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March 27, 2009


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The talking points that come out of right field are often brazenly asserted if only to forgo a genuine assessment of actual events. In this case, the transfer payments that support a huge retiree population (SS and Medicare) also support a large health-care component dependent on that market. The retail, gaming, and tourist components are artificially buoyed that way as well.

So, what's going to happen when people stop moving here when they can no longer cash out their homestead? Or when Arizona's vaunted quality of life interfaces growing border violence and urban poverty? Or when Arizona's youth are left out of the economic mix and move elsewhere?

Bob Robb was cheerleading the housing boom as late as 2007. His blinders permanently fixed, he can no more see the reality of this place than libertarians can see the complexity in anything beyond Laffer curves and John Stossel infomercials.

It looks like Mr. Talton has done an excellent job covering the bases here.

However, a discussion of state unemployment rates in the recession tells us nothing if the rates before the economic collapse are not used as a starting point. Mr. Robb fails to do this at all, and Mr. Talton has selected the wrong time frame.

If you compare unemployment rates for May 2007, and February 2009, you see that Arizona's rate more than doubled, from 3.6 percent to 7.4; California's did the same, from 5.2 to 10.5; and Washington state did similarly but fared a little better, moving from 4.5 to 8.4 percent.

So, it occurs to me (belatedly) that a major part of the answer to the "mystery" may simply be that Arizona's current unemployment rate is lower because its original unemployment rate was lower.

The fact is that more than half of the jobs lost in Arizona were in the construction sector; this is scarcely an argument that Arizona has a diversified economy; on the contrary, it shows excessive concentration in real-estate development, just as Mr. Talton has been saying all along.

Note: I am having difficulty reconciling the figures given by Mr. Talton in his "beyond the unemployment index" paragraph with Bureau of Labor Statistics data:

Note that this site is well organized, very easy to use, can be switched to metro data (Phoenix-Mesa-Scottsdale) and that clicking on back data (the little green dinosaur) gives an easy to read table including the current data.

"and their souls no less sacred to God than any blue-eyed Anglo's"

I'm not a believer, Jon - but you touch me with asides like those.


A couple of additional remarks:

Note that the U.S. unemployment rate was 4.5 percent in May of 2007 and was 8.1 in February of 2009.

It's useful to consider what I call the layoff rate: the difference between the two unemployment rates, before the recession and now, in percentage points.

For the U.S. during this period, it was 3.6; for Arizona it was 3.8, and for Washington state it was 3.9; for both states, then, the layoff rate is roughly in line with the national average.

Note that in a general recession, the layoff rate is independent of the question of whether an economy is diversified: the layoff rate gives the percentage of jobs lost so far in the recession, whereas the diversification (or concentration) of the economy merely determines the distribution of those lost jobs amongst the various economic sectors.

According to Mr. Robb, 2/3 of the jobs lost in Arizona were in construction, which seems to argue strongly that the Arizona economic is overconcentrated in that sector, not that it is diversified.

On the other hand, it could be argued that in the current recession, the housing market was the first and (so far) primary victim, so that one would expect construction job losses to constitute an unusually high percentage of total job losses in many states.

Note that in May 2007, construction jobs in Arizona constituted 8.5 percent of all non-farm jobs; for Washington state the figure was 7.1 percent.

On that basis alone, it doesn't seem as if Arizona is unduly reliant on construction. However, this may be misleading, since the question is whether the other economic sectors are unduly reliant on new construction (e.g., the spread of retail shops into expanded suburbs, as opposed to the enlargement of a manufacturing base independent of suburban growth). For this reason, it might be more meaningful to compare the economies on a quantitative, sector by sector basis.

Unfortunately, my online time is extremely limited and I can't comfortably research this issue or compose an analysis, at the moment.

Here's another article addressing the Bobby Robby column in question:




It just goes to show that there are lies, damned lies, and statistics. Using the same Feb. 2008 to Feb. 2009 time frame that Dave Wells does, but using these BLS tables for Arizona and Illinois:

I find that Arizona's employment decreased by 22,434 jobs, and that its unemployment increased by 94,225. If that seems to defy logic, bear in mind that Arizona's labor force actually increased by 71,791 during this time, so that the increase in unemployment is partly the loss of jobs, but mostly the increase in the labor force (unable to find jobs).

I find that Illinois employment decreased by 306,898 jobs, and that its unemployment increased by 173,901. That's possible because Illinois' labor force, unlike Arizona's, decreased during this time, by 132,997.

So to me, on the basis of this data, it looks like, even accounting for population differences, Illinois lost a lot more jobs, but its unemployment statistics looked better than they otherwise would have simply because a huge number of individuals left its labor force (note that this could mean that they left the state, or that they stopped "actively looking" for employment, or some combination).

Of course, Dave Wells holds a doctorate in political economy and public policy; I hold a G.E.D.; I don't even want to know what Robert Robb holds, because I suspect that the appendage belongs to the Goldwater Institute.

I do enjoy reading Robb, simply because he makes a good scratching post. His arguments have a specious plausibility that makes them interesting to destroy, as opposed to some of his fellow conservatives who depend on vague rhetoric. It's like playing someone in chess who isn't as good as you, but whose errors aren't always obvious.

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