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 October 2, 2009, BLS announcement, "Employment Situation: September 2009."

[Note to teacher: 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.]

Resources:

• Bureau of Labor Statistics: October 2, 2009, BLS press release on the "Employment Situation."
  www.bls.gov/news.release/empsit.nr0.htm ^{[5] [1]}
   
• Bureau of Labor Statistics: Here are the 'Frequently Asked Questions' about the employment reports.
  www.bls.gov/news.release/empsit.faq.htm ^{[6] [16]}
    
•  Bureau of Labor Statistics: This webpage offers the Current Population Survey Databases, Tables and Reports.
  www.bls.gov/cps/ ^{[7] [17]} 
  
  
•  Bureau of Labor Statistics: Here is an article on seasonal data adjustments.
  www.bls.gov/cps/cpsrs2008.pdf ^{[4] [13]}
  
  
• Bureau of Labor Statistics:  This webpage contains the BLS Glossary.
  www.bls.gov/bls/glossary.htm ^{[8] [18]}

Process:

October 2, 2009 Bureau of Labor Statistics announcement: The Employment Situation: September 2009

The BLS confirmed that the recent series of monthly job losses has continued through September. "Nonfarm payroll employment continued to decline in September (-263,000), and the unemployment rate (9.8 percent) continued to trend up, the U.S. Bureau of Labor Statistics reported today. The largest job losses were in construction, manufacturing, retail trade, and government."

The BLS summed up the impact of the 2008-2009 recession with this statement. "Since the start of the current recession in December 2007, the number of unemployed persons has increased by 7.6 million to 15.1 million, and the U.S. unemployment rate has doubled to 9.8 percent."

Demographic Breakdown

The breakdown of the unemployment rates for demographic groups found little change from the August rates. "Unemployment rates for the major worker groups--adult men (10.3 percent), adult women (7.8 percent), teenagers (25.9 percent), whites (9.0 percent), blacks (15.4 percent), and Hispanics (12.7 percent)." The unemployment rate for Asians was 7.4 percent, not seasonally adjusted. The rates for all major worker groups are much higher than at the start of the recession." Figure 1, below, shows the basic September labor force data. The figure shows seasonally adjusted data - reflecting somewhat different numbers than the unadjusted data.  For details about seasonal adjustments, see the comments that follow later in this lesson.  
 

Unemployment

According to the BLS, people are unemployed, "if they do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work. Persons who were not working and were waiting to be recalled to a job from which they had been temporarily laid off are also included as unemployed. The unemployment rate represents the number unemployed as a percent of the labor force." LINK:  http://www.bls.gov/cps/lfcharacteristics.htm#unemp ^[1] . This web page provides definitions of employment terms and links to data.

Figure 2 shows the monthly U.S. unemployment rates from 1990 to the present. Notice the up and down cycles that are consistent with the business cycles during that  time period.





Reasons for September Job Losses

In addition to the unemployment rates, the BLS commented on the reasons for the job losses. "Among the unemployed, the number of job losers and persons who completed temporary jobs rose by 603,000 to 10.4 million in September. The number of long-term unemployed (those jobless for 27 weeks and over) rose by 450,000 to 5.4 million. In September, 35.6 percent of unemployed persons were jobless for 27 weeks or more."

The increase in the number of long-term unemployed - 27 weeks or more - was particularly distressing to economists and policy makers.  Reuters.Com news agency writer Christopher Swann commented about the impact of long-term unemployment in an October 2 column.  "Alarming as the climb in unemployment is, the growing duration of joblessness is more worrying still. America’s army of long-term unemployed — those without work for six months or more — swelled to 5.4 million, according to today’s figures. This is roughly equal to the combined populations of Los Angeles, San Diego and Sacramento. (For the internationally minded, it is slightly more than the population of Finland.)"

Swann called for action by the federal government to address the continued length of unemployment and the number of long-term unemployed. "A further extension of jobless benefits is now critical. These have already been stretched out to an unprecedented 79 weeks in some states with high unemployment. Congress should now press ahead with plans for an additional 13 weeks. In addition to preventing large numbers falling into poverty, this is among the best forms of fiscal stimulus. Money given to the unemployed is almost certain to be spent quickly."

Swann added, "When it comes to unemployment, time matters. Skills atrophy after extended periods without work. Then, when growth picks up, these workers are no longer in a position to fill new jobs.  A slew of academic papers suggest that a quick return to the workforce — even in a humbler capacity — is often a good idea, especially for the young. Research by Tom Mroz at Clemson University showed that a six-month spell of unemployment at the age of 22 reduced wages even a decade later."

"So the extra spending on unemployment benefit needs to be combined with much more assistance with job searching and retraining. According to the OECD, U.S. funding for retraining and job searching has risen by less than 20 percent during the crisis. Failure to do more to retool the long-term unemployed will create lingering problems for the U.S. economy. Extending benefits is an important first step, but it is not enough to ensure that the administration’s stimulus is effective. For the more Americans are permanently dislocated from the workforce, the less robust any recovery will be."  LINK: http://blogs.reuters.com/columns/2009/10/02/the-perils-of-long-term-unemployment/ ^[2] .

Labor Force Participation

The BLS report added data about changes in the labor force participation rate. "The civilian labor force participation rate declined by 0.3 percentage point in September to 65.2 percent. The employment-population ratio, at 58.8 percent, also declined over the month and has decreased by 3.9 percentage points since the recession began in December 2007."

A Wall Street Journal "Market Watch" column of October 3, 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."

Underemployment: Part Time and Marginally Attached Workers

In September, the number of persons working part time for economic reasons (sometimes referred to as involuntary part-time workers) was little changed at 9.2 million. The number of such workers rose sharply throughout most of the fall and winter but has been little changed since March. The BLS defines part-time workers as, "1 to 34 hours per week." Full-time is 35 or more hours per week.

About 2.2 million persons were marginally attached to the labor force in September, an increase of 615,000 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 706,000 discouraged workers in September, up by 239,000 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 other 1.5 million persons marginally attached to the labor force in September had not searched for work in the 4 weeks preceding the survey for reasons such as school attendance or family responsibilities.

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: http://www.marketwatch.com/story/us-job-losses-accelerate-to-263000-in-september-2009-10-02?pagenumber=2 ^[3]

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.

Industry Payroll Employment by Industry Group (Establishment Survey Data)

The BLS broke down the September 2009 job loss numbers for various industry groups. The following data is summarized from the report.

Weekly Hours (and Weekly Earnings (Establishment Survey Data)

The BLS report added data about the average workweek and earnings. In addition to the rise in unemployment, those who were working worked slightly fewer hours. The good news is that those who were working saw slight increases in earnings - with their hourly wages mostly offset by fewer hours.

"In September, the average workweek for production and nonsupervisory workers on private nonfarm payrolls edged down by 0.1 hour to 33.0 hours. Both the manufacturing workweek and factory overtime decreased by 0.1 hour over the month, to 39.8 and 2.8 hours, respectively."

"In September, average hourly earnings of production and nonsupervisory workers on private nonfarm payrolls edged up by 1 cent, or 0.1 percent, to $18.67. Over the past 12 months, average hourly earnings have risen by 2.5 percent, while average weekly earnings have risen by only 0.7 percent due to declines in the average workweek."

Revisions of Previous Data

Using newer and more comprehensive data, the BLS revised the employment data for previous months, resulting in slightly larger job losses than previously reported. The July numbers were increased and the August numbers were decreased. These revisions did not impact the reported unemployment rates.  "The change in total nonfarm payroll employment for July was revised from -276,000 to -304,000, and the change for August was revised from -216,000 to -201,000."  For a detailed breakdown of the hour and wage data by industry group, go to: ftp://ftp.bls.gov/pub/suppl/empsit.ceseeb2.txt.

What is "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 (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. 

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.

[Note to teacher: For a full explanation of the seasonal adjustment process, see the BLS article at: www.bls.gov/cps/cpsrs2008.pdf ^{[4] [1]}

Conclusion:

The 2008-2009 Recession

Take another look at the most recent data. U.S. nonfarm payroll employment declined by 263,000 jobs in September and the U.S. unemployment rate increased to 9.8 percent. U.S. Real gross domestic product decreased at an annual rate of 0.7 percent in the second quarter of 2009. The U.S. Consumer Price Index for all Urban Consumers (CPI-U) rose 0.4 percent in August, 2009. The index has decreased 1.5 percent over the last 12 months on a not seasonally adjusted basis.

All signs point to the continuation of the recession that began in December, 2007. The Federal Reserve decided to keep the target range for the federal funds rate at 0 to 1/4 percent to keep interest rates low and stimulate borrowing. Congress continues to provide tax and spending policies to support the banking system, and improve consumer spending and private investment.

The September BLS "Employment Situation" report showed that the downturn has continued, although at a lesser rate of decline. With fewer employed people, income for consumption spending will continue to decrease. Are we at the bottom? Will current conditions worsen and create a "W" shaped cycle? (A bottom with a brief recovery and then another decline to a bottom.)

The bottom can take several shapes:

V - A sharp decline to a bottom and a fast recovery creating a "V" shape.
U - A decline to a bottom with a period of time at that level prior to a recovery.
W - The "double dip - decline, bottom, slight recover, more decline, bottom and recovery.

The key difference is the length of the bottom. Will the U.S. economy remain in a stagnant state for a period of time prior to recovery? 

If the economy does not create jobs, have we recovered? Many economists and planners fear a "jobless" recovery. Conditions may improve through increases in productivity and increasing output in ways that do not create as many jobs as were lost.

Only time will tell.

Assessment Activity:

Have your students click here to complete interactive exercises to assess your knowledge of the Unemployment lesson.

1. What was the unemployment rate reported on October 2, 2008?

a. 8.6 percent
b. 9.8 percent [CORRECT]
c. 10.2 percent

[See the BLS October 2 announcement. The reported unemployment rate was 9.8 percent.] 

2. How does the September 2009, unemployment rate compare to the rate reported for the previous month?

a. same
b. lower
c. higher [CORRECT]

[See the BLS February 6 announcement. The reported unemployment rate for September was 9.8 percent. The rate reported in September for the month of August 2009, was 9.7 percent.]

3. Which of these groups had the highest unemployment rates in January 2009?

a. Hispanics
b. Teenagers [CORRECT]
c. Adult men

[See the BLS announcement.  The unemployment rates for teenagers in September 2009 was 25.9 percent. The rate for Hispanics was 12.7 percent. The rate for Adult Men 10.3 percent.]

4. In September 2009, which of these industry groups experienced job growth? 

a. retail trade
b. education and health care [CORRECT]
c. government

[`See the BLS announcement.  Education and health care was the only category (in the lesson summary) that increased - 3,000 jobs. Government and retail employment decreased.]

5. Are marginally attached workers counted as employed, unemployed or not in the labor force?

a. Employed
b. Unemployed
c. Not in the labor force [CORRECT]

[Marginally attached workers are "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."]

6. What is the percentage of the civilian noninstitutional population that is employed or unemployed called?

a. Labor force participation rate [CORRECT]
b. Employment population ratio
c. Employment rate

[The labor force participation rate is the percentage of the labor force who are counted as employed or unemployed.]

7. What is the general consensus estimate of the unemployment rate of full employment? 

a. 4-4.5 percent
b. 4.5-5 percent [CORRECT]
c. 5-5.5 percent 

[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.]

8. Given the following data, what is the unemployment rate?

   Civilian population: 144,350,000
   Civilian labor force: 120,400,000
   Number of employed: 112,100,000
   Number of unemployed: 8,300,000
   Number not in labor force: 23,950,000

a. 5.7 percent
b. 7.4 percent [CORRECT]
c. 6.9 percent

[The unemployment rate is the percentage of the labor force who are unemployed.]

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."]

Extension Activity:

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: http://www.bls.gov/cps/wlf-intro-2009.pdf ^[9]  

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

Links Used:

1. ^{^} "http://www.bls.gov/cps/lfcharacteristics.htm#unemp" - (www.bls.gov)
2. ^{^} "http://blogs.reuters.com/columns/2009/10/02/the-perils-of-long-term-unemployment/" - (blogs.reuters.com)
3. ^{^} "http://www.marketwatch.com/story/us-job-losses-accelerate-to-263000-in-september-2009-10-02?pagenumber=2" - (www.marketwatch.com)
4. ^{^ ^} "www.bls.gov/cps/cpsrs2008.pdf" - (www.bls.gov)
5. ^{^} "www.bls.gov/news.release/empsit.nr0.htm" - (www.bls.gov)
6. ^{^} "www.bls.gov/news.release/empsit.faq.htm" - (www.bls.gov)
7. ^{^} "www.bls.gov/cps/" - (www.bls.gov)
8. ^{^} "http://www.bls.gov/bls/glossary.htm" - (www.bls.gov)
9. ^{^} "http://www.bls.gov/cps/wlf-intro-2009.pdf" - (www.bls.gov)