INDIANAPOLIS - Indiana’s unemployment rate in July was 10.1 percent; this was the twelfth highest of the 50 states.  Nevada was running at 14.3 percent to lead the nation while the lowest rate was 3.6 percent in North Dakota. We’re much closer to the worst than we are to the best. 
           
Are these the best of times or the worst of times? In material terms, these might be the best of times. Many of the poorest walk around with cell phones to their ears; children go to air conditioned schools that are downhill (both ways) from home; machines for washing dishes and clothes stand ready for duty in many homes where baseball games are watched in HDTV on screens longer than the arm of any adult in the house.
           
Psychologically, these are bad times. Uncertainty is rampant in the economy. Fear and anxiety are responses to uncertainty that plague many households and businesses. Most, however, responded to the current economic uncertainty with caution. They cut back on spending, increased cash balances, reduced debt and assumed an adamant position sitting on their wallets.
           
Nonetheless, these are not the worst of times. As we scan the records of unemployment rates from January 1976 to the present, July 2010 was the worst month for only one state (Nevada, 14.3 percent). Indiana’s highest unemployment rate in those 34 years was 12.7 percent in January 1983. It was during that 1982-83 recession that 29 of our 50 states experienced their peak unemployment rates.  
            
That long term view offers some comfort, but does not tell us if we are better off now than a year ago. Indiana’s unemployment rate in July was 10.1 percent compared to 10.3 percent a year earlier. But we have learned that an improvement in the unemployment rate is not necessarily the sign of a healthy economy.
           
Over the past year, the number of persons employed in Indiana has declined by nearly 52,000 persons (1.8 percent) which is the fifth worse case in the nation. Simultaneously, we saw the number unemployed fall by 11,000. Put those two numbers together and Indiana’s labor force dropped by 63,300, a two percent decline, the sixth worse case in the U.S.
           
Our state’s economy remains in bad shape. We are one of 17 states that had the numbers of employed and unemployed persons both drop in the past year. We’re in the same class as New York, Michigan, Wisconsin, Ohio, and Kentucky.  
Normally, when people lose jobs, the number unemployed rises. These times are so tough that people who already are unemployed leave the labor force along with those losing their jobs. The result is that the unemployment rate may improve although the underlying conditions are worsening.

Indiana had 39 counties in which the number of employed persons grew in the past year. As the number of employed persons grew in 26 of these counties, the number unemployed declined while the labor force grew. Kosciusko (Warsaw) is an example: employment grew by 2,100, unemployment fell by 900, and the labor force increased by 1,200.      
           
The majority of Indiana counties (53) saw the number employed fall.

In 22 of these counties, the decline in employment was accompanied by a rise in unemployment. Vanderburgh (Evansville) exemplifies these counties with a 2,500 decline in employed persons and a rise of only 900 in those unemployed. The result was a labor force shrinkage of 1,600.
           
By contrast, there were 31 counties where the numbers employed and unemployed fell, depressing the labor force. Shelby County, for example, saw a 900 person decrease in its labor force, the combination of a loss of 700 persons with jobs and a decline of 200 in those unemployed.  
           
As ever, the full story is always deeper than the headlines.

Mr. Marcus is an independent economist, speaker, and writer formerly with IU’s Kelley School of Business.