Lower Unemployment Rate May Be Due to Discouraged Workers

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Although Berkeley's unemployment rate decreased to 10.3 percent in December, the drop may be attributed to workers withdrawing from the labor force rather than finding employment.

The rate declined from the August peak of 11.2 percent, but it may be a result of people who have become too discouraged to look for jobs, said Ruth Kavanagh, a labor market consultant for the state's Employment Development Department, which calculates the city's unemployment figures.

The unemployment rate is determined by dividing the number of those unemployed by the number of people in the labor force. If people stop looking for work and leave the labor force, they belong to neither group, which lowers the unemployment rate, Kavanagh said.

Jon Haveman, founding principal of Beacon Economics, a research and consulting firm, agreed with Kavanagh's assessment.

"Unemployment rates around the Bay Area have been ticking down a little bit, and it's not because they're finding jobs," he said. "It's because they're leaving the labor force."

In such cases, those who leave the labor force may also leave the area, he said.

"The Bay Area as a whole is a relatively expensive place to live," he said. "It seems very plausible to me that in order to save some of those remaining dimes and nickels they've decided to move to somewhere cheaper."

In addition, Kavanagh said that

others who leave the workforce return to school.

She added that over the past 19 years, the unemployment rate in Alameda and Contra Costa Counties has declined on average by two-tenths of a percent between November and December. This past year's decline was five-tenths of a percent, but Kavanagh said that no data was available to determine why.

"A part of that was due to declines in the labor force, but we don't have data indicating to what extent that was occurring between November and December," she said.

The department will revise its unemployment data from the last two years and release preliminary figures for January on March 5, Kavanagh said.

Haveman said that though the current recession has been long, the American Investment and Recovery Act has been effective in slowing down the rate of job loss. However, he added that those who have already lost jobs still have difficulties finding new ones.

However, Havemen said he expected job growth for the last three quarters of 2010.

"An enormous amount of people have been out of work for a year or longer," he said. "The unemployment rate should continue to tick down."

Michael Caplan, the city's economic development manager, said he was hopeful about what the decline could signal.

"It may be the beginnings of some strengthening in the employment situation," he said.


Denise Poon covers local business. Contact her at [email protected]

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