This lesson examines the September 4, 2009, U.S. Department of Labor, Bureau of Labor Statistics, announcement of employment data and the unemployment rate for the month of August, 2009. 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, Economic Growth, Full Employment, Labor Force, Labor Market, Macroeconomic Indicators, Types of Unemployment, 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 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.

The September 4, 2009, BLS announcement, "Employment Situation: August 2009"

"Nonfarm payroll employment continued to decline in August (-216,000), and the unemployment rate rose to 9.7 percent, the U.S. Bureau of Labor Statistics reported today. Although job losses continued in many of the major industry sectors in August, the declines have moderated in recent months.”

“In August, the number of unemployed persons increased by 466,000 to 14.9 million, and the unemployment rate rose by 0.3 percentage point to 9.7 percent. The rate had been little changed in June and July, after increasing 0.4 or 0.5 percentage point in each month from December 2008 through May. Since the recession began in December 2007, the number of unemployed persons has risen by 7.4 million, and the unemployment rate has grown by 4.8 percentage points."

[Note to Teachers: Click on this link for the full BLS September 4, 2009 Employment Situation Press Release .]

[Notes to Teachers on the employment and unemployment rate lessons:

During the first half of this 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 January 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 basics. What is the level of employment? What is the unemployment rate? How are they measured? 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. Calendar year-end review and analysis.]

MATERIALS


Key Economic Indicators

as of September 4, 2009

Inflation

On a seasonally adjusted basis, the Consumer Price Index (CPI-U) was unchanged in July after rising 0.7 percent in June. The index for all items less food and energy increased 0.1 percent in July after increasing 0.2 percent in June.

Employment and Unemployment

U.S. nonfarm payroll employment continued to decline in August (-216,000), and the unemployment rate rose to 9.7 percent. Although job losses continued in many of the major industry sectors, the declines have moderated in recent months.

Real GDP

U.S. Real gross domestic product decreased at an annual rate of 1.0 percent in the second quarter of 2009, (that is, from the first quarter to the second quarter), according to the "second" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP decreased 6.4 percent.

Federal Reserve

The Committee (FOMC) will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

PROCESS

 In August, 2009, the U.S. unemployment rate continued its almost steady increase begun in March, 2007 when the rate was just 4.4 percent. Since March, 2007, the rate has gradually increased with very small drops in a few months.

Figure 1 shows the U.S. unemployment rate since 1990.  Note the significant upward trend in unemployment since early 2007. The upward and downward movements of the unemployment rate mimic the U.S. business cycles of growth and decline. According to the national economics standards, business cycles are "Fluctuations in the overall rate of national economic activity with alternating periods of expansion and contraction; these vary in duration and degrees of severity; usually measured by real gross domestic product (GDP)."
Unemployment Figure 1

Along with the gradual increase of the unemployment rate, the U.S. economic has been losing jobs as the total number of jobs has increased. In August 2009, the economy lost a net total of 216,000 jobs. While this seems to be a big loss, it is far less than the losses in previous months. Since January, 2008, the U.S. economy has lost 6,929,000 jobs, with greatest monthly loss of 681,000 jobs in January of 2009. The rate of losses have slowed, but the total losses in this recession continue to increase.

This report is an additional sign that the economy continues to be weak. A significant concern is that when unemployment is increasing and people are concerned about the future of their jobs and lose confidence in the economy, they may decreased their spending as their confidence decreases. Unemployment can lead to further economic contraction.

The August 2009 unemployment rate reached the highest unemployment[ rate since it was 9.8 percent in July of 1982. The highest the unemployment rate reached during the 1982-83 recession period was 10.8 percent in December 2008. For more historical data, go to the BLS Historical Unemployment Data .  Go to 'Change Output Options' and change the 'From' to 1982 then click the 'Go' button.

U.S. Employment Data, August 2009
Category August 2008 August 2009
Civilian Non-Institutional Population 234,107,000 236,087,000
Civilian Labor Force 155,387,000 154,577,000
Employed 145,909,000 139,649,000
Unemployed 9,479,000 14,928,000
Persons Not in Labor Force 78,719,000 81,509,000
Persons Who Currently Want a Job* 5,024,000 5,609,000
 
Participation Rate 66.4% 65.5%
Employment-Population Ratio 62.3% 59.2%
Unmemployment Rate 6.1% 9.7%
* Includes persons classified as discouraged workers, other workers marginally attached to the labor force, and others who expressed a desire for employment.

 
What is the Bureau of Labor
From the BLS website mission statement, "The Bureau of Labor Statistics (BLS) is the principal fact-finding agency for the Federal Government in the broad field of labor economics and statistics. The BLS is an independent national statistical agency that collects, processes, analyzes, and disseminates essential statistical data to the American public, the U.S. Congress, other Federal agencies, State and local governments, business, and labor. The BLS also serves as a statistical resource to the Department of Labor."

"BLS data must satisfy a number of criteria, including relevance to current social and economic issues, timeliness in reflecting today’s rapidly changing economic conditions, accuracy and consistently high statistical quality, and impartiality in both subject matter and presentation." (Source: About BLS )

The BLS collects and reports on a wealth of economics data, primarily related to employment, productivity and prices. For more information on available BLS data, go to these sites:

The Unemployment
The unemployment rate is the percentage of the U.S. labor force that is unemployed. It is calculated by dividing the number of unemployed individuals by the sum of the number of people unemployed and the number of people employed. The number of people unemployed and the number of people employed is defined as the number of individuals in the labor force.

An individual is counted as unemployed if the individual is over the age of 16 and is actively looking for a job, but cannot find one. Students, those individuals who choose to not work, and retirees are not in the labor force, and therefore not counted in the unemployment rate.

Unemployment announcements receive headline treatment almost every month. Changes are significant indicators of national economic conditions and have relevance to every local community as unemployment has significant costs to the individuals who are unemployed and to the entire community and the U.S. economy.

Changes in levels of employment are also included in the announcements and often receive less attention. However, the employment data are equally, perhaps even more, important indicators of the direction of the U.S. economy.
 

How is the Unemployment Rate Determined? 
(U.S. Labor Market Data, August 2009)
Total civilian population (16 +) 236,086,000
- Not in Labor force 81, 509,000
= Labor force 154,577,000
- Employed 139,649,000
= Unemployed 14,929,000
divided by the labor force 154,577,000
= Unemployment Rate 9.7%  (expressed as a percentage)

 Distribution of Unemployment

Unemployment varies significantly among groups of individuals and parts of the country. The September 4, 2009 announcement included this breakdown of unemployment by major demographic groups: 

Population Percent
Total Labor Force 9.7%
Adult Men 10.1%
Adult Women 7.6%
Whites 8.9%
Hispanics 13.0%
Blacks 15.1%
Asians 7.5%
Teenagers 25.5%

The BLS report added some comments on significant data about those who are not included as "unemployed," but show additional problems in the labor markets.

In August, the number of persons working part time for economic reasons was little changed at 9.1 million. These individuals indicated that they were working part time because their hours had been cut back or because they were unable to find a full-time job. The number of such workers rose sharply in the fall and winter but has been little changed since March. 

About 2.3 million persons were marginally attached to the labor force in August, reflecting an increase of 630,000 from 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.

Among the marginally attached, the number of discouraged workers in August (758,000) has nearly doubled over the past 12 months. (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 other 1.5 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."

The Marriage Benefit

One interesting piece of data from the September 4 report comes from the breakdown of the data in a table called, "Selected Unemployment Indicators." While the U.S. unemployment rate for all persons reached 9.7%, and the rates for men and women reached 10.9% and 8.2% respectively, the rates for married persons in a home with a spouse present were only 7.1% for men and 5.4 percent for women.

Unemployment in Industry Groups

The breakdown of the August 2009 job losses extended to almost all industry groups, as listed below (BLS preliminary estimates). Only education and health gained a significant number of industry jobs.
 

Industry Data, August 2009
(Establishment Survey Data)
Total Nonfarm Payroll -216,000
Goods Producing -136,000
     Construction Employment -65,000
     Manufacturing Employment -63,000
Service Producing -80,000
     Financial Services -28,000
     Wholesale Trade Employment -17,000
     Retail Trade Employment -10,000
     Education and Health +52,000
     Professional and Business Services -22,000
     Leisure and Hospitality -21,000
     Government -18,000

Types of Unemployment

There are three types of unemployment, 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 shifts 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 marketable 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.

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.

Full Employment

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.

Seasonally Adjusted Household Survey Data

Short-run trends in labor force are influenced by seasonal and periodic fluctuations associated with recurring events such as weather, holidays, and the opening and closing of schools. Seasonal adjustment eliminates the influence of these fluctuations and makes it easier for users to observe fundamental changes in the level of the series, particularly changes associated with general economic expansions and contractions.

At the end of each calendar year, BLS updates the seasonal adjustment factors for the labor force data derived from the Current Population Survey (CPS), or household survey. This past year, seasonally adjusted data for January 2008-November 2008 were subject to revision. For example, the unemployment rate in November 2008 was originally reported at 6.7 percent and revised to 6.8 percent by the time of the January 9 announcement.

For a more full explanation of the seasonal adjustment process, see the BLS article named Revision of Seasonally Adjusted Labor Force Series in 2008 .

What Do the BLS Employment and Unemployment Numbers Mean? 

Employment: Each month the Current Employment Statistics (CES) program surveys 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 publishes a monthly "Current Employment Statistics Highlights ." This report identifies trends in key industry groups.

Unemployment: BLS conducts a monthly household survey, providing comprehensive information on the employment and unemployment of the population classified by age, sex, race, and other characteristics." An online BLS publication outlines, "How the Government Measures Unemployment ."

In BLS employment and unemployment data, there are basically three categories that all people, age sixteen and over fall into:

  • People with jobs are employed.
  • People who are jobless, looking for jobs, and available for work are unemployed.
  • People who are neither employed nor unemployed are not in the labor force.

Key BLS Definitions

[Teacher Note: The student version of the lesson asks students to go online to the BLS website "glossary" to learn the definitions of the key BLS "employment report" terms. If they are not able to go online, provide them with the following definitions.]

Labor Force: "The labor force includes all persons classified as employed or unemployed in accordance with the definitions contained in this glossary."

Civilian Noninstitutional Population: "Included are persons 16 years of age and older residing in the 50 States and the District of Columbia who are not inmates of institutions (for example, penal and mental facilities, homes for the aged), and who are not on active duty in the Armed Forces."

Employed Persons: "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" a variety of reasons."

Unemployed Persons: "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."

Not in the Labor Force: "Includes persons aged 16 years and older in the civilian non-institutional population who are neither employed nor unemployed in accordance with the definitions contained in this glossary. Information is collected on their desire for and availability for work, job search activity in the prior year, and reasons for not currently searching."

Unemployment Rate: "The unemployment rate represents the number unemployed as a percent of the labor force."

Duration of Unemployment: "The length of time in weeks (through the current reference week) that persons classified as unemployed had been looking for work. For persons on layoff who are counted as unemployed, duration of unemployment represents the number of full weeks they had been on layoff. The data do not represent completed spells of unemployment."

Full-time Workers: "Persons who work 35 hours or more per week."

Hours Worked: "There are two different hours concepts measured in the CPS: usual hours and actual hours at work. Usual hours refer to a person’s normal work schedule versus their actual hours at work during the survey reference week. For example, a person who normally works 40 hours per week, but was off for a 1-day holiday during the reference week, would report his or her usual hours as 40 but actual hours at work for the reference week as 32."

Contingent Workers: "Workers who do not have an implicit or explicit contract for long-term employment. BLS uses three alternative measures of contingent workers that vary in scope."

Marginally Attached Workers: "Persons not in the labor force who want and are available for work, and who have looked for a job sometime in the prior 12 months (or since the end of their last job if they held one within the past 12 months), but were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. Discouraged workers are a subset of the marginally attached."

Discouraged Workers: "Persons not in the labor force who want and are available for a job and who have looked for work sometime in the past 12 months (or since the end of their last job if they held one within the past 12 months), but who are not currently looking because they believe there are no jobs available or there are none for which they would qualify."

Self-employed Persons: "Those persons who work for profit or fees in their own business, profession, trade, or farm. Only the unincorporated self-employed are included in the self-employed category."

Job Leavers: "Unemployed persons who quit or otherwise terminated their employment voluntarily and immediately began looking for work." 

Job Losers: "Unemployed persons who involuntarily lost their last job or who had completed a temporary job. This includes persons who were on temporary layoff expecting to return to work, as well as persons not on temporary layoff. (See Unemployed persons.) Those not on temporary layoff include permanent job losers and persons whose temporary jobs had ended."

Seasonally Adjusted: "Seasonal adjustment removes the effects of events that follow a more or less regular pattern each year. These adjustments make it easier to observe the cyclical and other nonseasonal movements in a data series."

Supply of Workers: Often refers to the labor force. The concept focuses on worker characteristics, especially their education and training, but also characteristics such as experience (often considered to be correlated with age), physical strength (often considered to be inversely correlated with age), ability to work in teams, etc."

Wages and Salaries: "Hourly straight-time wage rate or, for workers not paid on an hourly basis, straight-time earnings divided by the corresponding hours. Straight-time wage and salary rates are total earnings before payroll deductions, excluding premium pay for overtime and for work on weekends and holidays, shift differentials, and non-production bonuses such as lump-sum payments provided in lieu of wage increases."

Weekly Hours: "The expected or actual period of employment for the week, usually expressed in number of hours. Some uses of the term may relate to the outside dimensions of a week (for example, 7 consecutive days)."

Want more information about employment and unemployment data?

The BLS web page has a link to Frequently Asked Questions (FAQs). Go to this page, named How the Government Measures Unemployment , for more information.

ASSESSMENT ACTIVITY

SHORT ANSWER ESSAY QUESTION:

1.  How is the unemployment rate determined?

[The number of unemployed persons divided by the labor force expressed as a percentage equals the unemployment rate.]

CONCLUSION

In August, 2009, the U.S. unemployment rate continued its almost steady series of monthly increase begun in March, 2007 when the rate was just 4.4 percent. Since March, 2007, the rate has gradually increased with very small drops in a few months during that time period.

Along with the gradual increase of the unemployment rate, the U.S. economic has been losing jobs as the total number of jobs has increased. In August 2009, the economy lost a net total of 216,000 jobs. While this seems to be a big loss, it is far less than the losses in previous months. Since Janaury, 2008, the U.S. economy has lost 6,929,000 jobs, with greatest montly loss of 681,000 jobs in January of 2009. The rate of losss have slowed, but the total losses in this recession continue to increase.

This data may tell us that the recession has continued, at least through August. Payroll employment is a primary indicator used by the National Bureau of Economic Research (NBER) "Business Cycle Dating Committee" to determine the beginnings and ends of recessions. The NBER committee determned that the current recession began in December 2008 when the level of payroll employment peaked. Of course, employment is not the sole measurement used by the NBER, but it is one of the key data points, if not the most critical. 

EXTENSION ACTIVITY

 

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.”  

(Teacher note: For a more detailed explanation of the Conference Board’s economic indicator indexes, go to Global Business Cycle Indicators .)

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 August 2008 and August 2009, the average duration of unemployment increased from 17.6 weeks to 25.1 weeks. 34.1 percent of the unemployed in August 2009 had been unemployed for at least 27 weeks.

(Teacher note: For Bureau of Labor Statistics data on the duration of unemployment, go to Selected Employment Indicators .)

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 .