Lucas County sees lower unemployment rate, but what's the rest of the story?

The headlines read:

"Lucas County unemployment rate dropping"

"April’s jobless rates at lowest in over 10 years"

Yes, the unemployment rate in the county dropped to 5.7 percent, but that's not the lowest it's been and the drop really isn't due to people finding jobs.

The county is facing the same issue as the state, as I wrote at Ohio Watchdog. The statistic is easily manipulated by changing the number in the workforce.

As a commissioner, I rarely looked at the unemployment rate. Instead, I tracked employment - the number of people actually working - as I thought it a much better gauge of the health of the economy.

The last time Lucas County saw an unemployment rate this low was October 2006 when the rate was 5.4 percent. It was 5.6 percent in September and November that year.

But here's the catch: the number of people employed in October 2006 was 214,400.

The number of people with jobs in April 2014 was 192,400 - 22,000 less!

The loss of people in the workforce is even greater. In October 2006, there were 226,700 people counted. But in April 2014, there were only 204,100. That's a difference of 22,600.

To put that in perspective, that's more people than live in the cities of Maumee (pop. 14,129) or Oregon (pop. 20,291) or Sylvania (pop. 18,892).

So even though the unemployment is down, it's not because there are more people employed - it's because we have 22,600 who aren't being counted in the workforce. And the number of people with jobs is actually less.

Here's a chart showing the declining workforce and the historical employment numbers from January 2006 to April 2014:

As you can see, the number of people in the workforce has steadily declined, even as the number of employed fluctuates up and down, though still not reaching pre-recession numbers.

Certainly, loss of population, retiring baby boomers and others who are no longer counted in the workforce contribute to the declining numbers - but they cannot account for all of the drop. At least some of the loss of workforce is due to individuals who are no longer seeking work because they don't believe there are any opportunities for them.

The key is to understand how much of the loss of workforce is due to what factor.

So rather than celebrate or tout the declining unemployment rate, elected officials, policy makers and citizens should insist on good analysis to find out why the number of employed people has not returned to historic levels. This is a critical factor as the cities make long-term decisions about taxation and services.

How money walks - Lucas County and Ohio both lose billions

We all know that people will flee high-tax areas and relocate to low-tax areas, a fact that too many politicians ignore. But the same applies to counties and cities and now we know how much.

"How Money Walks," by Travis Brown, takes a look at data from the Internal Revenue Service and then examines how wealth and people move between states. His website maps the data with numbers. The correlation is clear, he says: the key to accumulating wealth in your state is to have a pro-growth tax policy that does not tax personal income.

Nationally, Ohio fairs poorly.

The state lost $18.39 billion in annual Adjusted Gross Income from 1992-2010.

To be fair, we did gain income from some states:

• $323.51 million New York
• $218.36 million West Virginia
• $205.12 million New Jersey
• $112.16 million Pennsylvania
• $15.20 million Connecticut

But here is who we lost to - and how much:

• $6.46 billion Florida
• $1.51 billion North Carolina
• $1.18 billion South Carolina
• $1.16 billion Texas
• $1.09 billion Arizona

In Lucas County, as in all the other large metropolitan areas, the story is the same:

Lucas County lost $1.82 billion in AGI. Here is where we lost to - and gained from:

Gained Wealth From:

• $8.27 million Allen County, OH
• $5.95 million Erie County, OH
• $5.25 million Lorain County, OH
• $5.08 million Seneca County, OH
• $4.86 million Trumbull County, OH

Lost Wealth To:

• $219.39 million Wood County, OH
• $204.14 million Monroe County, MI
• $100.26 million Franklin County, OH
• $60.18 million Fulton County, OH
• $42.49 million Lee County, FL

In both the state and county data, you can see that we're losing far, far more than we're gaining.

There are lessons here, especially in light of Toledo's income tax - but is anyone paying attention?

Ohio is a shrinking state

You probably knew this based upon our loss of two congressional seats, but maybe you didn't realize it - and what it means.

ResidencyHQ tracks migratory patterns through their residency product data and their recent article at the Financial Times details the five states residents are fleeing. Ohio is #5 in the countdown with New Jersey, California, New York and Illinois rounding out the list.

The Buckeye State is one of the few around that actually has a balanced budget. One of the reasons is because they tax their residents so well. The interesting part about Ohio though, is that a constant stream has always existed out of the state. Some of the migration is probably due to weather, but they also have very strict well-defined rules surrounding residency. Ohio’s Bright-Line Test names the specific number of days over, under, and in between that dictate someone as resident, non-resident, or other (the burden of proof is on the resident in question for ‘other’). These rules make it simple for an Ohioan to decide whether to stay put or make a run for it.

Why should you care, other than the general image this has for our state?

Cities and states always have an ebb and flow in population, but if you are in a state with a decreasing population it could impact you in the way of higher taxes (to make up for lost revenues), a less healthy economy (less people to buy stuff), and possibly less pay in your pocket (as a result of shrinking business revenues). This ‘sucking effect’ of residents flowing out of the state can be a self-fulfilling feedback loop that decimates a region. The analogy of rats jumping off a sinking ship might come to mind.

We definitely experience this in Toledo with local politicians always asking for more while telling us there's nothing left to cut. It's a double whammy when it's happening state-wide as well.

On a side note, I came across this article on countries with no income taxes. I'm not saying I'd want to live in the Middle East, but an island like Bermuda, in The Bahamas, in the Caribbean or even Vanuatu might be nice. I'd rule out the Maldives regardless of how beautiful because there are pirates in that part of the world.

The problem is that in a global society, we're not limited to where we live and that is a factor too many politicians and taxing authorities fail to consider. Yes, there are other important things to consider in terms of where you live (type of government, access to health care - especially if you're older, general freedom), but if those other criteria are equal, or nearly so, taxation ends up as the deciding factor.

And sadly for the people making the tax decisions, those who choose to pick up and leave aren't going to call the taxers and tell them about it ahead of time. They're just going to go leaving the politicians scratching their heads wondering what's going on.