Wisconsin’s unemployment rate in January was 3.8%, a slight drop from the previous month but also a dramatic change from the last time the Department of Workforce Development released data.
When the department released December jobs data earlier this year, the state’s unemployment rate was estimated at 5.5%. In the newly released data, the department now says December’s unemployment rate was 4%.
The dramatic change in employment figures is the result of a benchmarking process performed by the U.S. Bureau of Labor Statistics. The monthly unemployment data is based on a survey of households. To make it more accurate, the bureau annually compares it to the Quarterly Census of Employment and Wages, a measure drawn from the unemployment insurance payments employers make and considered the gold standard in jobs data.
Dennis Winters, chief economist at DWD, said the benchmarking this year helped provide a better understanding of how the employment picture changed during the COVID-19 pandemic.
“2020 was, you can imagine, a very difficult year for workforce data,” Winters said on a call with reporters. He pointed out that one challenge was how to treat laid off workers versus those who said they were employed but waiting to be called back.
Winters added that working with a small sample and models based on historic data is difficult when an unprecedented change in the numbers takes place.
The big change in the numbers after the benchmarking appears to be a smaller labor force. The latest figures put Wisconsin’s labor force at 3,053,800 in December, a drop of 60,100 from the original preliminary December data. Most of that shift came from those considered unemployed, a figure that dropped 50,100. The total number of people considered employed dropped 10,000.
Wisconsin’s labor force participation rate highlights this change. It dropped a full percentage point to 65.5% from December 2019 to December 2020 in the newly benchmarked data. The previous data suggested a 0.2-point drop to 66.7% for December.
While the newly benchmarked data presents a complicated picture for Wisconsin’s job market, the data for January did include some good news.
The labor force did grow slightly and overall employment increased by 7,300, leading to a 0.2-point drop in the unemployment rate.
Total nonfarm payrolls, a figure that comes from a different survey than the unemployment rate, was up 11,100 on a seasonally-adjusted basis. The non-adjusted figure was down 51,600 from December.
Winters said economists generally expect a decline in jobs from December to January and this year’s decline came in less than expected.
Private sector employment was up by 7,000 from December to January, driven by gains in a number of sectors including retail and wholesale trade, manufacturing, business services and leisure and hospitality.
The monthly report also underscores just how far the job market has to go to recover from the pandemic.
Year-over-year, private sector employment was down 125,700 in January. The leisure and hospitality sector accounts for about half of the decline at 62,800, including a drop of 48,300 in accommodation and food service and 14,500 in arts, entertainment and recreation. Health care and social assistance and durable goods manufacturing are the two other areas with significant year-over-year declines.
Winters said the pieces are in place for a strong recovery in economic growth and the leisure and hospitality jobs should return when demand bounces back.
“Once, I think, people are convinced that their risk of getting sick or worse is very low, I think you’ll see a pretty good return and a quick recovery in those numbers,” he said. “It’s all going to be dependent on people’s confidence against the rate of inoculations.”
Winters added that he isn’t concerned about challenges getting workers back into the labor market as demand returns. He said even if some employers have gone out of business during the pandemic, others will be creating jobs when consumers have confidence to congregate in public again.
“It’s only going to be about the demand and what the configuration of that is,” he said. “We're kind of primed for a nice increase in demand. I've got confidence that once we hit that vaccine threshold that the economy will come back pretty quickly.”
