Why no one believes the unemployment estimate in Spokane

A few days ago, the State of Washington released the latest unemployment estimates and unemployment in Spokane is reported to have gone down. Which should be a positive report.

For many, though, a falling unemployment rate does not seem real. Here’s why – as shown in a chart of Spokane’s employed non-farm workforce versus population. As you can see, the overall population has been increasing while the number employed has been falling recently and is mostly steady over the past decade.

The State estimates unemployment by estimating the number of people working and the number of people wanting to work, versus the number not currently employed. The unemployment rate is considered to go down if more people choose not to work, even though fewer people might be working.

Thus, a lower unemployment rate – which seems like good news – can also be bad news. When unemployment drops because fewer people are looking for work (given up?) rather than an increase in jobs, it means that society is less productive.

For this chart, the 2010 population for Spokane County is estimated as 2009 plus the amount of increase from 2008 to 2009. That’s a crude estimate of course, but likely close enough. The number of employed comes from the US Bureau of Labor Statistics and is the same data also available at Workforceexplorer.com.

While the official unemployment rate is down, a smaller percent of the population in Spokane County is working at jobs showing up in the official tally. (The chart uses the official data for non-farm jobs from which the government also excludes active duty military, self employed and some others.)

I wonder why the population is increasing but the job totals are not increasing. I worry that this is not “good news”.

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Why Washington’s Top Down Industrial Clustering Policy Will Fail

Government run industrial clustering, like we have in Washington, and which has been inflicted on Spokane, has been tried in Japan and failed:

Faced with declining competitiveness, Japan launched a series of top-down initiatives in the ’80s to boost innovation. It invested billions of dollars in creating industry clusters—by developing large technology parks and providing subsidies for companies that locate in them. All these efforts failed to achieve their objectives. Undeterred, the Japanese government is doubling its bet and creating a new cluster in Okinawa. With a world-class research university as its nucleus, it hopes to turn this tropical paradise—which happens to be home to America’s largest Asian military base—into a global research-and-development center.Doubtless the university will provide Japan with significant long-term benefit. But the cluster will fail: All the other ingredients for innovation are missing.

via Okinawa’s Doomed Innovation Experiment – BusinessWeek.

Like Spokane, Japan plans to re-make Okinawa into an “info tech, biotech and environmental science cluster” at the direction of the government. Unlike Spokane, Okinawa will have a comprehensive research university.

But these plans will fail, says the author, because:

The Japanese have it all wrong. The original clusters failed—just as nearly all the cluster development projects all over the world fail—because the basic premise is wrong: Governments can’t mandate or manufacture innovation, no matter how much they invest. Clusters happen where like-minded entrepreneurs congregate, start risky ventures, and learn from one another other by networking. Innovation is a by-product of this synergy and experimentation. What is needed is less government control, not more.

Read the linked story, above. The story is a mirror image of what is happening in Spokane – and documents why industrial clustering will fail here, for the same reasons.

More about Washington’s industrial clustering policy is here. Spokane’s industrial clustering policy, set down by Olympia, is not going to work – except to the extent the State is making it happen by funding more government and more health care in Spokane.