This lesson examines the December 2, 2011, U.S. Department of Labor, Bureau of Labor Statistics, announcement of employment data and the unemployment rate for the month of November, 2011. This lesson introduces the basic concepts of the BLS employment and unemployment data. The meaning and importance of the data are discussed. Assessment exercises are included for reinforcing knowledge of the concepts.

KEY CONCEPTS

Business Cycles, Labor Force, Macroeconomic Indicators, Unemployment, Unemployment Rate

STUDENTS WILL

  • Review the most recently reported U.S. employment and unemployment data.
  • Determine the changes in U.S. employment and unemployment from the past month and year.
  • Determine the factors that have influenced the change in the U.S. unemployment rate.
  • Explain the implications of the employment and unemployment data for individuals, population groups, and the U.S. economy.

Current Key Economic Indicators

as of May 5, 2013

Inflation

On a seasonally adjusted basis, the Consumer Price Index for All Urban Consumers decreased 0.2 percent in March after increasing 0.7 percent in February. The index for all items less food and energy rose 0.1 percent in March after rising 0.2 percent in February.

Employment and Unemployment

Total nonfarm payroll employment rose by 165,000 in April, and the unemployment rate was little changed at 7.5 percent. Employment increased in professional and business services, food services and drinking places, retail trade, and health care.

Real GDP

Real gross domestic product increased at an annual rate of 2.5 percent in the first quarter of 2013 (that is, from the fourth quarter to the first quarter), according to the "advance" estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 0.4 percent.

Federal Reserve

To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent...

INTRODUCTION

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 focuses on the December 2, 2011, BLS announcement, "Employment Situation: November 2011."  The lesson will also look at the relationship of employment and unemployment data to other macroeconomic data, such as GDP and CPI, and business cycles.  s........,,mmmm

[NOTE: Employment and Unemployment Rate Focus on Economic Data Schedule:

During the first half of the 2011-2012 school year, (September - December), EconEdLink will publish four Focus on Economic Data lessons on "employment and the unemployment rate." During this time period, the lessons will begin with the 'basics' in September and progressively focus more on complex data, issues and comparisons. All monthly Focuses on Economic Data will include the current data and significant recent changes.

  • September: employment and unemployment data basics. What is employment? What is the unemployment rate? How are they measured? What is the current data? What do they mean?
  • October: details and issues about the measurement and meaning of employment and unemployment, adding concepts such as underemployment, full employment, etc.
  • November: detailed breakdown of the data by region and industry (trends, identifying trends and comparisons of regions and demographic groups
  • December: the relationships of employment and unemployment data to other economic data, such as GDP, CPI, etc., and the business cycle.  THIS LESSON]

MATERIALS


Key Economic Indicators

as of December 22, 2011

Inflation

On a seasonally adjusted basis, the CPI-U decreased 0.1 percent in October after increasing 0.3 percent in September. The index for all items less food and energy rose 0.1 percent in October, the same increase as in September

Employment and Unemployment

The unemployment rate fell by 0.4 percentage point to 8.6 percent in November, and nonfarm payroll employment rose by 120,000, the U.S. Bureau of Labor Statistics reported today. Employment continued to trend up in retail trade, leisure and hospitality, professional and business services, and health care. Government employment continued to trend down.

Real GDP

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 2.0 percent in the third quarter of 2011 (that is, from the second quarter to the third quarter) according to the "second" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 1.3 percent.

Federal Reserve

The FOMC decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.

PROCESS

The employment and unemployment data released by the Bureau of Labor Statistics for the month of November, 2011, presents a mixed message.  The announcement began with the 0.4 percentage point decrease in the unemployment rate – very good news.  594,000 fewer people were unemployed in November – seemingly, more good news.

Then, the BLS added that 120,000 jobs were created in November – just enough to keep up with the normal growth of the labor force.  So, why did the unemployment rate decrease by so much? 

[Teacher Note: Students can speculate as to why the unemployment rate decreased.  If they have done previous Focus on Economic Data lessons, they may make the connection between the numbers of unemployed and the size of the labor force.]

The size of the U.S. labor force shrunk by 315,000 in November and the number of people “not in the labor force” increased by 487,000.  Remember, the unemployment rate is the percentage of people in the labor force who are unemployed.  When the number of unemployed – either those who found jobs or those who stopped looking for jobs – decreases, the unemployment rate will decrease. 

Take a close look at the employment and unemployment numbers to determine whether or not the November data is really good news.

The Employment Situation – November 2011
U.S. Bureau of Labor Statistics
Released December 2, 2011

The unemployment rate fell by 0.4 percentage point to 8.6 percent in November, and nonfarm payroll employment rose by 120,000, the U.S. Bureau of Labor Statistics reported today. Employment continued to trend up in retail trade, leisure and hospitality, professional and business services, and health care. Government employment continued to trend down. ”

Household Survey Data – Unemployment Data

“In November, the unemployment rate declined by 0.4 percentage point to 8.6 percent. From April through October, the rate held in a narrow range from 9.0 to 9.2 percent. The number of unemployed persons, at 13.3 million, was down by 594,000 in November. The labor force, which is the sum of the unemployed and employed, was down by a little more than half that amount. (See table A-1. )”

[Teacher Note:  A reference to a "table" after a set of data refers to the tables following the BLS announcement. http://www.bls.gov/news.release/empsit.nr0.htm ]

In November, 13.3 million people were unemployed, down from over 15 million unemployed in November, 2010.  In October of 2006, U.S. unemployment had reached a recent low level of 6.7 million people and an unemployment rate of 4.4 percent, and increased somewhat steadily until October, 2009, when the unemployment rate hit a high of 10.1 percent.

[Teacher Note: Students can look at the historic unemployment rate data to see how many people were unemployed in previous years.  http://data.bls.gov/timeseries/LNU03000000?years_option=all_years&periods_option=specific_periods&periods=Annual+Data ]

Figure 1, below, shows the monthly U.S. unemployment rates from 2000 to November, 2011.  Note the increases into the recession and the decreases beginning in 2009.  The 0.4 percentage point decrease from October to November has been the biggest monthly decrease.

Figure 1

Figure 2, below, shows the November unemployment rates for demographic groups and for levels of educational attainment. Note the very high unemployment rates for teenagers and for non-high school graduates.      

[Teacher Note: To see  the history of unemployment rates for age, race, and educational attainment, click on the BLS “Top Picks” for labor force statistics, http://data.bls.gov/cgi-bin/surveymost?ln   Select the groups you want and hit the “Search” button at the bottom.  You can select the period of time.]

Figure 2:  Unemployment Rates by Demographic Group
November 2011

(Seasonally adjusted)
Demographic Group October
2011
November
2011
1 month
change
Total, 16 years and over 9.0 8.6 -0.4
Adult men (20 years and over) 8.8 8.3 -0.5
Adult women (20 years and over) 8.0 7.8 -0.2
Teenagers (16 to 19 years) 24.1 23.7 -0.4
White 8.0 7.6 -0.4
Black or African American 15.1 15.5 0.4
Asian (not seasonally adjusted) 7.3 6.5 -0.8
Hispanic or Latino ethnicity 11.4 11.4 0.0
Unemployment Rates by Educational Attainment
November 2011

(Seasonally adjusted)
Level of Attainment October
2011
November
2011
1 month
change
Total, Ages 25 years and over 7.8 7.4 -0.4
Less than a high school diploma 13.8 13.2 -0.6
High school graduates, no college 9.6 8.8 -0.8
Some college or associate degree 8.3 7.6 -0.7
Bachelor's degree and higher 4.4 4.4 0.0

 

Long-term Unemployment

One serious concern during the recent recession was the number of people who were unemployed for an extended period of time.  Unemployment insurance benefits were extended during the recession, but many people’s benefits ended when those limits were reached.  

“In November, the number of job losers and persons who completed temporary jobs declined by 432,000 to 7.6 million. The number of long-term unemployed (those jobless for 27 weeks and over) was little changed at 5.7 million and accounted for 43.0 percent of the unemployed. (See tables A-11 and A-12 .)”

[Teacher Note: Ask this question: Should unemployment benefits be extended for as long as people are out of work?  Are the benefits a disincentive for people to look for a job?  Unemployment benefit rules and payments are established by each individual state.  To learn more about unemployment benefits, go to: http://www.bls.gov/cps/#faq ]

Labor Force Participation

“The civilian labor force participation rate declined by 0.2 percentage point to 64.0 percent. The employment-population ratio, at 58.5 percent, changed little. (See table A-1 .)”

One factor in the determination of the unemployment rate is the size of the labor force.  In November, the labor force shrunk by 315,000, reducing the labor force participation rate, which has shrunk from over 67 percent in early 2001 to the present 64 percent.

Part-time and Marginally Attached Workers

Another area of recent concern has been the increasing number of persona who are employed, but not working to their full potential. They may be working part time, involuntarily, or unable to find a job at their level of training.  Again, these numbers have begun to fall.

“The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) dropped by 378,000 over the month to 8.5 million. 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. )”

“In November, 2.6 million persons were marginally attached to the labor force, about the same as 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 .)”

“Among the marginally attached, there were 1.1 million discouraged workers in November, a decrease of 186,000 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 1.5 million persons marginally attached to the labor force in November 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 .)”

Establishment Survey Data – Employment Data

The BLS Establishment Survey gathers employment data from a cross-section of business firms.  This data measures job growth or decline in many industries.  It is separate from the Household Survey, which is data gathered from individuals and determines the unemployment rate.

“Total nonfarm payroll employment increased by 120,000 in November, in line with the average gain for the prior 12 months (+131,000). The private sector added 140,000 jobs, as employment rose in a number of service-providing industries. Government employment continued to trend down. (See table B-1 .)”

November Employment by Major Industry Groups - Highlights

• Employment in retail trade increased by 50,000
• Employment in leisure and hospitality increase by 22,000
• Employment in professional and business services increased by 33,000
• Employment in manufacturing increased by 2,000
• Employment in construction decreased by 12,000
• Employment by governments decreased by 20,000
• Employment in transportation and warehousing increased by 8,000
• Employment in information industries decreased by 4,000
• Employment in financial services increased by 8,000
• Employment in professional and business services increased by 33,000
• Employment in educational and health services increased by 27,000

[Teacher Note: For details by more specific industry groups, see the December 2, 2011 BLS “Employment Situation” announcement, Table B-1 .  http://www.bls.gov/news.release/empsit.nr0.htm ]

The BLS also reports data on the average workweek, unchanged at 34.3 hours in November, the manufacturing workweek, down by 0.2 hour to 40.3 hours, and the average workweek for production and nonsupervisory employees, down by 0.1 hour to 33.6 hours. (See tables B-2 and B-7. )

Average hourly earnings for all employees decreased in November by 2 cents, or 0.1 percent, to $23.18. Average hourly earnings of private-sector production and nonsupervisory employees increased by 2 cents, or 0.1 percent, to $19.54. (See tables B-3 and B-8. )

Additional good news was that the employment estimates for the previous two months were revised upward.  September employment was revised from and increase of 158,000 to and increase of 210,000.  The employment change for October was revised from up 80,000 to up 100,000.

Reviewing The Recession

Although it is officially over, declared ended in June, 2009, by the National Bureau of Economic Research, the effects of the recession linger with slow growth and high unemployment.

The U.S. economy lost 3,623,000 jobs in 2008 and 4,740,000 jobs in 2009.  The U.S. is still million of jobs behind the employment level of December 2007, the date the NBER identified as the beginning of the recession.  

[Teacher Note: To read the December 1, 2008, NBER’s “Business Cycle Dating Committee” recession announcement, go to this site: Determination of the December 2008 Peak in Economic Activity .]

[Teacher Note:  This is a great time to review the concept of the “business cycle.”  The NBER web page defines busies cycles and the factors used by the Business Cycle Dating Committee to identify recessions.]

2011 Macroeconomic Data - Business Cycles, Employment, GDP and CPI 
 
The economy moves in continuous periods of growth and decline called business cycles. The cycle primarily represents the growth, peak, decline, and trough phases of gross domestic product (GDP) and employment, and may also represent other measurements of the general health of the economy. When the economy is in a period of declining GDP and employment it may be in a recession.

 

Take a look at how the three macroeconomic measurements in the "Focus on Economic Data" lesson series compare over the last year and the current recession. Figure 3, below, illustrates a typical business cycle model.

figure 3


Employment and Unemployment (Recap of this Month’s Data)

The unemployment rate fell by 0.4 percentage point to 8.6 percent in November, and nonfarm payroll employment rose by 120,000, the U.S. Bureau of Labor Statistics reported today. Employment continued to trend up in retail trade, leisure and hospitality, professional and business services, and health care. Government employment continued to trend down. ”

Including the revised estimates for September and October, U.S. employment has increased by 430,000 jobs over the last three months.  Private sector employment is picking up and government employment continues to decrease.

Figure 4, below, again shows the monthly U.S. unemployment rates from 2000 through November, 2011.

figure 4


Real Gross Domestic Product (Real GDP)

U.S. real gross domestic product increased at an annual rate of 2.0 percent in the third quarter of 2011, after increasing 1.2 percent in Q2.  The economy, as measured by real GDP, is growing, although at a somewhat slow rate.

The U.S. rate of GDP growth fell-off considerably in 2008, the beginning of the recession. 2008 saw decreases in real GDP in three of four quarters. The losses continued through the second quarter of 2009, when growth began again, at annualized rates of 3.7 percent in Q1, 1.7 percent in Q2 and 2.5 percent growth in Q3.

Figure 5, below, shows the quarterly changes in real GDP growth over the last few years.  Note the "cycles" of increased and decreased growth rates. Those periods below the "0" line are negative GDP growth.

figure 5

Consumer Price Index

”The Consumer Price Index for All Urban Consumers (CPI-U) decreased  0.1 percent in October on a seasonally adjusted basis. Over the last 12 months,  the all items index increased 3.5 percent before seasonal adjustment.”

As has frequently been the case in recent months, energy prices were the major factor in the all items seasonally adjusted price level. A decline in the energy index more than offset small increases in the indexes for food and all items less food and energy. The energy index turned down in October after increasing in each of the three previous months as the gasoline and household energy indexes declined.  While the shelter and medical care indexes accelerated in October and the apparel index turned up, the indexes for new vehicles, used cars and trucks, airline fare, and recreation all declined.  Although many fear future inflation, there has been little evidence of inflationary pressures in recent years.

figure 6

[Teacher Note:  Students should be able to draw conclusions about the relationships of the three data sets - real GDP growth, unemployment and CPI.  They should be able to explain how they are typically directly or indirectly related.  For instance, the real GDP and unemployment data are usually directly related. Normally, they rise and fall in a similar pattern.  Employment and CPI data are most often indirectly related.  Normally, there is little inflationary pressure when the unemployment rate is rising.]

ASSESSMENT ACTIVITY


Essay Questions:

1.  How are changes in real GDP and the unemployment rate related?

[Real GDP is a measurement of output of goods and services. Output is a determinant of the demand for labor and thus, the number of jobs. As output has decreased and the demand for labor has decreased, the unemployment rate has increased.]


2.  What change in what macroeconomic indicator will convince you that the recession is over? Why?

[The key is that they can explain the meaning of the indicator relative to the general definition of a recession.]

CONCLUSION

Once again, the BLS reported “The unemployment rate fell by 0.4 percentage point to 8.6 percent in November, and nonfarm payroll employment rose by 120,000..."  The number of unemployed decreased by almost one-half million, but the labor force shrunk and the number of people "not in the labor force" increased.  Many of the unemployed may have just given-up seeking employment.

The economy is growing at a moderate pace, but job creation is not keeping up an adequate pace for a more robust recovery. 

What do you think about the health of the U.S. economy?  Are we really out of the recession? 

What can government or the private sector do to create a real recovery?

EXTENSION ACTIVITY

How do other economic indicators compare to the recent changes in real GDP, unemployment rate, and the consumer price index? Take a look at some of the indicators listed below. Click on the name of the indicator to find a definition, the source, and links to more information and recent data. Compare the chart to the figures in this lesson on real GDP, unemployment, and the consumer price index.

 
How does the indicator reflect the current economic problems?

  1. Is the recent history of the indicator similar or related to the GDP, unemployment, or CPI?
  2. How are people or businesses impacted by the economic data?


[Note to teachers: Assign one of the indicators to individual or groups of students. They can report on their indicator comparing a chart of that indicator to other indicators.  Are the indicators related?]