UHERO 101.1: Unemployment Rate

by Kimberly Burnett UHERO, June 7, 2013

How can economics help me understand the world around me? Check in every Friday for UHERO 101: explaining news that matters with basic economic concepts. UHERO cuts through the jargon and tells you what this means to you.

Star Advertiser: Isle jobless rate drops slightly to 5.1%

Hawaii's unemployment rate is often praised as being below the national average. While this is mathematically correct, there are two important caveats to keep in mind.

1. Hawaii's Prepaid Health Care Act provides benefits to employees working more than 20 hours a week. Employers may have incentive to hire 2 part-time workers to do the job of 1 full-timer to avoid this extra expense.

2. The unemployment rate captures people with zero jobs, rather than people with half a job (and from point #1, there are many of these in Hawaii).

The moral of the story is that while there may not be many people with no jobs in Hawaii, there are likely lots of people with less jobs than they need. Therefore, caution should be taken when interpreting Hawaii's low unemployment rate as a measure of economic well-being.