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Mixed signals on local economy

Bucking the national trend, unemployment in Archuleta County has decreased for the fourth straight month and dropped a full point — from 7.6 percent in July to 6.6 percent in August.

While the unemployment numbers could indicate that the local area is avoiding the worst of the national recession, it is difficult to interpret just how those figures reflect what is actually going on with the local economy.

In fact, August sales tax receipts reported on Tuesday suggest that the local economy continues to stumble. That report showed a 7.53-percent decline from the same month last year and a drop of11.55 percent for the year to date as compared with last year.

Apparently, the drop in unemployment numbers does not tell the whole story.

“The unemployment rate was not designed to be an economic indicator,” said Joe Winter, senior economist at the Colorado Department of Labor and Unemployment. “It was meant to be an allocator of federal funds.”

While Winter agreed that, at least on the surface, the August figure was good news for Archuleta County, he was quick to add that, due to the county’s sparse population, even a small boost in employment could lead to an apparently significant change in unemployment figures.

“Due to the relatively small population in Archuleta County, it doesn’t take a lot of movement to change that number,” Winter said.

However, the Bureau of Labor Statistics (BLS) also reported that the local employment pool continued to increase, to 6,589 in August, up from 6,521 in July, and up almost 8 percent from this year’s lowest number of available work force, 6,004 in March, an indication that Archuleta County is not losing population.

The August numbers reflect what is traditionally one of the best months for employment in Archuleta County, likely due to recreational, tourist and agricultural sectors ramped up during late summer.

Nonetheless, local unemployment numbers remain lower than numbers statewide (7.3 percent in August) and significantly lower than U.S. unemployment figures.

Nationally, the BLS reported another 263,000 jobs were lost in September, taking the official U.S. unemployment rate from 9.7 to 9.8 percent, putting about 15.1 million Americans out of work.

Unofficially, however, the so-called U-6 number (a BLS figure which includes jobless Americans who have become discouraged from looking for work and those working part-time but desiring full-time jobs) marks a total of 26.5 million Americans, 17 percent of the entire U.S. work force, as being either unemployed or underemployed.

The national U-6 number raises questions regarding the quality of employment in Archuleta County, however, as it is uncertain exactly how many local residents are employed part-time but desire full-time employment (a number folded into the total unemployed workers in the county) or how many residents have become discouraged and have given up looking for work and are thus not counted in local unemployment figures.

According to Winter, U-6 numbers are not reported at the local level and are only reported on the state level as an average for the year.

Chloe Weibe, supervisor at the Colorado Workforce Center (where local unemployment claims are handled), said that the BLS numbers don’t reflect what her office is seeing. “There are several people coming in seeking jobs,” she said, regarding the Archuleta County office.

According to Weibe, while there were 18 jobs listed with 78 active job seekers in August 2008 (when unemployment in Archuleta County was 4.9 percent), there were only 5 jobs listed with 119 active job seekers in August 2009 — about 73 percent fewer jobs for 33 percent more applicants. Clearly, the BLS numbers indicating an August 2009 unemployment rate of 6.6 percent does not reflect the entire employment picture in the county.

“I’m just hopeful we’re on the upswing but I can’t draw any conclusions from these figures,” said Weibe.

While the story of local unemployment numbers may seem cloudy at best, the national employment situation presents a clearer and more pessimistic picture.

The 9.8 percent jobless rate for the U.S. is the highest in 26 years, just behind the 10.1 percent unemployment rate in June 1983; the 10.8 percent unemployment rate in December1982 remains the highest recorded since the BLS started reporting employment data in 1948.

One of the features that makes the recent recession unique is the length and depth of continued falling employment figures. Since December 2007, the economy has lost almost 8 million jobs — the steepest and most sustained decline of any recession in the post-WW II period. Unfortunately, while most economists have predicted that national unemployment figures would reach (or exceed) 10 percent by the end of this year and would, by most estimates, linger in the double-digits for most of 2010, those predictions have taken on a more troubling dimension. Recently, economists add that continued high jobless numbers would likely slow economic recovery as high unemployment prevents many Americans from purchasing durable goods or otherwise helping to fuel economic recovery.

Adding in the “third wave” of home foreclosures (option ARMs — adjustable rate mortgages which produced negative amortization by allowing borrowers to choose to pay only the minimum monthly payment) that are just now beginning to register, especially as unemployed homeowners are unable to make mortgage payments — and the national economic horizon looks as uncertain as it does dire.

In fact, a Wells Fargo report released Oct. 9 suggested that, while housing prices are beginning to stabilize, a return to previously unsustainable values is unlikely, with foreclosure sales accounting for a full third of predicted housing sales. Furthermore, Wells Fargo analysts predicted that foreclosure rates should peak in mid to late 2010 with almost 2 million units facing foreclosure during that period, with a total of 7.2 million foreclosures by 2014.

In fact, Archuleta County Treasurer Betty Diller reports that, while reporting that the numbers of local foreclosures have recently slowed, “By June we had double what we had done last year.”

As of press time, Diller reports that Archuleta County had opened 173 foreclosures or about a third more than the same time last year (when the county had opened 126 foreclosures). While the state Legislature passed a law in 2009 to ameliorate the situation, requiring lenders to work with the federal government to avoid foreclosures, Diller conceded that the program offered little help to unemployed homeowners unable to make mortgage payments.

Furthermore, Diller reports a recent rise in local commercial foreclosures, a trend reflected both statewide and nationally as option ARM foreclosures become more prevalent.

Future forecasts remain grim, with many economists predicting that unemployment could continue to remain as high as 7-8 percent in a relatively flat recovery. More troubling is the prediction that those unemployment numbers could be sustained through 2015 — just in time for the next recession (if history is any indication regarding the nature of economic cycles). In fact, a few economists believe that 10-percent employment is an overly sanguine prediction, especially if the option ARM crisis exceeds standard predictions, stalling construction for both residential and commercial real estate.

While some lawmakers have pointed to the stalled economy and increasing unemployment as proof of the failure of President Obama’s stimulus package, others (lawmakers and economists) have stated that those numbers are evidence that the stimulus did not go far enough and that further federal money is needed to stimulate job growth and consumer spending.

Ultimately, how the national economic situation affects the regional economy remains to be seen.

Recent sales tax revenue figures provide a gloomy picture of the local economy, showing that the number of dollars spent in the county continues to decrease. If unemployment was in fact on the decline, sales tax revenues should have increased, as previously unemployed workers put some of their new paychecks back into the economy.

While August’s figure remains the highest since March 2005 (minus the previous seven months), on the tail-end of the last recession, on the surface that number might provide some hope that the worst is over in what appears to be the worst economy since the Great Depression. Nonetheless, the drop in unemployment should translate into more sales tax revenues for the area.

In fact, the number could indicate that the apparent drop in unemployment is the result of an exodus from the county, as workers leave to seek work elsewhere. The precipitous increase in local foreclosures would appear to support the idea that residents are fleeing the area.

Furthermore, the decline in local unemployment numbers could also reflect that many of the unemployed have either been without work so long they have dropped off unemployment eligibility (up to 46 weeks), have lost hope in finding a job, or have taken part-time employment (which would cancel most unemployment benefits) — all variables of the U-6 number, a number not reported for local unemployment.

The BLS unemployment numbers for August in Archuleta county appear to provide a glimmer of hope. Unfortunately, few local residents take much stock in that number or the news it suggests. The harsh news seems to be that the number is an anomaly — and not an accurate reflection of the cold, economic reality in Pagosa Country.

jim@pagosasun.com