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This lesson examines the April 1, 2011, U.S. Department of Labor, Bureau of Labor Statistics, announcement of U.S. employment data and the unemployment rate for the month of March, 2011. This lesson introduces the basic concepts of the BLS employment and unemployment data. The meaning and importance of the data are discussed. Assessment exercises are included for reinforcing knowledge of the concepts.

KEY CONCEPTS

Business Cycles, Cyclical Unemployment, Discouraged Workers, Employment Rate, Frictional Unemployment, Labor Force, Macroeconomic Indicators, Structural 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 November 10, 2014

Inflation

The Consumer Price Index for All Urban Consumers increased 0.1 percent in October on a seasonally adjusted basis. The core inflation rate increased the same amount. For the previous 12 months, the index increased 1.7%, the same rate as reported in the September report.

Employment and Unemployment

According to the October report of the Bureau of Labor Statistics, the unemployment rate fell from 5.9% to 5.8%, and the number of individuals unemployed also decreased. Total nonfarm employment rose by 214,000 in October. Employment gains were concentrated in retail trade, food services and health care.

Real GDP

The advance estimate for real GDP growth in the third quarter of 2014 was 3.5%, a decrease from the revised second quarter growth of 4.6%. Inventory investment reduced third quarter growth, while it added to second quarter growth. In addition, consumer spending increased at a lower rate in the third quarter, compared to the second. Finally, business investment increased in the third quarter, but at a lower rate than in the second quarter.

Federal Reserve

The FOMC believes that the labor market has shown considerable improvement and the risks of inflation rising above its 2% target are low. Therefore, the Federal Reserve announced plans to end its purchase of financial assets. In addition, the federal funds rate will remain at its current low level. However, the FOMC has signaled its willingness to increase the federal funds rate if inflation shows signs of rising above the 2% target.

INTRODUCTION

Each month, the U.S. Bureau of Labor Statistics (BLS) releases data from the monthly "Household Survey" conducted by the Bureau of the Census, providing a comprehensive body of information on the employment and unemployment experience of the U.S. population, classified by age, sex, race, and a variety of other characteristics.

The BLS also conducts the Current Employment Statistics (CES) program, surveying about 150,000 businesses and government agencies, representing approximately 390,000 individual work sites, in order to provide detailed industry data on employment, hours, and earnings of workers on nonfarm payrolls.

The BLS compiles information from these sources and announces the monthly "Employment Situation," reporting the current U.S. employment and unemployment data estimates. The monthly announcement reports employment data from the previous full month.

This lesson focuses on the April 1, 2011, BLS announcement, "Employment Situation: March, 2011."  The lesson will also look at the relationship of employment and unemployment data to other macroeconomic data, such as GDP and CPI, and business cycles.  s........,,mmmm

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

During the second half of the 2010-2011 school year, (January-May), EconEdLink will publish four Focus on Economic Data lessons on "employment and the unemployment rate." 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.

  • January: 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?
  • February: details and issues about the measurement and meaning of employment and unemployment, adding concepts such as underemployment, full employment, etc.
  • March: detailed breakdown of the data by region and industry (trends, identifying trends and comparisons of regions and demographic groups
  • April: the relationships of employment and unemployment data to other economic data, such as GDP, CPI, etc., and the business cycle.  THIS LESSON]
  • May: Year-end summary.

RESOURCES

For additional information about the Employment and Unemployment data announcements, teachers should visit these BLS sites:


Key Economic Indicators

as of April 1, 2011

Inflation

On a seasonally adjusted basis, the CPI-U increased 0.5 percent in February after rising 0.4 percent in January. The index for all items less food and energy rose 0.2 percent in February, the same increase as in January.

Employment and Unemployment

U.S. nonfarm payroll employment increased by 216,000 in March, and the unemployment rate was little changed at 8.8 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in professional and business services, health care, leisure and hospitality, and mining. Employment in manufacturing continued to trend up.

Real GDP

U.S. real gross domestic product increased at an annual rate of 3.1 percent in the fourth quarter of 2010, that is, from the third quarter to the fourth quarter), according to the "third" estimate released by the Bureau of Economic Analysis. In February, the second estimate, the increase in real GDP was estimated to be 2.8 percent In the third quarter of 2010, U.S. real GDP increased 2.6 percent.

Federal Reserve

The Federal Open Market Committee 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 for the federal funds rate for an extended period.

PROCESS

The April 1, 2011, "Employment Situation" announcement from the BLS was greeted with bi-partisan enthusiasm and hope that the continued growth of employment is a sure sign of economic recovery. President Obama hailed the report as "good news" for the economy.  The New York Times headline referred to the new  "resilience" of the economy.  But, even with the "good news," the U.S. unemployment rate remained stubbornly high.  Take a look at the BLS announcement and decide for yourself - good news or bad?

The Employment Situation – March 2011
U.S. Bureau of Labor Statistics
Released April 1, 2011

Nonfarm payroll employment increased by 216,000 in March, and the unemployment rate was little changed at 8.8 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in professional and business services, health care, leisure and hospitality, and mining. Employment in manufacturing continued to trend up.”

March 2011 Highlights

  • The number of unemployed people in the U.S. decreased by 131,000 to 13.542 million.
  • The number of employed persons in the U.S. increased by 291,000.
  • The number of people “not in the labor force” decreased by 11,0000.
  • The national unemployment rate fell by 0.1 percent to 8.8 percent. Since November 2010, the U.S. unemployment rate has declined by 1.0 percentage point.
  • Unemployment rates decreased for adult men (-0.1 percent), adult women (-0.3 percent), whites (-0.1 percent) and Hispanics (-0.3 percent).
  • Unemployment rates increased for teenagers (+0.6 percent), blacks (+0.2 percent), and Asians (+0.3 percent).
  • The number of long-term unemployed (27 weeks or more) increased by 129,000.

Figure 1, below, is the basic U.S. labor force data for March, 2011.  Take a good look at the March data.  Do you see any data that impacts you or your family's current life or future?

[Teacher Note:  This is a good time to review the components of the labor force data.  Understanding the components puts the reported unemployment rate into perspective.]

Key U.S. Labor Force Data
March 2011
Civilian Non-institutionalized Population 239,000,000 +149,000
Civilian Labor Force 153,406,000 +160,000
Civilian Labor Force Participation Rate 64.2% No change
Employed Persons 139,864,000 +291,000
Employment-Population Ratio 58.5% +0.1%
Unemployment Persons 13,542,000 -131,000
Unemployment Rate 8.8% -0.1%
Persons Not in Labor Force 85,594,000 -11,000
Employed Part-Time for Economic Reasons 8,430,000 +93,000
Marginally Attached to the Labor Force 2,434,000 -296,000
Discouraged Workers 921,000 -99,000
Note:  For complete labor force data, see the BLS report, Tables A-1, A-2, and A-3.  www.bls.gov/news.release/empsit.nr0.htm


Figure 2, below, provides unemployment data for the month of March, 2011, including unemployment rates by ethnicity and educational attainment.  Do you see any interesting data?

Figure 2:  U.S. Unemployment Rates
Demographic Categories
March 2011
Category Rate Change
Total (16 years and older)  8.8%  -0.1%
Adult men (20 years and older)  8.6%  -0.1%
Adult women (20 years and older)  7.7%  -0.3%
Teenagers (16-19 years)  24.5%  +0.6%
Whites  7.9%  -0.1%
Black or African American  15.5%  +0.2%
Hispanic or Latino  11.3%  -0.3%
Asians  7.1%  +0.3%
Less than a high school diploma*  13.7%  -0.2%
High school graduate*  9.5%  0
Some college, no diploma*  7.4%  -0.4%
College graduates*  4.4%  +0.1%
*Age 25 and older

 
[Teacher Note:  Point out the differences between unemployment rates for different levels of educational attainment.  Can student make the connection between education level and employability?  The BLS web page “Education Pays,” shows unemployment rate and median weekly income by level of educational attainment.  Link: www.bls.gov/emp/ep_chart_001.htm .]

Critics of the BLS labor market data argue that the extent of unemployment is understated in the BLS announcements.  To fully understand the current "employment situation," you have to look at the history.  

  • Many people who were once in the labor force are no longer seeking work.  The BLS reported, "In March, the civilian labor force participation rate held at 64.2 percent, and the employment-population ratio, at 58.5 percent, changed little."  Until the end of 2008, the labor force participation rate had consistently been over 66 percent for the previous 20 years. The employment-population ratio had been between 62 and 64 percent since 1993.  Why do you think these rates of labor force participation remained low?
  • The BLS reported, "The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was little changed in March, at 8.4 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."  Many who would like to work full-time are not able to find adequate employment.  Does the understate the real rate of unemployment? 
  • Some people have simply given-up looking for jobs. The BLS reported, "In March, 2.4 million persons were marginally attached to the labor force, up slightly from a year earlier. (These 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."  If jobs were available, do you think these people would seek them and become counted as in the labor force?

A note about the marginally attached, "Among the marginally attached, there were 921,000 discouraged workers in March, little changed from a year earlier. (These data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.5 million persons marginally attached to the labor force in March had not searched for work in the 4 weeks preceding the survey for reasons such as school attendance or family responsibilities."

[Teacher Note:  Students may have opinions about how to count the marginally attached and discouraged workers.  Technically, if they did not seek employment, they are not “unemployed.” What do your students have to say about the “accuracy” of the unemployment rate? Maybe the BLS should count two half-time workers (involuntary part-time) as one full unemployed worker.  This might be an interesting discussion about “real” unemployment or about the validity of statistics.]

Establishment Survey Data – Employment Data

The Establishment Survey measures, among other things, employment trends in various industry groups.

"Total nonfarm payroll employment increased by 216,000 in March. Job gains occurred in several service-providing industries and in mining, and manufacturing employment continued to trend up. Since a recent low in February 2010, total payroll employment has grown by 1.5 million. 

Industry Employment Highlights:

  • In March, employment in the service-providing sector continued to expand, led by a gain of 78,000 in professional and business services. Most of the gain occurred in temporary help services (+29,000) and in professional and technical services (+35,000)."
  • "Health care employment continued to increase in March (+37,000). Over the last 12 months, health care has added 283,000 jobs, or an average of 24,000 jobs per month."
  • "Employment in leisure and hospitality rose by 37,000 over the month, with more than two-thirds of the increase in food services and drinking places (+27,000)."
  • "Manufacturing employment continued to trend up in March (+17,000). Job gains were concentrated in two durable goods industries--fabricated metal products (+8,000) and machinery (+5,000). Employment in durable goods manufacturing has risen by 243,000 since its most recent low in December 2009."
  • "In March, employment in mining increased by 14,000, with much of the gain occurring in support activities for mining (+9,000)."
  • "Employment in local government continued to trend down over the month. Local government has lost 416,000 jobs since an employment peak in September 2008."

The National Bureau of Economic Research (NBER) announced that the 2008-2009 recession ended in June, 2009, but significant job growth did not begin until many months later.  U.S. non-farm employment has increased by 1,323,000 jobs in the past year (March 2010 to March 2011).  Figure 3, below, shows the employment breakdown by industry category in the past year.

Figure 3:  Employment by Selected Industry
March 2010 - March 2011
(1,000s)
Industry Category March
2010
March
2011
Total U.S. nonfarm employment 128,584 129,907
Total U.S. private employment 105,671 107,360
Goods-producing 17,248 17,502
   Mining and logging 668 680
   Construction 5,213 5,183
   Manufacturing 11,367 11,575
     Motor vehicles and parts 666 698
   Nondurable goods 4,407 4,390
     Food manufacturing 1,418 1,417
Private service-providing 88,423 89,858
   Retail trade 14,203 14,289
   Transportation and warehousing 4,111 4,196
   Financial activities 7,606 7,573
   Professional and business services 16,343 16,879
   Educational and health services 19,599 20,019
   Leisure and hospitality 12,578 12,774
Government 22,913 22,547
   Federal 2,905 2,832
   State government 5,280 5,253
   Local government 14,728 14,462


For details about the March 2011 Employment Situation report, go to these sites:

Business Cycles and Unemployment

Figure 4, below, shows the monthly U.S. unemployment rates from 1990 to the present.  Note the “up and down” cycles of high and low unemployment over time period.  These generally follow the “business cycles.”   Periods of very high unemployment are typically correlated with period of slowing or decreasing GDP growth. 

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

Figure 4

Macroeconomic Data - Business Cycles, Employment, GDP and CPI 
 
The economy moves in continuous periods of growth and decline called business cycles. The cycle primarily represents growth and decline of gross domestic product (GDP) and employment, and may also represent other measurements of the general health of the economy. When the economy is in a state of declining GDP and employment it may be in a recession. Let's take a look at how the three macroeconomic measurements in the "Focus on Economic Data" lesson series compare recently and over the last few years. Figure 5, below, illustrates a typical business cycle, from trough to a period of growth, to the peak, to a period of decline, and back to a trough. 

Figure 5

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

Nonfarm payroll employment increased by 216,000 in March, and the unemployment rate was little changed at 8.8 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in professional and business services, health care, leisure and hospitality, and mining. Employment in manufacturing continued to trend up

After losing over 2.2 million jobs in 2008 and almost 4.7 million jobs in 2009, the U.S. economy reversed the trend for few months in early 2010.  As previously stated in this lesson, the economy has gained over 1.2 million jobs in the last year.  Although the number of U.S. non-farm jobs has been increasing, total non-farm employment is still over seven million jobs below the high level of 13,996,000 jobs reported in January, 2008.

Real Gross Domestic Product (Real GDP)

U.S. real gross domestic product increased at an annualized rate of 3.1 percent in the fourth quarter of 2010, according to the "final" estimate released by the Bureau of Economic Analysis. In the third quarter of 2010, real GDP increased 2.6 percent.  The economy is growing again, although at a rate far below that needed to create millions of new jobs.

The U.S. rate of GDP growth fell-off considerably in 2008, the beginning of the recession. 2008 saw decreases in real GDP in three of four quarters. The losses continued through the second quarter of 2009, when growth began again, at annualized rates of 3.7 percent in Q1, 1.7 percent in Q1 and 2.5 percent growth in Q3. In 2010, real GDP increased at an annual rate (average of the quarterly rates) of 2.9 percent

Figure 6, below, shows the quarterly changes in real GDP growth over the last few years.  Note the "cycles" of increased and decreased growth rates. Those periods with lines below the "0" line are quarters of negative growth.

Figure 6

Consumer Price Index

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.5 percent in February on a seasonally adjusted basis. Over the last 12 months, February 2010 to February 2011, the all items price index increased 2.1 percent before seasonal adjustment.

Though the seasonally adjusted increase in the all items index was broad-based in the last month, the energy index was once again the largest contributor.  The gasoline index continued to rise, as it had for much of the last year.  The “food at home” index had its largest increase since July 2008. 

Although many people fear future inflation as a result of the rising federal debt and continued problems in some financial markets, there has been little evidence of inflationary pressures the current period of time.

Figure 7

Monetary Policy – Federal Funds Rate

Through its last meeting in March, 2011, the Federal Reserve System’s Federal Open Market Committee (FOMC) has kept its target for the federal funds rate at 0 - 1/4 percent, the level established in December 16, 2008.  The FOMC again stated in March that the rate will be kept low in the near future.  The intent of the low interest rate policy is to stimulate the economy by making borrowing - for consumption and investment – cheaper.

Figure 8

Recent Macroeconomic Data

The chart below, Figure 9, compares the primary macroeconomic data, real GDP growth, consumer price index, the unemployment rate, and the federal funds target rate, from 1999 to the present.  Are there patterns in their relationships?

[Teacher note: Students can look at the ten years of economic data to identify patterns of relationships. For instance, what is the relationship between GDP growth and employment? Is there a relationship between inflation and unemployment?]

Figure 9:  Selected Macroeconomic Data
1999-2010
Year Real
GDP
Change
(Annual)
Unemployment
Rate
(Annual)
CPI-U
Change
(Annual)
Fed
Funds
Rate
Target
1999 4.5 4.2 2.2 4.75
2000 3.7 4.0 3.4 6.00
2001 0.8 4.3 2.8 5.00
2002 1.6 5.7 1.6 1.75
2003 2.6 5.9 2.3 1.00
2004 3.6 5.8 2.7 1.00
2005 2.9 5.2 3.4 2.75
2006 2.8 4.7 3.2 4.75
2007 2.0 4.4 2.8 5.25
2008 1.1 5.1 3.8 2.25
2009 -2.4 9.8 0.2 0 to .25
2010 2.9 9.4 1.6 0 to .25

ASSESSMENT ACTIVITY

Essay Questions:


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

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

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

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

CONCLUSION

Once again, the BLS reported, “Nonfarm payroll employment increased by 216,000 in March, and the unemployment rate was little changed at 8.8 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in professional and business services, health care, leisure and hospitality, and mining. Employment in manufacturing continued to trend up.”

The pace of job growth seems to have increased, but it is still well-below a level that will significantly lower the unemployment rate.  Many fear that this recovery will be "jobless," meaning that the increased output is from improved capital resources and productivity increases, not more employed workers. 

Some people are questioning the traditional concept of the "natural rate of unemployment" and the level considered to be "full employment." Remember, full employment may include those who are frictionally unemployed (changing jobs) and some who are structurally unemployed and the jobs they seek no longer exist where they seek them.  The "real" full employment level of unemployment may be those who are cyclically unemployed - not working because of inadequate demand for the products they produce.  Estimates of the full employment level of unemployment range from 2 to 7 percent.  For the fifteen years prior to the 2008-2009 recession, the U.S. unemployment rate fluctuated between 4 and 6 percent, with one month below 4 percent, the 3.8 percent low level in April, 2000. There are still over 13.5 million unemployed people in the United States.

Is the "real" level of unemployment 8.8 percent?  If we subtract, say, 6 percent for the frictionally and some structurally unemployed, is the "real" rate 2.8%.  Are these the people we can expect to be reemployed as the economy reaches a peak in the current business cycle?

EXTENSION ACTIVITY

How do other economic indicators compare to the recent changes in real GDP, unemployment rate, consumer price index, and the federal funds rate target? Take a look at some of the indicators listed below.

The Conference Board's Index of Leading Economic Indicators is published monthly.  The ten components of The Conference Board Leading Economic Index® for the U.S. include:

  • Average weekly hours, manufacturing
  • Average weekly initial claims for unemployment insurance
  • Manufacturers’ new orders, consumer goods and materials
  • Index of supplier deliveries – vendor performance
  • Manufacturers' new orders, nondefense capital goods
  • Building permits, new private housing units
  • Stock prices, 500 common stocks
  • Money supply, M2
  • Interest rate spread, 10-year Treasury bonds less federal funds
  • Index of consumer expectations

Access the Leading Indicators: www.conference-board.org/data/bcicountry.cfm?cid=1

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