Focus on Economic Data: U.S. Employment and the Unemployment Rate, September 2, 2011
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Each month, the U.S. Bureau of Labor Statistics (BLS) releases data from the monthly "Household Survey" conducted by the Bureau of the Census, providing a comprehensive body of information on the employment and unemployment experience of the U.S. population, classified by age, sex, race, and a variety of other characteristics.
The BLS also conducts the Current Employment Statistics (CES) program, surveying about 150,000 businesses and government agencies, representing approximately 390,000 individual work sites, in order to provide detailed industry data on employment, hours, and earnings of workers on nonfarm payrolls.
The BLS compiles information from these sources and announces the monthly "Employment Situation," reporting the current U.S. employment and unemployment data estimates. The monthly announcement reports employment data from the previous full month.
This lesson is about the September 3, 2010, BLS announcement, "Employment Situation: August 2010 ." This lesson will also look at the recent history of employment and unemployment data.
For this lesson you will review the most recently reported U.S. employment and unemployment data. Next you will determine the changes in U.S. employment and unemployment from the past month and year. You will also determine the factors that have influenced the change in the U.S. unemployment rate. Finally, you will explain the implications of the employment and unemployment data for individuals, population groups, and the U.S. economy.
The Bureau of Labor Statistics “Employment Situation” news release for the month of August, 2011, was far more negative than most of the experts’ predictions and reinforced the consensus that the U.S. economic recovery is sputtering at best. The U.S. economy created no net new jobs in August.
The New York Times cited “a prolonged increase in economic anxiety in August that began with the brinksmanship in Washington’s debt-ceiling debate, followed by the country’s loss of its triple-A credit rating, stock market whiplash and renewed concerns about Europe’s sovereign debt” as contributors to the poor economic performance. (DeWan, Shaila, “Job Growth at Halt in U.S.; Worst Showing in 11 Months, NYTimes.Com, September 2, 2011)
The Employment Situation – August 2011
U.S. Bureau of Labor Statistics
Released: September 2, 2011
“Nonfarm payroll employment was unchanged (0) in August, and the unemployment rate held at 9.1percent, the U.S. Bureau of Labor Statistics reported today. Employment in most major industries changed little over the month. Health care continued to add jobs, and a decline in information employment reflected a strike. Government employment continued to trend down, despite the return of workers from a three week partial government shutdown in Minnesota.”
According to the BLS report, total private employment increased by 17,000 jobs, but government payrolls decreased by 17,000 jobs, resulting in a net change of zero. The report did mention two significant events in August that impacted the overall numbers – the 45,000 Verizon Communications workers who were on strike in August (now over) and the end of the three week partial government shutdown in Minnesota. The Minnesota government employees returned to work by August, and the Verizon employees will be back at work in September. These are good examples that tell us to look closer at the numbers to understand the real story.
Household Survey Data - Unemployment
“The number of unemployed persons, at 14.0 million, was essentially unchanged in August, and the unemployment rate held at 9.1 percent. The rate has shown little change since April.” See Table A-1 for details. But, as usual, the burden of unemployment was not evenly distributed among demographic groups or around the nation.
Unemployment Rates by Demographic Group
|*See Tables A-1, A-2, and A-3 for details.|
Unemployment by Educational Attainment
|Total, 25 years and over||7.8%|
|Bachelor's degree and higher||4.3%|
|Some college or associate degree||8.2%|
|High school graduates, no college||9.6%|
|Less than a high school diploma||14.3%|
BLS data tells us that "education pays" in more than one way. Those with higher educational attainment typically earn higher incomes and they are less likely to be unemployed. For more information on the relationship between educational attainment, median income, and unemployment rates, see the BLS "Education Pays" webpage, http://www.bls.gov/emp/ep_chart_001.htm .
Discussion Question: Does education pay?
Key Labor Market Data, August, 2011
“The number of long-term unemployed (those jobless for 27 weeks and over) was about unchanged at 6.0 million in August and accounted for 42.9 percent of the unemployed.” See Table A-12 for details. The length of joblessness for the long-term unemployed did not increase in August.
“The labor force rose to 153.6 million in August. Both the civilian labor force participation rate, at 64.0 percent, and the employment-population ratio, at 58.2 percent, were little changed.” See Table A-1 for details. The size of the labor force increased by 200,000 in August.
The size of the labor force is a key factor when looking at the numbers. If the labor force grows and the number of unemployed stays the same, the unemployment rate decreases. If a few more people are unemployed and the labor force shrinks, the unemployment rate can increase much more. There have been months when fewer people have been unemployed and the unemployment rate increased because more entered the workforce.
“The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) rose from 8.4 million to 8.8 million in August. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.” See Table A-8 for details.” 400,000 more people who wanted full-time work were working part-time in August. Those working part-time are counted as employed and their loss of income is not reflected in the unemployment data. So-called “underemployment” - people working part-time or people working in jobs that do not fully utilized their skills(with lower pay) is not reflected in the unemployment rate but can be a significant burden for some who are counted as “employed.”
“About 2.6 million persons were marginally attached to the labor force in August, up from 2.4 million a year earlier. (The data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.” See Table A-16 for details. Many of these people may have just given-up looking for jobs because they did not think they would find one. If their numbers were added to the number of unemployed, the total of unemployed would be 16.6 million.
Discussion Question: If 16.6 million people had been counted as unemployed in August, what would the unemployment rate have been?
“Among the marginally attached, there were 977,000 discouraged workers in August, down by 133,000 from a year earlier. (The data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.6 million persons marginally attached to the labor force in August had not searched for work in the 4 weeks preceding the survey for reasons such as school attendance or family responsibilities. ”See Table A-16 for details. Apparently, some of the discouraged workers have begun looking for work. Is this a positive sign that they think they will find work or is it that they have been out of work so long, they are in more dire need of income?
Establishment Survey Data - Employment
“Total nonfarm payroll employment, at 131.1 million, was unchanged (0) in August. Employment changed little in most major private-sector industries.” See Table B-1 for details. Again, total private employment increased by 17,000 jobs, but government payrolls decreased by 17,000 jobs in August.
Employment Data by Industry Group, August, 2011
As usual, in August, there was growth in some industries and lob losses in others. The monthly changes in selected major industry groups are listed below.
|Industry Group||Job Growth/ Loss|
|Education and Health Services||+35,500|
|Professional and Business Services||+28,000|
|Mining and Logging||+5,000|
|Leisure and Hospitality||+2,000|
|* Verizon Communications strike, -45,000|
The length of the average workweek or the amount that employees work overtime can be an indicator of economic growth or decline. As things get better, employers may choose to pay more overtime rather than fully commit to hiring more full-time workers. An increase in the average workweek is usually a positive sign. In August, the average workweek declined. In manufacturing, the amount of overtime increased.
“The average workweek for all employees on private nonfarm payrolls edged down by 0.1 hour over the month to 34.2 hours. The manufacturing workweek was 40.3 hours for the third consecutive month; factory overtime increased by 0.1 hour over the month to 3.2 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls edged down to 33.5 hours in August, after holding at 33.6 hours for the prior 6 months.” See Tables B-2 and B-7 for details.
Average Hourly Earnings
“In August, average hourly earnings for all employees on private nonfarm payrolls decreased by 3 cents, or 0.1 percent, to $23.09. This decline followed an 11-cent gain in July. Over the past 12 months, average hourly earnings have increased by 1.9 percent. In August, average hourly earnings of private sector production and nonsupervisory employees decreased by 2 cents, or 0.1 percent, to $19.47.See Tables B-3 and B-8 for details.
Revisions of the June and July 2011 Employment Estimates
To add to the bad news, the BLS revised the non-farm employment estimates for the past two months to show 58,000 jobs fewer jobs than previously reported. “The change in total nonfarm payroll employment for June was revised from +46,000 to +20,000, and the change for July was revised from +117,000 to +85,000.”
Key Employment and Unemployment Terms
What is the unemployment rate?
The unemployment rate is the number unemployed persons as a percent of the labor force. For instance, if there are one million people in a nation's labor force and 100,000 of them are unemployed, the nation's unemployment rate is 10 percent. 100,000 divided by 1,000,000 is .10 - expressed as 10 percent.
The U.S. unemployment rate in August, 2011, was 9.1 percent, the same as the previous month, July, 2011. Figure 1, below, shows the recent history of the U.S. unemployment rate since 1990. Note the periods of increases and decreases that correspond with the business cycles. The higher levels of unemployment begriming in December 2007 and reaching over 10 percent in 2009 represent the most recent recession.
Who is counted as unemployed?
According to the BLS web site glossary, the unemployed are, "Persons aged 16 years and older who had no employment during the reference week, were available for work, except for temporary illness, and had made specific efforts to find employment sometime during the 4-week period ending with the reference week. Persons who were waiting to be recalled to a job from which they had been laid off need not have been looking for work to be classified as unemployed."
The two pieces of data used to determine the unemployment rate are the number of unemployed as determined through the BLS Current Population Survey and the size of the labor force.
What is the labor force?
According to the BLS glossary, the labor force includes "all persons classified as employed or unemployed..."
Who are the "employed"?
According to the BLS Glossary, employed persons are "persons 16 years and over in the civilian non-institutional population who, during the reference week, (a) did any work at all (at least 1 hour) as paid employees; worked in their own business, profession, or on their own farm, or worked 15 hours or more as unpaid workers in an enterprise operated by a member of the family; and (b) all those who were not working but who had jobs or businesses from which they were temporarily absent because of vacation, illness, bad weather, childcare problems, maternity or paternity leave, labor-management dispute, job training, or other family or personal reasons, whether or not they were paid for the time off or were seeking other jobs.”
Note: if you worked just one hour for pay during the survey week, you were "employed."
Discussion Question: What about a person who has given-up looking for a job? Is that person "unemployed." The BLS definition says no. What do you think?
What is payroll employment?
"Employment is the total number of persons on establishment payrolls employed full or part time who received pay for any part of the pay period which includes the 12th day of the month. Temporary and intermittent employees are included, as are any workers who are on paid sick leave, on paid holiday, or who work during only part of the specified pay period. A striking worker who only works a small portion of the survey period, and is paid, would be included as employed under the CES definitions. Persons on the payroll of more than one establishment are counted in each establishment. Data exclude proprietors, self-employed, unpaid family or volunteer workers, farm workers, and domestic workers. Persons on layoff the entire pay period, on leave without pay, on strike for the entire period or who have not yet reported for work are not counted as employed. Government employment covers only civilian workers."
Counting the number of jobs, workers, or employment is sometimes difficult. Some people have multiple jobs. Some people are not legally working. Some people are not paid, but do contribute to the nation's output of goods and services. Why aren't the owners of small businesses counted in the number of employed?
Discussion Question: What do you think is a good definition of "employment."
Types of Unemployment (BLS Definitions)
There are generally three types of unemployment typically identified by economists, each of which describes the particular circumstances of the individual and their employment situation.
- Frictional unemployment is temporary unemployment arising from the normal job search process. Frictional unemployment helps the economy function more efficiently as it simply refers to those people who are seeking better or more convenient jobs and those who are graduating and just entering the job market. Some frictional unemployment will always exist in any economy.
- Structural unemployment is the result of changes in the economy caused by technological progress and changes in the demand for goods and services. Structural changes eliminate some jobs in certain sectors of the economy and create new jobs in faster growing areas. Persons who are structurally unemployed do not have appropriate job skills and may face prolonged periods of unemployment, as they must often be retrained or relocate in order to find employment.
- Cyclical unemployment is unemployment caused by a drop in economic activity. This type of unemployment can hit many different industries and is caused by a general downturn in the business cycle. Lower demand for goods and services reduces the demand for workers. Much of the increase in unemployment in 2008 was cyclical as a result of the economic downturn and recession.
The BLS publishes monthly data on "Unemployed Persons by Reason for Unemployment" as part of the Employment Situation report (Table A-11). This data does not distinguish between the "types" of unemployment listed above. Take a look: http://www.bls.gov/news.release/empsit.t11.htm
At the levels of unemployment that economists consider to be the lowest possible sustainable levels (discussed below), the only unemployment that exists is due to friction in labor markets and structural changes in the economy.
Economists define the approximate unemployment rate that is 'full employment'. If unemployment falls to a very low rate, there will be upward pressure on prices. If unemployment rises to a very high rate, there will downward pressure on prices or prices will remain steady. In the middle is a level, or more likely a range, where there is not pressure on wages to rise or fall. That is the full employment rate of unemployment.
Economists do not agree or know for certain what that rate is and it does change over time. A consensus estimate is that the full employment rate of unemployment is currently between 4.5 and 5.0 percent of the labor force being unemployed.
Discussion Question: Between 2008 and 2010 federal laws extended eligibility for unemployment compensation for up to 99 weeks in states with persistently high unemployment rates. Some argue that longer eligibility for unemployment compensation may, in fact, discourage people from seriously seeking employment. Do you agree or disagree?
What About Part-time Workers?
According to the BLS, part-time "refers to those who worked 1 to 34 hours during the survey reference week and excludes employed persons who were absent from their jobs for the entire week." These people are counted in the labor market as employed.
Some people work part-time for economic reasons, "those who worked 1 to 34 hours during the reference week for an economic reason such as slack work or unfavorable business conditions, inability to find full-time work, or seasonal declines in demand."
Some people worked part-time for noneconomic reasons, "such as "persons who usually work part time for noneconomic reasons such as childcare problems, family or personal obligations, school or training, retirement or Social Security limits on earnings, and other reasons."
Persons Not in the Labor Force
In August, 2011, about 86 million people in the United States were "not in the labor force," not employed or unemployed. Who were they?
The BLS explains: "Labor force measures are based on the civilian noninstitutional population 16 years old and over. Excluded are persons under 16 years of age, all persons confined to institutions such as nursing homes and prisons, and persons on active duty in the Armed Forces. As mentioned previously, the labor force is made up of the employed and the unemployed. The remainder—those who have no job and are not looking for one—are counted as "not in the labor force." Many who are not in the labor force are going to school or are retired. Family responsibilities keep others out of the labor force."
- Those under age 16 are not in the labor force.
- Those who are retired and not working are not in the labor force.
- Those in the military are not in the labor force.
- Those who are institutionalized (incarceration or hospitalized) are not in the labor force.
- Those who have not sought work in 4 weeks are not in the labor force.
- Those who simply do not have to or want to work are not in the labor force.
For answers to some common questions about labor market data, such as "Who is not in the labor force?" go to the BLS FAQs, http://www.bls.gov/cps/cps_htgm.htm#nilf .
Alternative Measurements of Unemployment
The BLS explains, "there is only one official definition of unemployment, and that was discussed above (in the lesson). However, some have argued that this measure is too restricted, and that it does not adequately capture the breadth of labor market problems. For this reason, economists at BLS developed a set of alternative measures of labor underutilization . These measures are published every month in the Employment Situation news release. They range from a very limited measure that includes only those who have been unemployed (as officially defined) for 15 weeks or more to a very broad one that includes total unemployed (as officially defined), all persons marginally attached to the labor force, and all individuals employed part time for economic reasons."
- U-1 Persons unemployed 15 weeks or longer as a percent of the civilian labor force
- U-2 Job losers as a percent of the civilian labor force
- U-3 Unemployed persons 25 years and over as a percent of the civilian labor force 5.6 for persons 25 years and over
- U-4 Unemployed full-time job seekers as a percent of the full-time civilian labor force
- U-5 Total unemployed as a percent of the civilian labor force (the official unemployment rate)
- U-6 Total full-time job seekers plus 1/2 part-time job seekers plus 1/2 total on part-time for economic reasons as a percent of the civilian labor force less 1/2 of the part-time labor force
- U-7 Total full-time job seekers plus 1/2 part-time job seekers plus 1/2 total on part-time for economic reasons plus discouraged workers as a percent of the civilian labor force plus discouraged workers less ½ of the part-time labor force
Discussion Question? Which of these do you think is the most meaningful measurement of unemployment in the economy?
BLS "Employment Situation" Announcement Tables, August 2011
- Employment Situation Summary Table A. Household data, seasonally adjusted
- Employment Situation Summary Table B. Establishment data, seasonally adjusted
- Employment Situation Frequently Asked Questions
- Employment Situation Technical Note
- Table A-1. Employment status of the civilian population by sex and age
- Table A-2. Employment status of the civilian population by race, sex, and age
- Table A-3. Employment status of the Hispanic or Latino population by sex and age
- Table A-4. Employment status of the civilian population 25 years and over by educational attainment
- Table A-5. Employment status of the civilian population 18 years and over by veteran status, period of service, and sex, not seasonally adjusted
- Table A-6. Employment status of the civilian population by sex, age, and disability status, not seasonally adjusted
- Table A-7. Employment status of the civilian population by nativity and sex, not seasonally adjusted
- Table A-8. Employed persons by class of worker and part-time status
- Table A-9. Selected employment indicators
- Table A-10. Selected unemployment indicators, seasonally adjusted
- Table A-11. Unemployed persons by reason for unemployment
- Table A-12. Unemployed persons by duration of unemployment
- Table A-13. Employed and unemployed persons by occupation, not seasonally adjusted
- Table A-14. Unemployed persons by industry and class of worker, not seasonally adjusted
- Table A-15. Alternative measures of labor underutilization
- Table A-16. Persons not in the labor force and multiple jobholders by sex, not seasonally adjusted
- Table B-1. Employees on nonfarm payrolls by industry sector and selected industry detail
- Table B-2. Average weekly hours and overtime of all employees on private nonfarm payrolls by industry sector, seasonally adjusted
- Table B-3. Average hourly and weekly earnings of all employees on private nonfarm payrolls by industry sector, seasonally adjusted
The September 2 BLS announcement said, "Nonfarm payroll employment was unchanged (0) in August, and the unemployment rate held at 9.1percent...”
The number of unemployed persons was little changed and the unemployment rate remained the same at 9.1 percent.” The labor market has stagnated for the past few months after signs of recovery in early 2011.
Again, the employment data presents a "good news - bad news" scenario. The private sector is growing - but very slowly. The government sector lost jobs. The net result, no change in employment. Overall, the lack of job growth was a shock to many analysts and planners.
Employment is not the only criteria used by the National Bureau of Economic Research when determining the beginnings and endings of recessions, but it is an important component. The recent recession "officially" ended in June 2009, but the continuing weakness and lack of job growth convinces many that the recession continues or is back. GDP growth has been very weak in 2011.
Are we in a recession?
Short Answer Questions:
1. How is the unemployment rate determined?
2. What is a "marginally attached" worker?
Extension Activity No. 1: Youth Unemployment
Students: In August, the BLS released data concerning youth employment and unemployment during the late Spring and Summer of 2010. Take a look at this data and compare it to your experiences and those of your friends.
Employment and Unemployment Among Youth - Summer 2010
Bureau of Labor Statistics
Released: August 27, 2010
From April to July 2010, the number of employed youth 16 to 24 years old rose by 1.8 million to 18.6 million, the U.S. Bureau of Labor Statistics reported today. This year, the share of young people who were employed in July was 48.9 percent, the lowest July rate on record for the series, which began in 1948. (The month of July typically is the summertime peak in youth employment.) Unemployment among youth increased by 571,000 between April and July , about half as much as in each of the two previous summers. (Because this analysis focuses on the seasonal changes in youth employment and unemployment that occur each spring and summer, the data are not seasonally adjusted.)
Youth Labor force
The youth labor force--16- to 24-year-olds working or actively looking for work--grows sharply between April and July each year. During these months, large numbers of high school and college students search for or take summer jobs, and many graduates enter the labor market to look for or begin permanent employment. This summer, the youth labor force grew by 2.4 million, or 11.5 percent, to a total of 22.9 million in July.
The labor force participation rate for all youth--the proportion of the population 16 to 24 years old working or looking for work--was 60.5 percent in July, the lowest July rate on record. The July 2010 rate was down by 2.5 percentage points from July 2009 and 17.0 percentage points below the peak for that month in 1989 (77.5 percent).
The July labor force participation rate for 16- to 24-year-old men, at 62.7 percent, was down by 2.2 percentage points from a year earlier, and the rate for women, at 58.1 percent, was down by 3.0 percentage points over the year. For several decades prior to 1989, the July labor force participation rate for young men showed no clear trend, ranging from 81 to 86 percent. Since July 1989, however, their participation rate for the month has trended down, falling by about 20 percentage points. The July labor force participation rate for young women peaked in 1989 at 72.4 percent, following a long-term upward trend; their rate has since fallen by about 14 percentage points.
The July participation rate for whites declined by 2.8 percentage points from a year earlier, to 63.2 percent. The rate for blacks, at 51.6 percent, was down slightly, and the rate for Hispanics, at 56.1 percent, decreased by 3.3 percentage points. For all three groups, labor force participation rates were substantially lower than their peaks reached in July 1989. The participation rate for Asian youth was 48.3 percent in July 2010, little changed from July 2009.
In July, 18.6 million 16- to 24-year-olds were employed. This summer's increase in youth employment was slightly larger than last year's (1.8 million vs.1.6 million) and about the same as in 2008. The employment-population ratio for youth--the proportion of the 16- to 24-year-old civilian noninstitutional population that was employed--was 48.9 percent in July, down 2.5 percentage points from July 2009. The ratio has dropped by about 20 percentage points since its peak in July 1989. July 2010 marks the first time in the history of the series that less than half of all youth 16 to 24 years old were employed in that month. The sharp decline in recent years reflects continued weak labor market conditions experienced during the recession that began in December 2007.
The employment-population ratio for young men was 49.9 percent in July, down from 52.2 percent in July 2009. The employment-population ratios for women (48.0 percent), whites (53.0 percent), and Hispanics (43.6 percent) in July 2010 also were substantially lower than a year earlier.
In July, 25 percent of employed youth worked in the leisure and hospitality sector (which includes food services), the same as a year earlier. Another 20 percent were employed in the retail trade industry, also the same proportion as a year earlier.
In July 2010, 4.4 million youth were unemployed, essentially the same as in July 2009. The youth unemployment rate edged up over the year to 19.1 percent in July 2010, the highest July rate on record for the series, which began in 1948. In recent years, higher youth unemployment reflects the weak job market. Among major demographic groups, the unemployment rates for young men (20.5 percent),
blacks (33.4 percent), and Asians (21.6 percent) continued to trend up from a year earlier; the jobless rates for young women (17.5 percent), whites (16.2 percent), and Hispanics (22.1 percent) were virtually unchanged.
Extension Activity No. 2: Economic Indicators
What do the levels of employment and unemployment tell us about the current, future and past states of the economy? Leading, Concurrent and Lagging Economic Indicators.
The level of employment (non-agricultural payroll employment) most often seen as a coincident indicator of economic activity. This means that it indicates the current trend and will increase or decrease directly and at the same time with current state of the economy (other measures of current economic activity). It is included as one of four measures in the Conference Board's “Coincident Economic Index.”
The Conference Board’s “Leading Economic Index” uses ten economic measurements, including “average weekly hours worked by manufacturing workers” and “average number of initial applications for unemployment insurance.” It makes sense that the earliest sign of problems in employment might be a reduction in average work hours as employers cut back hours or reduce overtime, rather than lay-off workers. An increase in initial unemployment claims then is the first sign of actual job losses. This is then followed by a change in the level of payroll employment (a coincident indicator) and, most likely, a change in the unemployment rate (assuming all other factors are constant.) The coincident indicators more clearly show the current trend.
The Conference Board’s “Lagging Economic Index” includes “the average duration of unemployment.” This would naturally follow the level of employment and confirm the earlier signs of labor market problems. As economic conditions worsen, the duration of unemployment will tend to increase. Between December 2008 and December 2009, the average duration of unemployment increased from 19.5 weeks to 29.1 weeks. 39.8 percent of the unemployed in December 2009 had been unemployed for at least 27 weeks.
What do you think are the other eight indicators of future economic problems (leading indicators)?
Make your own list of indicators of future problems in employment, output or price level? What do the indicators you have identified tell us about the future of the economy? After you have completed your list, compare it to the Conference Board’s list of the ten components of the “Leading Economic Index.” Go to Global Business Cycle Indicators.