By John Lyon
Arkansas News Bureau

LITTLE ROCK — Arkansas’ unemployment rate last month was 7 percent, a significantly lower figure than the national rate of 9.4 percent and a statistic that on its face suggests the effects of the recession have been less severe in Arkansas than in much of the country.

Arkansas’ chief economist isn’t so sure.

“I think there is a technical problem with the indicator for Arkansas,” said John Shelnutt, administrator for economic analysis and tax research at the state Department of Finance and Administration. “That problem is causing (the reported unemployment rate) to be low compared to the nation and most of the region.”

Shelnutt said he does not have enough information to pinpoint the problem, but he said something does not add up. He said Arkansas’ insured unemployment rate, or the rate at which unemployment insurance claims are filed, logically should have been lower in May than the national rate, but instead it was higher.

U.S. Department of Labor statistics show Arkansas’ insured unemployment rate was 5.4 percent for the week ending May 30, while the national rate for the same week was 4.5 percent.

Could Arkansas’ jobless rate in fact be no better than the national rate, or worse?

“That’s my guess, but it’s purely speculation without more information,” Shelnutt said.

He added that he was speaking only for himself, not for DF&A, the state fiscal office.

The question of which figure is more reliable, the overall unemployment rate or the insured unemployment rate, is complicated. Shelnutt said the overall unemployment rate is closer to a real-time indicator than the insured unemployment rate, which lags behind events because of the passage of time between when a worker becomes unemployed and when a claim is filed.

The insured unemployment rate is based on more concrete data, however, he said.

According to the Web site of the federal Bureau of Labor Statistics, the overall unemployment rate is based on several factors, including a monthly survey of 60,000 households — about 800 of them in Arkansas, according to the state Department of Workforce Services — as well as data provided by the states on insurance claims and state and regional models that combine current and historical data.

Shelnutt said the insured unemployment rate is based on the actual number of claims filed, as reported to Washington by the state Department of Workforce Services. That makes it a “harder” statistic than the overall unemployment rate, which “is relying on a regional methodology and model rather than large numbers of actual surveys completed within the state,” he said.

But Kimberly Friedman, spokeswoman for the Department of Workforce Services, said the insured unemployment rate only measures a portion of the unemployed population.

“The insured unemployment rate is those who … can draw benefits, but the total unemployment rate includes everyone as well,” she said. “You may have quit your job and may not be eligible for benefits, but you could be counted in the total unemployment rate. It’s got a bigger umbrella, I guess you could say.”

Asked if she could think of reason why Arkansas’ total unemployment would be well below the national rate while its insured unemployment would be higher than the national rate, Friedman said the question would require some study, but one possible factor might be differences in state laws regarding unemployment insurance.

“I really don’t know as far as what other states’ laws say on that, but if Arkansas’ unemployment insurance laws cover more employees than, say, other states would do, our insured employment rate could be higher than other states,” she said.

Friedman also said the insured unemployment rate only includes people drawing regular benefits. If Arkansas has a relatively small number of people who have exhausted their regular benefits and are receiving extended benefits, that could cause the state’s insured unemployment rate to be higher than other states’ rates even though a smaller percentage of people might be out of work, she said.

Kathy Deck, director of the Center for Business and Economic Research at the University of Arkansas in Fayetteville, said that although “we all know federal statistics can have some substantial measurement problems,” she does not see any reason to suspect a systemic problem with the overall unemployment figures for Arkansas.

Deck said the best way to look at unemployment data is to look for trends from month to month, and in that respect Arkansas’ figures are in line with what one would expect. She said the state’s unemployment rate has been increasing at roughly the same pace as the national rate, which President Obama has predicted will reach double digits by the end of the year.

“In general you see that Arkansas’ economy is following the national economy,” Deck said. “I would expect that as we begin to see improvements in … the country, Arkansas too will see improvements.”