migration to cause drops in total population.  I warned about this problem when I blogged about the 2008 loss in population for 10 of Maine's counties--it is called demographic winter.  Now demographic winter has spread to the entire state.

While this is bad news, hopefully this will propel policy-makers to start taking demographic winter seriously.  There are no easy solutions to this problem--just ask Japan, eastern europe and Russia all of whom face more severe cases of demographic winter and have yet to defeat it.

Today the U.S. Department of Commerce's Census Bureau released new state population data for July 1, 2009 (previous years were also revised).

The data brings more bad news.  Maine's total population shrank by 1,390 people to 1,318,301 in 2009 from 1,319,691 in 2008 (click "continue reading" to view chart).  This is the first decrease in total population since the 1960s.

More blogs to follow in dissecting this disturbing drop in population.

In this study from a few months ago, I found that over the last decade the private sector lost 13,000 jobs while government added 3,400 jobs.  Now that a few more months have passed, I thought it would be a good time to update the data.  Also, the data for November 2009 was just released today by the U.S. Department of Labor's Bureau of Labor Statistics.

As shown in the accompanying chart (click "continue reading" to view chart), Maine's private sector has now lost 20,200 jobs over the last decade (from November 2000 to November 2009).  Maine's government employment, while down, is still 300 jobs higher than a decade ago.

Since the recession begun in January 2008, the private sector has shed 29,700 jobs while government jobs have dropped by 3,500.  What is really interesting about this is that the decline in government jobs has followed the decline in private sector jobs.  This is not "government reform" driving the drop in government jobs--its the lack of revenue caused by a rapidly shrinking private sector.

In my previous blog, I noted the apparent discrepancy between a shrinking labor force but increasing employment.  The answer may lie in the difference between the definition of jobs and employment.  "Employment" is a term used in the unemployment survey while "jobs" is a term used in the wage and salary employment survey both of which are published by the Maine Department of Labor.  The key difference between employment and jobs is that employment includes the self-employed whereas jobs only include those employed by someone else.

The attached chart (click "continue reading" to view chart) shows the growth in employment versus jobs since the recession began in January 2008.  Overall, employment and jobs closely track one another with a few exceptions.  However, one of the exceptions occurred in October 2009 where employment went up while jobs went down.  This suggests that employment went up because of increased numbers of self-employed.

The problem I have with this is that self-employment is not as economically stable as jobs, especially in a recession.  Some would argue it is a form of "under-employment" which is a situation where a worker, while employed, is earning less than before--a prime example is someone going from full-time work to part-time work.

As a result, the unemployment survey is implicitly making a judgment that self-employment is the economic equivalent to a full-time job when it accepts, at face value, someone reporting in as self-employed.  This is an open question and certainly more so during a recession.

Therefore, the data suggests that the decline in unemployment was a result of two factors.  First, more than half of the unemployed gave up and dropped out of the labor force.  Second, many of the remaining joined the ranks of the self-employed which is like leaving one foot in the labor force and one foot out of the labor force. 

However, since there is no official category for them, they are classified as employed.  Only time will tell if they are truly in long-term employment positions, but with jobs declining it appears their grip on employment is tenuous at best.  So it's best to take the apparent dip in unemployment in October (see previous blog) with a big grain of salt.

Today, the Maine Department of Labor released new unemployment data.  The data reveals a mixed picture. 

First, Maine's labor force dropped in October after posting modest increases in August and September. The drop puts the labor force back at the same level it was in April/May, 2006.

Correcting for the drop in the labor force that began in January, 2009, shows the "modified unemployment rate" at 9.5 percent versus the reported "unemployment rate" of 8.2 percent (click "continue reading" to view chart).

Second, in contrast to the shrinking labor force, employment jumped by 1,021 between September and October.  This begs the questions: how can employment go up when people are leaving the labor force.  This seems counter intuitive . . . see my next blog post for a possible explanation.

In my previous blog, I noted that in 2008 Maine's private sector share of personal income set a new all-time record low.  Unfortunately, it appears that the 2008 record will soon be shattered in 2009.

In the 2nd quarter of 2009, Maine's private share of personal income plummeted to 62.9 percent--down from 64.4 percent in the 1st quarter of 2009 (click "continue reading" to view chart).

However, it's not just Maine's private sector that has been shrinking but the whole country's.  Of course, that points to the culprit--the Bush and Obama federal stimulus packages.  The stimulus can be seen in its effect on personal current transfer receipts which has grown tremendously--$9.998 billion in the 4th quarter of 2008 to $10.398 in the 1st quarter of 2009 and to $11.127 in the 2nd quarter of 2009.

Whatever the merits of the stimulus package, they must be counter-balanced by the severe crowding-out of the private sector.  Hopefully, this crowding-out is temporary but that hinges on whether or not states decide to pick-up where the stimulus leaves off.  This data strongly suggests that the best course of action is to let the stimulus lapse and let the private sector rebound.

Unfortunately, the track-record for Maine politicians suggests that they will try to make many aspects of the federal stimulus package permanent to the detriment of Maine's private sector.  Therefore, it is all the more important for Maine to have a Taxpayer Bill of Rights in place to prevent the further erosion of Maine's private sector post-stimulus.

Last Friday the U.S. Department of Commerce's Bureau of Economic Analysis released their latest comprehensive revision of data back to 1969 as well as released the latest 2nd Quarter 2009 estimates (see next blog).  Unfortunately, the new data brings a ton of bad news for Maine's economy.

The revised 2008 annual data shows that Maine's private sector share of personal income set a new all-time record low of 66.5 percent (click "continue reading" to view chart).  The previous low point was set in 1975 at 66.6 percent.

Looking more deeply into the data reveals that it was personal current transfer receipts (PCTR) that was most responsible for this dramatic decline in the private sector.  In 2008, PCTR grew by an astounding $1.031 billion--or 11.8 percent.  In absolute dollars this is a new record which was set only a few years earlier at $653 million in 2005.

The growth in PCTR was driven by Medicaid which accounted for 57 percent of the growth ($591 million).  This too was a new record in absolute dollars with the previous record set in 2005 with an increase of $411 million.

With this better understanding of the state of Maine's economy, it is no wonder that the state government just got word that the two-year budget deficit just grew by another $200 million.  Government has been crowding-out the private sector for so long that the private sector's ability to pay taxes is waning at an alarming rate.

This new data should seriously worry Mainers as there is a significant correlation between the size of the private sector and overall economic well-being.  This also shows why Maine needs a Taxpayer Bill of Rights in order to slow this runaway government spending.

Today Maine's Department of Labor released new  unemployment data for August, 2009.  It contains some good news and bad news. 

First, the good news.  As I blogged on earlier, Maine's labor force has been shrinking and had set an unprecedented record of six consecutive months of decline.  That record will not get worse as the labor force grew slightly by 678 people.  Although this is a small number and we still have to  hope it does not get revised away in the future.

The higher labor force also means fewer "shadow unemployment" folks which left the modified unemployment rate at 9.8 percent (click "continue reading" to view chart).

However, the bad news is that the ranks of the unemployed grew by 792 people.  As a result, the unemployment rate rose to 8.6 percent from 8.5 percent.