This lesson examines the October 8, 2010, U.S. Department of Labor, Bureau of Labor Statistics, announcement of employment data and the unemployment rate for the month of September, 2010. 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 Market, 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 is about the October 8, 2010, BLS announcement of the "Employment Situation" for the month of September 2010.

[NOTE: "Employment and Unemployment Rate" Focus on Economic Data lesson schedule:

During the first half of the 2010-2011 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 (this lesson) 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.
  • May: End of the school year review of employment data and summary of the recent history of labor markets.]

MATERIALS

  • BLS Employment Situation News Release for September 2010, released  October 8, 2010.
    www.bls.gov/news.release/archives/empsit_09032010.htm
     
  • Bureau of Labor Statistics: The Current Population Survey (CPS): This site contains a monthly survey of households conducted by the Bureau of Census for the Bureau of Labor Statistics. It provides a comprehensive body of data on the: labor force, employment, unemployment and persons not in the labor force.
    www.bls.gov/cps/ 
     
  • Ranks of Discouraged Workers and Others Marginally Attached to the Labor Force Rise During Recession: This report addressed the long-standing issue of the importance of including discouraged and marginally attached workers in determining the real level of unemployment.
    www.bls.gov/opub/ils/pdf/opbils74.pdf
  • Revision of Seasonally Adjusted Labor Force Series in 2008: This is a BLS article on seasonal data adjustments. 
    www.bls.gov/cps/cpsrs2008.pdf
  • NBER FAQ's:  This site provides National Bureau of Economic Research answers to frequently asked questions related to their Business Cycle Dating Procedure.
    www.nber.org/cycles/recessions_faq.html

Key Economic Indicators

as of October 8, 2010

Inflation

On a seasonally adjusted basis, the U.S. consumer price index for all urban consumers(CPI-U) increased 0.3 percent in August, the same increase as in July. The index for all items less food and energy was unchanged in August after rising 0.1 percent in July.

Employment and Unemployment

U.S. nonfarm payroll employment edged down by 95,000 jobs in September, and the unemployment rate was unchanged at 9.6 percent. Government employment declined by 159,000 jobs, reflecting both a drop in the number of temporary workers for Census 2010 and job losses in local government. Private-sector payroll employment continued to trend up modestly by 64,000 jobs.

Real GDP

U.S. real gross domestic product increased at an annual rate of 1.7 percent in the second quarter of 2010, according to the "third" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 3.7 percent.

Federal Reserve

The Federal Open Market 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, 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

Over the past year, while the economy has been growing - as evidenced by increases in real gross domestic product - employment growth has been very slow.  Is this a so-called "jobless recovery"?

The National Bureau of Economic Research (NBER) declared in August that the recession that began in December of 2007 ended in June of 2009, when large monthly job losses ended and real GDP began to recover.  Some question the meaning of a "technical" end to the recession, especially when the unemployment rate remains historically high.

Let's see what the Bureau of Labor Statistics (BLS) said about employment and unemployment September 2010.

Bureau of Labor Statistics: The Employment Situation – September 2010

Released October 8, 2010

"Nonfarm payroll employment edged down (-95,000) in September, and the unemployment rate was unchanged at 9.6 percent, the U.S. Bureau of Labor Statistics reported today. Government employment declined (-159,000), reflecting both a drop in the number of temporary jobs for Census 2010 and job losses in local government. Private-sector payroll employment continued to trend up modestly (+64,000)."

The economy experienced a net loss of jobs in September because the decrease in the number of government jobs was greater than the increase in the number of private sector jobs.   Most of the loss of government jobs was predicted, as the work on the 2010 U.S. Census ended.  What was not as expected was a significant loss of state and local government jobs.

[Note: Ask your students: Is any increase in private sector jobs - no matter how small - good news? Are private sector jobs better (in the long run) than government employment?] 

The private sector created 117,000 jobs in July and 93,000 jobs in August.  Is the slowing of private sector job growth - just 64,000 in September - a bad sign for the economy and the possibility of a "double dip" recession?

Household Survey Data- Unemployment

"The number of unemployed persons, at 14.8 million, was essentially unchanged in September, and the unemployment rate held at 9.6 percent."

Remember, the unemployment rate is determined as the percentage of the labor force who are unemployed.  The number of employed, unemployed and the size of the labor force change each month.  It is possible that the unemployment rate can decrease if the size of the labor force increases and the number of unemployed increases, decreases or remains constant.    Just the same, the unemployment rate can increase if enough people leave the labor force and the other factors do not change to the same degree.

Remember also that those who are working part-time, are "marginally attached," or "underemployed" are not counted as unemployed.  Some estimate that the real unemployment rate, factoring in the underemployed, part-time workers who want full-time jobs and some others, may be as high as 20 percent.

Is the published unemployment rate a meaningful number?

[Note: For more information about this issue and the unemployment measurement process, go to: How the Government Measures Unemployment (BLS).]

Who were the unemployed in September?

The BEA report continued, "Among the major worker groups, the unemployment rate for adult men (9.8 percent), adult women (8.0 percent), teenagers (26.0 percent), whites (8.7 percent), blacks (16.1 percent), and Hispanics (12.4 percent) showed little or no change in September. The jobless rate for Asians was 6.4 percent, not seasonally adjusted."

Figure 1, below, provides the basic labor market data for the month of September, 2010.

Figure 1:  Labor Market Data
September 2010
(1,000s)
Employment Status Sept. 2010 Monthly Change
Civilian Non-institutional Population 238,322 223
Civilian labor force 154,158 48
Participation rate 64.7 0.0
Employed 139,391 141
Employment-population ratio 58.5 0.0
Unemployed 14,767 -93
Unemployment rate 9.6 0.0
Not in labor force 84,164 175

[Teacher Note:  Review these data with your students.  These are the data that critical to understanding the BLS announcement.  For definitions, go to the BLS Glossary .]

Figure 2, below, breaks down the September unemployment rates by race or ethnicity and age.  There were few significant changes according to the BLS report comments.

Figure 2:  Unemployment by Race/Ethnicity and Age
September 2010
Demographic Group Sept. 2010 Monthly Change
Total, 16 years and over 9.6 0.0
Adult men (20 years and over) 9.8 0.0
Adult women (20 years and over) 8.0 0.0
Teenages (16 to 19 years) 26.0 -0.3
White 8.7 0.0
Black or African American 16.1 -0.2
Asian (not seasonally adjusted) 6.4 0.0
Hispanic or Latino ethnicity 12.4 0.4


[Note:  Ask your students what they think of the data in Figure 2.  Are there patterns?  The unemployment rates for ethnic/racial minorities are significantly higher than whites.  Why?  This may generate a difficult discussion for some students.]

Figure 3, below, shows unemployment rates by educational attainment.  Note the negative relationship - the less education, the higher the unemployment rate.

Figure 3:  Unemployment Rates by Educational Attainment
(Age 25 years and over)
Education Level Sept. 2010 Monthly Change
Total population, 25 and over 8.3 0.0
Less than a high school diploma 15.4 1.4
High school graduates, no college 10.0 -0.3
Some college or associate degree 9.1 0.4
Bachelor's degree and higher 4.4 -0.2


[Teacher Note:  For more information, go to the BLS page,  "Education Pays ." ]

Length of Unemployment

"The number of long-term unemployed (those jobless for 27 weeks and over), at 6.1 million, was little changed over the month but was down by 640,000 since a series high of 6.8 million in May. Inn September, 41.7 percent of unemployed persons had been jobless for 27 weeks or more."

[Note:  The recent recession resulted in a large number of people who were (are) unemployed for a longer time.  How is the impact of of unemployment different as the length increases?  Loss of job skills?  Structural changes in industries?  Mobility problems?]

Labor Force Participation Rate

One key to the meaning of the employment data is understanding the size of the labor force and the participation rate.  When large numbers of people enter into or exit from the labor force, the unemployment rate may change significantly.  Some people simply give up looking for work - they are then no longer "unemployed."  Some are underemloyed - working part time or in jobs that do not use their education or skills. 

"In September, both the civilian labor force participation rate, at 64.7 percent, and the employment-population ratio, at 58.5 percent, were unchanged."

[Note: For historical data on the labor force participation rate, go to the BLS page:  "Labor Force Participation Rate." ]

Part Time Workers

"The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) rose by 612,000 over the month to 9.5 million. Over the past 2 months, the number of such workers has increased by 943,000. 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 2.5 million persons were marginally attached to the labor force in September, up from 2.2 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."

Discouraged Workers

"Among the marginally attached, there were 1.2 million discouraged workers in September, an increase of 503,000 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 1.3 million persons marginally attached to the labor force had not searched for work in the 4 weeks preceding the survey for reasons such as school attendance or family responsibilities."

[Teacher Note:  Ask your students of these people (part time, marginally attached, discouraged workers) should be counted as unemployed.  For instance, is a person who can only find half-time employment really unemployed half-time?]

Establishment Survey Data - Employment

"Total nonfarm payroll employment edged down by 95,000 in September. Government employment fell by 159,000, reflecting both the departure of 77,000 temporary Census 2010 workers from federal government payrolls and a decline of 76,000 in local government employment. Private sector payroll employment continued to trend up (+64,000) over the month."

How Did Industry Groups Fair in September?

"Health care employment rose by 24,000 in September. The increase was concentrated in ambulatory health care services (+17,000). Health care employment has risen by an average of 21,000 per month this year."

"Within professional and business services, employment services added 28,000 jobs in September. Temporary help services accounted for most of the gain."

"Within leisure and hospitality, employment in food services and drinking places increased by 34,000 over the month and has risen by 104,000 thus far in 2010."

"Mining employment continued to trend up (+6,000) over the month. Mining has added 77,000 jobs since a recent low in October 2009."

"Employment in manufacturing changed little in September and, on net, has been essentially flat since May. The industry added 134,000 jobs during the first 5 months of the year."

"Employment in wholesale trade, retail trade, transportation and ware- housing, information, and financial activities showed little change in September."

"Employment in construction edged down (-21,000) over the month, partly offsetting an employment gain in August. Both the August and September changes were concentrated among nonresidential specialty trade contractors. Construction employment has shown little net change since February."

"Government employment fell by 159,000 in September. A decline in federal government employment was due to the loss of 77,000 temporary Census 2010 jobs. As of September, about 6,000 temporary decennial census workers remained on the federal government payroll, down from a peak of 564,000 in May. Employment in local government decreased by 76,000 in September with job losses in both education and noneducation."

Do your students see any patterns here?  Maybe one particular industry represents a large percentage of employment in your community.

[Note: For a more detailed breakdown of industry employment, go to the BLS page, "Employment Situation Summary, Table B ."]

Average Work Week

"In September, the average workweek for all employees was unchanged at 34.2 hours. The manufacturing workweek for all employees decreased by 0.1 hour to 40.1 hours, and factory overtime was unchanged at 3.0 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls was unchanged at 33.5 hours."

Average Hourly Earnings

"Average hourly earnings of all employees on private nonfarm payrolls increased by 1 cent to $22.67 in September. Over the past 12 months, average hourly earnings have increased by 1.7 percent. In September, average hourly earnings of private-sector production and nonsupervisory employees increased by 1 cent to $19.10."

Revisions from the September Announcement

"The change in total nonfarm payroll employment for July was revised from -54,000 to -66,000, and the change for August was revised from -54,000 to -57,000."

Source: BLS Unemployment Situation News Release for September 2010

Figure 4, below shows the changes in the U.S. unemployment rates from 1990 to the present.  Note the up and down cycles over time - generally following the business cycles.  The high prak of unemployment rates in 2008 and 2009 show the recent recession.

Figure 4

One clear impact of this recession has been the increase in those working part-time – unable to find full-time employment and not part-time by choice. Related this are those who have simply been discouraged from seeking employment and are now “marginally attached” to the labor force.

Marginally attached workers are defined by the BLS as “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 are defined by the BLS as, “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.”

Source: BLS Unemployment Situation News Release for September 2010 , Summary Table A. Household Data (seasonally adjusted)

[Note to Teachers:  Students can discuss the validity and reliability of the current BLS method of measuring unemployment.  Should the unemployment rate somehow include the underemployed?]

Impact of Unemployment

A Wall Street Journal "MarketWatch" column by Rex Nutting, dated October 2, 2009, commented on the real impact of persistent long-term unemployment, "More than a half a million people dropped out of the labor force, and the employment participation rate fell to 65.2%, the lowest in 23 years. The average duration of unemployment rose to 26.2 weeks, a record high. An alternative gauge of unemployment, which includes discouraged workers and those with part-time employment, rose from 16.8% to 17% -- the highest in the 15-year history of the data." 

LINK: Job Losses Accelerate to 263,000 in September

This raises questions about the real meaning of the BLS employment and unemployment data. Does the BLS undercount the "unemployed" by using such a narrowly defined  measurement? The BLS provides all of the data available from the household and establishment surveys. Those who use the data must decide what it really means.

Full Employment

When analyzing business cycles, economists define an unemployment rate that is "full employment." Full employment exists when nearly all persons willing and able to work at the prevailing wages and working conditions are employed. Generally, this is called the an acceptable level of "natural" unemployment, when cyclical unemployment is at a minimum. This often referred to as the "non-accelerating inflation rate of unemployment" or NAIRU.

Economists do not agree or know for certain what the full employment rate is. 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. The measure of full employment will exclude frictional unemployment and structural unemployment.

Remember, there are three general types or causes of unemployment.

  • Frictional unemployment is temporary unemployment arising from the normal job search process.
  • Structural unemployment is the result of changes in the economy caused by technological progress and shifts in the demand for goods and services.
  • Cyclical unemployment is unemployment caused by a drop in economic activity.

When the economy is at full employment and other productive resources are being utilized to their fullest, the economy may be reaching its "full employment GDP." At this point, the economy is reaching or is at its potential output or GDP, given existing productive resources.   The lost output from unemployment in a recessionary period is called the "Recessionary Gap."

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.

[Note to teachers: For a full explanation of the seasonal adjustment process, see the BLS article Revision of Seasonally Adjusted Labor Force Series in 2008 .]

ASSESSMENT ACTIVITY

 

Short Answer Question: 


1. What people are considered to be "not in the labor force"?

["Not in the labor force" includes persons aged 16 years and older in the civilian noninstitutional population who are neither employed nor unemployed in accordance with the BLS definitions. (Those under sixteen, retired, not working or looking for work, institutionalized, in school full time, etc.)]

2. What is a "discouraged worker"?

[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."]

CONCLUSION

Once again, U.S. nonfarm payroll employment was down by 95,000 jobsin September.  The unemployment rate reamined the same 9.6 percent. 

Government employment declined by 159,000) jobs (a drop in the number of temporary jobs for Census 2010 and job losses in local government.)

Private-sector payroll employment increased by 64,000 jobs. Is any increase in private sector jobs - no matter how small - good news?  Are private sector jobs better (in the long run) than government employment?

All-in-all, the September employment announcement was disappointing to many and may be a sign of an even slower recovery.

What do you think the government or the private sector can do to increase employment and get the economy going?

EXTENSION ACTIVITY

Women in the Labor Force

The past several decades have been seen significant changes in women’s participation in the labor force and employment. Since the 1970s, women’s labor force participation has risen substantially, particularly among women with children, and a larger share of women work full time and year round than ever before. Although the average hours worked and average wage rates for women lag those of men, the gaps are narrowing.

Go to the BLS online publication, "Women in the Labor Force: A Databook ," to read a brief history of the changes in the labor force participation of women.

How do you think these changes in the status of women have affected our society, our economy, and our lives?

U.S. Labor Force Demographics

The BLS also provides information about the Demographics of the U.S. labor force, including age, youth, women, educational attainment. etc.   Take a look at any special group you wish to research.