This lesson examines the November 6, 2009, U.S. Department of Labor, Bureau of Labor Statistics, announcement of employment data and the unemployment rate for the month of October, 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, Full Employment, Labor Force, Macroeconomic Indicators, Types of Unemployment, Unemployment, Unemployment Rate

STUDENTS WILL

  • Review the November 6, 2009 BLS announcement of 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.

This lesson is about the November 6, 2009, BLS announcement, "Employment Situation: October 2009."  This lesson will also look at regional employment and unemployment trends, similarities, and differences.

[Note to teachers: Employment and Unemployment Rate Focus on Economic Data Schedule:

During the first half of this school year, (September-January), EconEdLink will publish five 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 lessons 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.
  • January: school year-end review and final analysis.]

MATERIALS


Key Economic Indicators

as of November 6, 2009

Inflation

On a seasonally adjusted basis, the U.S. CPI-U increased 0.2 percent in September after rising 0.4 percent in August. The index for all items less food and energy increased 0.2 percent in September after increasing 0.1 percent in August.

Employment and Unemployment

In October, the U.S. unemployment rate rose to 10.2 percent, the highest since April 1983, and nonfarm payroll employment declined by 190,000 jobs. The largest job losses over the month were in construction, manufacturing, and retail trade.

Real GDP

U.S. real gross domestic product increased at an annual rate of 3.5 percent in the third quarter of 2009. In the second quarter, real GDP decreased 0.7 percent.

Federal Reserve

The FOMC will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

PROCESS

On November 7, 2009, newspaper headlines around the nation read...  

U.S. Unemployment Rate Hits 10.2%, Highest in 26 Years

In October 2009, 15.7 million Americans were unemployed, more than 10 percent of the U.S. labor force.  Another 190,000 Americans were added to the total of unemployed in October, with unemployment reaching it highest level since April of 1983.

Who are the unemployed? What industries are most affected?  Why are they unemployed?  How long will the job losses continue?  Let's take a look at the employment data to find some answers - or, maybe, to find more questions.

U.S. Bureau of Labor Statistics News Release: The Employment Situation, October 2009
Released November 4, 2009

"The unemployment rate rose from 9.8 to 10.2 percent in October, and nonfarm payroll employment continued to decline (-190,000), the U.S. Bureau of Labor Statistics reported today. The largest job losses over the month were in construction, manufacturing, and retail trade."

The increase in the unemployment rate in October did not surprise many economists and analysts, but the size of the increase was generally unexpected.  For some time, many have predicted that the U.S. unemployment rate would top ten percent and, possibly, top the April 1983 (10.2 percent ) or the recent historical high of 10.8 percent in November 1982.  To put these numbers in historical perspective, the U.S. unemployment rate reached over 25 percent during the Great Depression of the 1930s

[Note to teachers: Click on this link to access U.S. Unemployment Data since 1948.]

"In October, the number of unemployed persons increased by 558,000 to 15.7 million. The unemployment rate rose by 0.4 percentage point to 10.2 percent, the highest rate since April 1983. Since the start of the recession in December 2007, the number of unemployed persons has risen by 8.2 million, and the unemployment rate has grown by 5.3 percentage points."

Unemployment Rates Among the Major Worker Groups
Adult Men 10.7%
Whites 9.5%
Adult Women 8.1%
Teenagers 27.6%
Blacks 15.7%
Hispanics 13.1%
Asians 7.5%


Long-Term Unemployed

"The number of long-term unemployed (those jobless for 27 weeks and over) was little changed over the month at 5.6 million. In October, 35.6 percent of unemployed persons were jobless for 27 weeks or more."

Labor Force Participation Rate

"The civilian labor force participation rate was little changed over the month at 65.1 percent. The employment-population ratio continued to decline in October, falling to 58.5 percent."

Part-time (underemployed) Workers

"The number of persons working part time for economic reasons (sometimes referred to as involuntary part-time workers) was little changed in October at 9.3 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."

Marginally Attached Workers

"About 2.4 million persons were marginally attached to the labor force in October, reflecting an increase of 736,000 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, there were 808,000 discouraged workers in October, up from 484,000 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 other 1.6 million persons marginally attached to the labor force in October had not searched for work in the 4 weeks preceding the survey for reasons such as school attendance or family responsibilities."

Payroll Employment - Establishment Survey Data

"Total nonfarm payroll employment declined by 190,000 in October. In the most recent 3 months, job losses have averaged 188,000 per month, compared with losses averaging 357,000 during the prior 3 months. In contrast, losses averaged 645,000 per month from November 2008 to April 2009. Since December 2007, payroll employment has fallen by 7.3 million."

Major Industries
Construction -62,000 jobs in October
Manufacturing -61,000 jobs in October
Retail Trade -40,000 jobs in October
Health Care +29,000 jobs in October

The Work Week

"The average workweek for production and nonsupervisory workers on private nonfarm payrolls was unchanged at 33.0 hours in October. The manufacturing workweek rose by 0.1 hour to 40.0 hours, and factory overtime increased by 0.2 hour over the month. "

Average Earnings

"In October, average hourly earnings of production and nonsupervisory workers on private nonfarm payrolls rose by 5 cents, or 0.3 percent, to $18.72. Over the past 12 months, average hourly earnings have risen by 2.4 percent, while average weekly earnings have risen by only 0.9 percent due to declines in the average workweek."

Revision for Previous Months

"The change in total nonfarm payroll employment for August was revised from -201,000 to -154,000, and the change for September was revised from -263,000 to -219,000."  The revisions reflected fewer job losses than had been previously reported. 

The U.S. Unemployment Rate, 1990 - 2009

The graph below shows the monthly U.S. unemployment rates from 1990 to October 2009.  Notice the up and down cycles over several years, then the dramatic increase beginning in 2008. 

Unemployment Figure 1


NOTE: The Employment Situation for November is scheduled to be released on Friday, December 4, 2009, at 8:30 a.m. (EST)

Regional and State Employment and Unemployment: September 2009

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 for all 50 States, the District of Columbia, Puerto Rico, the Virgin Islands, and over 300 metropolitan areas and divisions.

Just a few days after the November 6 report on the national unemployment rate and employment data for October 2009, the BLS released the monthly reports on unemployment in metropolitan areas, states and regions. These reports cover the month of September, 2009. Here are the highlights of those reports.

 States – Unemployment

“Regional and state unemployment rates were generally little changed in September. Twenty-three states and the District of Columbia recorded over-the-month unemployment rate increases, 19 states registered rate decreases, and 8 states had no rate change.” In the past year, unemployment increased in all 50 states and the District of Columbia.”

States - Employment

“In September, nonfarm payroll employment decreased in 43 states and the District of Columbia and increased in 7 states.” The largest employment decrease were in  New York, Texas. California, Wisconsin and Michigan. The District of Columbia had the biggest month to month percentage decrease in employment. The largest month-to-month increases were in Indiana, New Mexico, Nevada and Utah.

New Mexico, Indiana, Nevada, and Utah had the largest percentage increases in employment. The largest year to year-to-year percentage decreases in employment were in Arizona and Michigan.

Regions - Unemployment

“In September, the West reported the highest regional jobless rate, 10.6 percent, followed by the Midwest, 9.8 percent. The Northeast and South recorded the lowest rates, 9.0 and 9.3 percent.” The largest percentage of job losses over the last year was in the west region.

“The Pacific continued to report the highest jobless rate, 11.6 percent in September, followed by the East North Central, 11.0 percent, and East South Central, 10.4 percent. The divisions registering the lowest jobless rates were the West North Central, 7.3 percent, and West South Central, 7.9 percent.”

States -  Unemployment

Michigan again recorded the highest unemployment rate among the states, with a 15.3 percent rates in September. The next highest rates were in Nevada, Rhode Island, and California. North Dakota had the lowest unemployment rate, at 4.2 percent. Other states with low rates were South Dakota and Nebraska. 27 states had unemployment rates significantly lower than the U.S. total. 9 states had unemployment rates that were significantly higher than the U.S. average.

“All states and the District of Columbia recorded statistically significant increases in their jobless rates from September 2008. The largest of these were in Michigan (+6.4 percentage points), Nevada (+6.0 points), and Alabama (+5.3 points), while the smallest rate increase occurred in North Dakota (+0.9 point).”

Nonfarm Payroll Employment (Seasonally Adjusted)

“Between August and September 2009, 15 states and the District of Columbia experienced statistically significant changes in employment, all of which were decreases. The largest statistically significant job losses occurred in New York (-81,700), Texas (-44,700), California (-39,300), Wisconsin (-21,700), and Michigan (-21,500). The smallest statistically significant decreases in employment occurred in Hawaii (-4,200), Nebraska (-6,300), and Arkansas (-7,700).”

“Over the year, 46 states experienced statistically significant changes in employment, all of which were decreases. The largest statistically significant job losses occurred in California (-732,700), Florida (-360,400), Michigan (-308,800), Illinois (-306,900), Texas (-303,700), Ohio (-258,100), New York (-56,100), and Georgia (-245,400). The smallest statistically significant decreases in employment occurred in South Dakota (-7,900) and Montana (-8,400).”

Metropolitan Area Employment Data

“Unemployment rates were higher in September than a year earlier in 371 of the 372 metropolitan areas and lower in 1 area, the U.S. Bureau of Labor Statistics reported today. Thirteen areas recorded jobless rates of at least 15.0 percent, while 12 areas registered rates below 5.0 percent. The national unemployment rate in September was 9.5 percent, not seasonally adjusted, up from 6.0 percent a year earlier. Among the 369 metropolitan areas for which nonfarm payroll employment data were available, 359 areas reported over-the-year decreases in employment, and 10 reported increases.”

Metropolitan Area Unemployment (Not Seasonally Adjusted)

“El Centro, Calif., and Yuma, Ariz., recorded the highest unemployment rates, 30.1 and 24.2 percent, respectively…. Bismarck, N.D., registered the lowest unemployment rate in September, 2.9 percent, followed by Fargo, N.D.-Minn., 3.7 percent, and Grand Forks, N.D.-Minn., 3.8 percent.”

“Detroit-Warren-Livonia, Mich., recorded the largest jobless rate increase from September 2008 (+8.4 percentage points), followed by Muskegon-Norton Shores, Mich. (+6.8 points)…Three areas reported rate increases of less than a full percentage point: Manhattan, Kan. (+0.4 point), Bismarck, N.D. (+0.5 point), and Grand Forks, N.D.-Minn. (+0.6 point). Only one area experienced an over-the-year jobless rate decrease, Houma-Bayou Cane-Thibodaux, La. (-1.4 percentage points), which had been impacted by Hurricane Gustav in September 2008.”

Of the 49 metropolitan areas with a Census 2000 population of 1 million or more, Deroit-Warren-Livonia, Mich., reported the highest unemployment rate in September, 17.3 percent. The large areas with the next highest rates were Riverside-San Bernardino-Ontario, Calif., 14.2 percent, and Las Vegas-Paradise, Nev., 13.9 percent. The large areas with the lowest jobless rates in September were Oklahoma City, Okla., 5.9 percent; Washington-Arlington-Alexandria, D.C.-Va.-Md.-W.Va., 6.2 percent; and Virginia Beach-Norfolk-Newport News, Va.-N.C., 6.7 percent.”

Metropolitan Area Nonfarm Employment (Not Seasonally Adjusted)

In September, 359 metropolitan areas reported over-the-year decreases in nonfarm payroll employment and 10 reported increases. The largest over-the-year employment decrease was recorded in Los Angeles-Long Beach-Santa Ana, Calif. (-220,000), followed by New York-Northern New Jersey-Long Island, N.Y.-N.J.-Pa. (-216,400), and Chicago-Naperville-Joliet, Ill.-Ind.-Wis. (-207,800)…The largest over-the-year increases in employment occurred in McAllen-Edinburg-Mission, Texas (+3,100), Kennewick-Pasco-Richland, Wash. (+2,900), and Sandusky, Ohio (+1,300)… Over the year, nonfarm employment declined in all 38 metropolitan areas with annual average employment levels above 750,000 in 2008.”

Responses to the Unemployment Rate Increase

 

A November 6 New York Times article on NYTimes.Com, "Jobs Report: Economists React," by R.M. Schneiderman reported the reactions of several prominent economists to the BLS report and the 10.2 percent unemployment rate.

"Here is how economists and other analysts reacted:

 

“If you had told everyone last Election Day what would happen, economically, in 2009, what policies would they have adopted then to stem this disaster? And why aren’t we implementing those policies now?” — Brad DeLong, University of California, Berkeley

“We expect job declines to continue to ease, since we expect that productivity gains will slow, and firms will find that they must bring in new workers to keep output growing. The extra boost provided by the hiring of Census workers should probably be enough to turn employment growth positive by March.” — Nigel Gault, IHS Global Insight

“Today the unemployment rate passed 10 percent, a sort of brutal milestone The thing to do, I guess, is to keep making the case for doing more; in particular, we can hope that centrist Democrats will finally realize that timid economic policies are hurting their own electoral prospects. But it’s an uphill fight.” — Paul Krugman, Princeton University

“Perhaps a timeout is in order in the debate over health care, so the president’s political capital can be used to address problems in the labor market. Finding employment for the 15.6 percent of those aged 20 to 24 and 10.8 percent of those between 25 and 34 — both key demographic groups partially responsible for the president’s electoral success — should be a priority, even if that means the necessary reform of the health care system is pushed back until 2010.” — Joseph Brusuelas, Moody’s Economy.com

“The bottom line is that although labor market deterioration is clearly not occurring at the pace suffered late in 2008 and early this year, conditions remain brutal. Moreover, we continue to believe that the healing process will be a slow one, and that households will be contending with weak income growth and balance sheet issues for some time.” — Joshua Shapiro, MFR Inc.

“We have argued and continue to argue that another jobless recovery is materializing and if our estimates for G.D.P. growth going forward materialize, the unemployment rate will remain at elevated levels for several years. Nearly 16 million people are unemployed right now while another 9 million are working part-time jobs because they cannot get a full-time job. Substantial economic growth is necessary to put these people back to work and account for new labor force entrants and account for a return of those who have left the labor force.” — Dan Greenhaus, Miller Tabak and Co.

“Over all, this recovery is shaping up to be a ‘jobless’ one, just like the last two. Our concern is that unlike the last recovery, with credit still tight, households aren’t going to be able to smooth their consumption using credit until the labor market eventually strengthens.” — Paul Ashworth, Capital Economics Ltd.

“The sharp jump in the unemployment rate is likely to spur policy makers to consider new measures to stimulate job creation. For example, after the September report, there was talk of enacting a new-job tax credit. We believe that such a measure — if designed correctly — could represent an important source of effective stimulus. We continue to see signs that the labor market will begin to show job growth in early 2010. But, it now appears that the unemployment rate will hit 10.5 percent — or even a bit higher.” — David Greenlaw and Ted Wieseman, Morgan Stanley Research"

ASSESSMENT ACTIVITY

Short Answer Questions: 

1.  What do you think accounts for differences in the unemployment rates between states and regions? [Answers will vary.]

2.  What does the trend in the unemployment rate tell you about the health of the economy? [The unemployment rate increase is a sign of continuing economic turmoil.] 

CONCLUSION

Take another look at the highlights of the November 6 BLS announcement:

The U.S. unemployment rate rose from 9.8 to 10.2 percent in October, the highest level since April of 1983.

The number of unemployed persons in the U.S. increased by 558,000 to 15.7 million.

Since the beginning of the recession in December 2007, the number of unemployed persons has risen by 8.2 million, and the unemployment rate has grown by 5.3 percentage points.

Although many economists have suggested that the recession is over - evidenced by the 3.5 percent increase in real GDP in the third quarter of 2009, the unemployment numbers do not confirm that conclusion. Unemployment is a lagging indicator - following other signs of recover, the significant increase may indicate that the end of the recession is not near.

Will the number of jobs increase and return to previous levels? Some suggest that we will experience another "jobless recovery" as output increases as a result of improved productivity. The two most recent recessions saw very slow job growth as the economy recovered. Perhaps the economy has structurally changed - less reliant on manufacturing jobs and more reliant on trade for the goods and services we consume. Maybe new technologies will mean that we no longer need the size of workforce we have required in the past. No matter what, a more vibrant economy, despite these structural changes, will create new jobs and opportunities that we do not even know about today.

EXTENSION ACTIVITY

The BLS regularly releases employment and unemployment data on metropolitan areas, states and regions. This data is not quite as current as the national data that is released monthly – given the extra time required to interpret more localized data. 

On October 21, 2009, the BLS released data on “Regional and State Employment and Unemployment.” 

“In September, 23 states and the District of Columbia recorded over-the-month unemployment rate increases, 19 states registered decreases, and 8 states had no change. Nonfarm payroll employment decreased in 43 states and the District of Columbia and increased in 7 states.”

On October 28, the BLS released data on “Metropolitan Area Employment and Unemployment.”

“Unemployment rates were higher in September than a year earlier in 371 of the 372 metropolitan areas and lower in 1 area. Among the 369 metropolitan areas for which nonfarm payroll employment data were available, 359 areas reported over-the-year decreases in employment, and 10 reported increases.”

Read the two BLS announcements. 

  1. How does your state compare to the national average and surrounding state?
  2. Are there regional patterns of unemployment that are higher and lower than the national average?
  3. Which five states had the highest unemployment rates in September 2009?
  4. Did the unemployment rate decrease in any states between August and September 2009?
  5. Why do you think your region or state differs from other regions or states, or the national employment and unemployment trends?

[Answers will vary. Students should show understanding of how their regional economy may differ or is similar to the nation or other regions. For instance, is their state more dependent on manufacturing? Is their state more agricultural?]