Lawmakers hear about the economic recovery and labor force challenges from leading Kentucky economist

5 August 2021 - Jacqueline Pitts (The Bottom Line News)

Lawmakers in Frankfort got an in-depth look at the status of Kentucky’s economic recovery, including the Commonwealth’s struggle to bring back workers and fill open positions. 

Dr. Michael Clark, Director of the Center for Business and Economic Research at the University of Kentucky’s Gatton College of Business and Economics, spoke to members of the Interim Joint Committee on Appropriations and Revenue about the economy, the labor market, and inflation. Clark partners with the Kentucky Chamber to produce quarterly economic reports, documenting the economic recovery. 

In terms of gross domestic product and payroll employment, Clark noted, the economy has shown strong signs of recovery. Kentucky has recovered almost 70 percent of the jobs lost during the first few months of the pandemic.

The recovery of Kentucky’s workforce, however, is a different story. While unemployment rates in Kentucky have improved, this metric does not give a complete picture of the labor market. A declining unemployment rate could be indicative of Kentuckians leaving the workforce as opposed to finding jobs. As Clark pointed out, “unemployment” is defined as individuals without a job but actively looking for a job and is determined through surveys conducted by the Bureau of Labor Statistics and the Census Bureau.

Instead of focusing on unemployment rates, Clark encouraged lawmakers to look at other metrics such as the percentage of Kentucky adults who participate in the workforce or who have jobs. These metrics illustrate significant struggles within Kentucky’s labor market. For example, the percentage of Kentucky adults who participate in the workforce – meaning individuals who work or are actively looking for work – is 3.1 percentage points today than it was before the pandemic. More concerning, the gap between the percentage of Kentucky adults and American adults who participate in the workforce has actually widened. This means that Kentucky is trailing the nation in workforce recovery. Fewer Kentuckians are working or looking for work than elsewhere in the country. 

The data highlighted by Clark reflects the struggles of Kentucky employers to find workers. Clark said that multiple factors may explain Kentucky’s low work rates, including health concerns, access to childcare, increased levels of retirements, skills and geographic mismatches, and enhanced unemployment benefits. 

Clark also discussed issues related to the housing market, the recovery of specific economic sectors in Kentucky, and inflation.

The quarterly economic reports that Clark produces in partnership with the Kentucky Chamber can be found here. In addition, the Center for Business and Economic Research produces an annual report on Kentucky’s economy, which can be accessed here.

Slides from Clark’s presentation to the Appropriations and Revenue Committee can be found here.