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This lesson examines the October 7, 2011, U.S. Department of Labor, Bureau of Labor Statistics (BLS), announcement of employment data and the unemployment rate for the month of September, 2011. This lesson introduces more of 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 7, 2011, BLS announcement of the "Employment Situation" for the month of September, 2011.

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

During the first half of the 2011-2012 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 2011: 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 2011: details and issues about the measurement and meaning of employment and unemployment, adding concepts such as underemployment, full employment, etc. [THIS LESSON]
  • November 2011: detailed breakdown of the data by region and industry (trends, identifying trends and comparisons of regions and demographic groups.
  • December 2011: the relationships of employment and unemployment data to other economic data, such as GDP, CPI, etc., and the business cycle, plus an end-of-year review.

RESOURCES

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

Key Economic Indicators

as of October 7, 2011

Inflation

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

Employment and Unemployment

Nonfarm payroll employment edged up by 103,000 in September, and the unemployment rate held at 9.1 percent. The increase in employment partially reflected the return to payrolls of about 45,000 telecommunications workers who had been on strike in August.

Real GDP

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 1.3 percent in the second quarter of 2011, (that is, from the first quarter to the second quarter), according to the "third" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 0.4 percent.

Federal Reserve

The FOMC decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013. The FOMC also decided to purchase up to $400 billion of long-term securities and sell short-term securities in order to "put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative."

PROCESS

  • Good news!  Total U.S. nonfarm payroll employment increased by 103,000 in September, 2011.
     
  • Bad news!  The U.S. unemployment rate remained at 9.1 percent in September.
     
  • Good news!  The total number of employed people in the U.S. increased by 398,000 in September.
     
  • Bad news!  14 million people remained unemployed in September, an increase of 25,000 from August.


[Note to teachers: Can your students figure out what really happened in September, 2011 by just looking at these numbers (above)?  It may be interesting to share their initial thoughts.]

The BLS "Employment Situation" announcement for September 2011 seems like a mystery - some good news and some bad news.  Let's see exactly what the Bureau of Labor Statistics (BLS) said about U.S. employment and unemployment in September, 2011.

Bureau of Labor Statistics: The Employment Situation – September 2011
Released October 7, 2011

"Nonfarm payroll employment edged up by 103,000 in September, and the unemployment rate held at 9.1 percent, the U.S. Bureau of Labor Statistics reported today. The increase in employment partially reflected the return to payrolls of about 45,000 telecommunications workers who had been on strike in August. In September, job gains occurred in professional and business services, health care, and construction. Government employment continued to trend down."

The consensus is that it takes about 125,000 new jobs each month just to employ new entrants into the labor force. If that is accurate, a gain of 103,000 jobs means we are falling behind.  In September, 25,000 more people were unemployed, despite the growth in the number of jobs that were created.

"The number of unemployed persons, at 14.0 million, was essentially unchanged in September, and the unemployment rate was 9.1 percent. Since April, the rate has held in a narrow range from 9.0 to 9.2 percent."

Unemployment remains very high, indicating that the recovery from the recent recession continues to be slow.  How can unemployment remain high if there are new jobs in the economy?  Remember, the unemployment rate is determined by two factors:  1) the size of the labor force, and 2) the number of unemployed persons.   Also remember, The number of employed persons plus the number of unemployed persons equals the labor force.

Category August 2011 September 2011 Increase
Labor force 153,594,000 154,017,000 423,000
Employed persons 139,627,000 140,025,000 398,000
Unemployed persons 13,967,000 13,992,000 25,000


In September, although the net gain was 103,000 jobs, the U.S. labor force increased by a much larger number.  The result: more people were unemployed in September than in August, 2011.

Note: The current employment data has been adjusted as a result of the population data from the 2010 U.S. Census. Some historical data has been adjusted to reflect the more accurate census data.

Recent Employment and Unemployment Data History

The U.S. unemployment rate has remained within a range of 9.0 to 9.2 percent since April, 2011, despite some job growth.   Figure 1, below, shows the monthly U.S. unemployment rates since 1990.

figure 1

Now, take a look at the details of the employment and unemployment data for September, 2011.

  • For more detailed unemployment data from September 2011, go to the October 7, 2011, BLS announcement, "Employment Situation Summary Table A. Household data, seasonally adjusted," http://www.bls.gov/news.release/empsit.a.htm .
     
  • For more detailed employment data from September 2011, go to the October 7, 2011, BLS announcement, "Employment Situation Summary Table B. Establishment data, seasonally adjusted," http://www.bls.gov/news.release/empsit.b.htm .

In Table A, look at the numbers of “employed persons at work part-time” (up in all categories) and “discouraged workers” (up 60,000).  Are these people functionally unemployed?  A part-time worker who wants a full-time job is still counted as "employed."  Someone who has dropped out of the labor force is not counted as "unemployed" because he or she has not looked for work in the last four weeks. 

Remember the BLS definition of an unemployed person.  “Persons aged 16 years and older who had no employment during the reference week, were available for work, except for temporary illness, and had made specific efforts to find employment sometime during the 4-week period ending with the reference week. Persons who were waiting to be recalled to a job from which they had been laid off need not have been looking for work to be classified as unemployed.

What is the unemployment rate if you count these and others who are not counted in the "headline" numbers?  The BLS has developed a set of "alternative measures of labor underutilization."  For September, 2011, the BLS reported six "alternative measures" of unemployment:

Discussion Question: Which of these do you think is the most meaningful measurement of unemployment?

  • U-1   Persons unemployed 15 weeks or longer, as a percent of the civilian labor force
  • U-2   Job losers and persons who completed temporary jobs, as a percent of the civilian labor force
  • U-3   Total unemployed, as a percent of the civilian labor force (official unemployment rate)
  • U-4   Total unemployed plus discouraged workers, as a percent of the civilian labor force plus discouraged workers
  • U-5   Total unemployed, plus discouraged workers, plus all other persons marginally attached to the labor force, as a percent of the civilian labor force plus all persons marginally attached to the labor force
  • U-6   Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force

[Teacher note: The BLS alternative measures of unemployment for September 2011 are: U-1, 5.4 percent; U-2, 5.3 percent; U-3, 9.1 percent; U-4, 9.7 percent; U-5, 10.5 percent; U-6, 16.5 percent. See "Table A-15. Alternative measures of labor underutilization." http://www.bls.gov/news.release/empsit.t15.htm ]

For the BLS definitions use in the above categories, see the BLS "Glossary," http://www.bls.gov/bls/glossary.htm

Unemployment Rates by Demographic Group

Figure 2, below, summarizes the September, 2011, unemployment data for age, ethnic, and educational attainment groups. Note the groups that are better-off or worse-off than other groups.

Figure 2:  Unemployment by Demographic Group
September 2011
Age:
Total labor force, 16 years and over 9.1 9.1 0.0
Adult men (20 years and over) 8.9 8.8 -0.1
Adult women (20 years and over) 8.0 8.1 0.1
Teenagers (16 to 19 years) 25.4 24.6 -0.8
Ethnicity:
White 8.0 8.0 0.0
Black or African American 16.7 16.0 -0.7
Asian (not seasonally adjusted) 7.1 7.8 0.7
Hispanic or Latino ethnicity 11.3 11.3 0.0
Educational Attainment:
Total labor force, 25 years and over 7.8 7.8 0.0
Less than a high school diploma 14.3 14.0 -0.3
High school graduates, no college 9.6 9.7 0.1
Some college or associate degree 8.2 8.4 0.2
Bachelor's degree and higher 4.3 4.2 -0.1


Discussion Question: Can you identify any patterns they see in the January, 2011, employment and unemployment data.  How does unemployment impact these demographic groups?

What generalizations can you make about these demographics group unemployment rates?

  • How important is education?
  • Why are women doing a little better than men?
  • Is unemployment evenly divided among ethnic groups?
  • Why is unemployment among teenagers so high?

[Teacher Note:  For more information about level of education, median earnings, and unemployment rates, go to the BLS page,  "Education Pays ."]

Employment and the Business Cycle

One of the important criteria used by the National Bureau of Economic Research (NBER) to identify business cycles and recessions is payroll employment data.  The most recent recession ended in June, 2009, when the NBER concluded that, among other things, employment was increasing - a sign of recovery.  Since then, the unemployment rate has remained stagnant, but there has been modest economic growth (see the Real GDP "EconEdLink lessons for the past few months.)  The Business Cycle model is illustrated below.

figure 3

[Note to teachers:  For more information about the business cycles, go to the National Bureau of Economic Research (NBER) website, http://www.nber.org/cycles/main.html .]

How Did Workers the Major Industry Groups Fair in September?

"Total nonfarm payroll employment edged up by 103,000 in September. Since April, payroll employment has increased by an average of 72,000 per month, compared with an average of 161,000 for the prior 7 months. In September, job gains occurred in professional and business services, health care, and construction. Government employment continued to trend down."

Figure 4, below, shows the changes in employment among major industry groups.  Of primary concern to many is the reversal of recent job growth in manufacturing.  Manufacturing lost 13,000 jobs in September.

Figure 4: Change in Employment
Major Industry Groups
September 2011
(1,000s)
Job Gains:
Mining and Logging 5.0
Construction 26.0
Retail Trade 13.6
Professional and Business Services 48.0
Information Services 34.0
Temporary Help Services 19.4
Education and Health Services 45.0
State Governments 2.0
Job Losses:
Manufacturing -13.0
Transportation and Warehousing -1.9
Leisure and Hospitality -4.0
Financial Activities -8.0
Other Services -3.0
Federal Government -1.0
Local Governments -35.0


[Note: For a complete breakdown of industry employment in January, 2010, go to the BLS announcement Table B-1. http://www.bls.gov/news.release/empsit.t17.htm ]

Note that the number of "service-providing" jobs increased by 119,000 in September, while the number of "good-producing" jobs increased by just 18,000.  Is this more evidence of a structural change in the U.S. economy and workforce? If so, what does it mean for the economy and individuals?

Discussion Question:  What important industries in your region have higher or lower rates of job growth (loss) than the average?

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."

Underemployment

The BLS does not officially use the term "underemployment."  The BLS explains on the Current Population Survey FAQ webpage: "Because of the difficulty of developing an objective set of criteria which could be readily used in a monthly household survey, no official government statistics are available on the total number of persons who might be viewed as underemployed. Even if many or most could be identified, it would still be difficult to quantify the loss to the economy of such underemployment."  In other words, the term is hard to define by BLS standards.

In articles, references to underemployment examples are those who work part-time and would like to work full-time, those who work at jobs with wages below their level of training, and those who are marginally attached to the labor force.  See the section of this lesson on "alternative measures of unemployment for more details.  

Discussion Question: Should the underemployed be counted as somehow unemployed?

Seasonally Adjusted Household Survey Data

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

At the end of each calendar year, the 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 .]

Household vs. Establishment Series

Statistics on nonagricultural employment, hours of work, and earnings are compiled from two major sources: household interviews and reports from employers.

Some of the confusion over the meaning of the unemployment and employment data arises from differences between the two primary sources of the data, the Current Population Survey (Household Survey) and the Current Employment Statistics Survey (Establishment Survey.)

The Household Survey is based on interviews obtained from a sample of the population, aged 16 years of age and over. This monthly survey, conducted by the Bureau of the Census, provides data on the labor force, the employed, and the unemployed, classified by such characteristics as age, sex, race, family relationship, marital status, occupation, and industry attachment. The survey is conducted during a calendar week that includes the 12th of the month.

The Establishment Survey data is complied each month from mail questionnaires and telephone interviews by the Bureau of Labor Statistics, in cooperation with State agencies.

This survey provides information on nonfarm wage and salary employment, average weekly hours, average hourly earnings, and average weekly earnings for the nation, states, and metropolitan areas. The survey is conducted from a sample of over 390,000 establishments employing over 47 million nonfarm full or part time wage and salary workers during the same week as the Household Survey.

Data from these two sources differ from each other because of variations in definitions and coverage, source of information, methods of collection, and estimating procedures. The major factors which have a differential effect on the levels and trends of the two data series are:

The key to the difference is the definition of who is employed in the surveys.  The Household Survey (CPS) includes the unincorporated self employed, unpaid family workers, agriculture and related workers, private household workers, and workers absent without pay.

The Establishment Survey (CES) estimate of jobs only those receiving pay for the reference pay period. The CES excludes many of the groups included in the CPS who do not work for the businesses that report data.

  1. Employment.  The household survey definition of employment includes wage and salary workers (including domestics and other private household workers), self-employed persons, and unpaid workers who worked 15 hours or more during the reference week in family-operated enterprises. The establishment survey covers only wage and salary employees on the payrolls of nonfarm business establishments.
  2. Multiple jobholding. In the Household Survey, each person is classified as employed, unemployed, or not in the labor force.  Employed persons holding more than one job are counted only once. For the Establishment Survey, people who worked for more than one establishment are counted each time their names appear on a payroll.
  3. Unpaid absences from jobs. The household survey includes among the employed all civilians who had jobs but were not at work during the reference week—that is, were not working but had jobs from which they were temporarily absent because of illness, vacation, bad weather, child care problems, labor-management disputes, or because they were taking time off for various other reasons, even if they were not paid by their employers for the time off. In the Establishment Survey, persons on leave paid for by the company are included, but those on leave without pay for the entire payroll period are not.  Source: http://www.bls.gov/lau/lauhvse.htm

In the definitions above, there are a couple of big differences between the two surveys that may impact the "official" number of employed and unemployed persons.   Again, just looking at the simple numbers from the surveys may not provide a complete picture of the health of the labor market in the United States.

Ask your students what they think.

CONCLUSION

Once again...

Total U.S. nonfarm payroll employment increased by 103,000 in September, 2011.

The U.S. unemployment rate remained at 9.1 percent in September.  The number of employed people increased by 398,000 in September. 14 million people remained unemployed in September, an increase of 25,000 from August.

The simple number of the unemployment rate and the number of "employed" do not tell the whole employment story.  The numbers are derived from two different sources that count different groups of people.

The Establishment Survey may undercount the number of people who are working and earning an income.  The Household survey may undercount "unemployment" by counting even those who worked just a couple of hours a week as employed. 

How do you more appropriately define "employed" and "unemployed"?

[Note to Teachers: Have your students take a look at the six BLS definitions of the "unemployment rate" in the lesson process.  Which do they think is the best (most appropriate) measure of the health of the economy?] 

ASSESSMENT ACTIVITY


Short Answer Questions: 


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

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.