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This lesson examines the U.S. Department of Labor, Bureau of Labor Statistics, announcement of employment data and the unemployment rate for the month of April, 2012, reported May 4, 2012. 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, Labor Force, 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 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 BLS announcement, "Employment Situation: April 2012," reported May 4, 2012  This lesson will also look at the recent history of employment and  unemployment data. 

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

During the second half of the 2011-2012 school year, (January-May), 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 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.
  • May: End of the school year review of employment data and summary of the recent history of U.S. labor markets. THIS LESSON]

MATERIALS


Key Economic Indicators

as of May 4, 2012

Inflation

On a seasonally adjusted basis, the Consumer Price Index for All Urban Consumers rose 0.3 percent in March after rising 0.4 percent in February. The index for all items less food and energy rose 0.2 percent in March after increasing 0.1 percent in February.

Employment and Unemployment

U.S. onfarm payroll employment rose by 115,000 in April, and the unemployment rate was little changed at 8.1 percent. Employment increased in professional and business services, retail trade, and health care, but declined in transportation and warehousing.

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 2.2 percent in the first quarter of 2012 (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 of 2011, real GDP increased 3.0 percent.

Federal Reserve

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today 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 late 2014.

PROCESS

Employment and Unemployment in April, 2012

To better understand the health of the U.S. labor markets and the impact of persistently high unemployment on the U.S. economy, take a quick look at U.S. Labor Market Data for April, 2012.

figure 1

Look at the data in Figure 1, above. The U.S. unemployment decreased again in April by 0.1 percent, falling 1 percentage point since August, 2011, and falling almost 2 percentage points since October, 2009.   Are we on the road to a "jobs recovery" since the recession?

In November, 2007, total employment in the U.S. was 146,595,000 jobs.   By December, 2009, that number dropped to 137,968,000.  That was a loss of 8,627,000 jobs in the recession and since.  The BLS reported a total of 141,865,000 U.S. jobs in April, 2012.  That means the U.S. is still 4,730,000 jobs behind the high of November, 2007. 

[Teacher Note: Ask your students:  Given this information about employment and unemployment in April, 2012,, does it look like the U.S. is still in a recession?]

Take a look at the details of the April, 2012, employment and unemployment data announcement and decide for yourself.

The Employment Report – April 2012
U.S. Bureau of Labor Statistics
Released: May 4, 2012

"Nonfarm payroll employment rose by 115,000 in April, and the unemployment rate was little changed at 8.1 percent, the U.S. Bureau of Labor Statistics reported today. Employment increased in professional and business services, retail trade, and health care, but declined in transportation and warehousing."

Many economists agree that it takes over 200,000 new jobs each month just to keep pace with the normal growth of the population and labor force.  If this generalization is true, creating just 115,000 new jobs should result in an increase in the unemployment rate. Why, then, did the unemployment rate decrease in April, 2012?  Look again at the data in Figure 1.  What happened to the size of the labor force?

Remember, the unemployment rate is the number of unemployed as a percentage of the total civilian labor force.  In April, with just 115,000 new jobs, the number of unemployed decreased by just 173,000 and the number of employed dropped by 169,000.  The size of the labor force decreased by 342,000.  The result - a drop in the unemployment rate.

The U.S. labor force participation rate fell to 63.6 percent, a drop from an all-time high of 67.3 percent in January-April, 2000, and a low level not seen since December, 1981.  For a history of the labor force participation rate, go to: data.bls.gov/pdq/SurveyOutputServlet

[Teacher Note:  Ask your students what they think about these employment and unemployment numbers.  Are they "good news" - lower unemployment rate, or "bad news" - a smaller percentage of the labor force is working?  They can discuss how the numbers might mean different things in different contexts or when compared to other numbers.]

When the labor force decreases, the unemployment rate can also decreases as people become more pessimistic about finding jobs and become "discouraged workers" leaving the labor force. When these people start looking for employment, they will, again, be counted as "unemployed."

Figure 2, below, shows the monthly U.S. unemployment rates from 1990 through April, 2012.  Note recent high monthly unemployment rate of 10.1 percent in October, 2009 and the most recent low unemployment rate of 4.4 percent in May, 2007.

[Teacher Note: Ask your students: Do you see the "business cycles" of the economy illustrated by the unemployment rates over time?]

figure 2

For more complete labor market data, as of April, 2012, go the these Tables from the May 4, 2012, BLS employment and unemployment news release.

[Teacher Note:  Students should be able to identify the recent business cycle as they look at the recent history of unemployment rate data.]

The previous twelve months have seen some improvement in U.S. economic conditions. 

  • The national unemployment rate has dropped from 9.0 percent to 8.1 percent from April, 2011, to April, 2012.
     
  • U.S. real gross domestic product increased at rates of 1.7 percent in 2011 and 2.2 percent in the first quarter of 2012.
     
  • Inflationary pressures have remained low, with the consumer price index increasing just 2.7 percent from March, 2011 to March 2012.


From March to April, the U.S. population in the BLS data increased by 180,000 to 242,784,000.  Of the total U.S. population, 154,365 were in the civilian labor force, a decrease of 1342,000 from March to April.

Remember, this is the “non-institutionalized civilian population.  Those in institutions (prison, mental facilities, etc.) and the military are not included.  This means that about 64 percent of the total population was counted as in the “labor force” in April.  88,419,000 people in the U.S., an increase of 522,000 in April, were “not in the labor force,” for a variety of reasons. 

The first data point in determining the unemployment rate is the size of the labor force.  The unemployment rate is the percentage of the labor force that is unemployed.  In April, 12,500,000 people were unemployed, a decrease of 173,000 from the previous month. 

12,500,000 divided by 154,365 (labor force) equals 8.1 percent – when rounded to nearest tenth of a point - the reported unemployment rate.

[Teacher Note:  Students should be able to calculate the unemployment rate, given figures for the size of the labor force and the number of unemployed.  Give individuals or groups of students different sets of data and ask them to "do the math." ]

The "opposite" of the unemployment rate is the "employment rate, the percentage of the labor force that is employed.  In April, 2012, the employment rate was 91.9 percent.  The "employment -population ratio is the percentage of the noninstitutionalized civilian population that is employed - currently 58.4 percent.

Figure 3, below, restates the key employment and unemployment data for the months of April 2011 and April, 2012, and the change from year to year.

figure 3

Key Labor Market Definitions

As a reminder, the following are the definitions of the key categories used to report employment and unemployment data from the BLS “Employment Report.” These definitions are from the BLS “Glossary.”

  • Civilian non-institutionalized population:  Included are persons 16 years of age and older residing in the 50 States and the District of Columbia who are not inmates of institutions (for example, penal and mental facilities, homes for the aged), and who are not on active duty in the Armed Forces.      
      
  •  Civilian labor force:  The labor force includes all persons classified as employed or unemployed (16 and over, non-institutionalized).  
     
  • Labor force participation rate: The labor force as a percent of the civilian non-institutional population.        
     
  • Employed Persons:  Persons 16 years and over in the civilian non-institutional population who, during the reference week, (a) did any work at all (at least 1 hour) as paid employees; worked in their own business, profession, or on their own farm, or worked 15 hours or more as unpaid workers in an enterprise operated by a member of the family (plus those temporarily absent from employment.)
     
  • Employment-population ratio: The proportion of the civilian non-institutional population aged 16 years and over that is employed. 
     
  • Unemployed:  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.
     
  • Unemployment rate:  The unemployment rate represents the number unemployed as a percent of the labor force. 
     
  • Not in labor force:  Includes persons aged 16 years and older in the civilian non-institutional population who are neither employed nor unemployed in accordance with the definitions contained in this glossary. Information is collected on their desire for and availability for work, job search activity in the prior year, and reasons for not currently searching.   
         
  • Persons who currently want a job:  Persons who want a job, have searched for work during the prior 12 months, and were available to take a job during the reference week, but had not looked for work in the past 4 weeks.


Unemployment by Demographic Groups

The BLS also reports the unemployment rates for several demographic groups, including race/ethnicity and educational attainment. Go to the May 4, 2012 press release and scroll down to Table A.  www.bls.gov/news.release/empsit.a.htm .

Gender, Age, and Ethnicity

Look at the section of the table on the unemployment rates for "Adult men, Adult women, Teenagers, White, Black/African American, Asian, and Hispanic/Latino Ethnicity."

[Teacher Note: Ask your students: Do you notice any patterns in this data?]

Unemployment continues to be unevenly distributed among racial/ethnic groups and age levels. Young workers are more than twice as likely to be unemployed than workers over 24 years of age. The unemployment rate for teenagers is very high.  Black/African American unemployment significantly exceeds other racial/ethnic demographic groups.

Educational Attainment

Look again at Table A, specifically at the section about educational attainment (Less than a high school diploma, High school diploma, Some college/associate degree, Bachelor's degree).

[Teacher Note: Ask your students: Do you notice any patterns in this data?]

Education is a strong indicator of potential for unemployment. There is a clear relationship between educational attainment and unemployment rates. The more education you have, the less chance of unemployment - on average. What is a high school diploma worth?   You will make more income, for sure (on average), but also a greatly decreased risk of unemployment.

 [Teacher Note:  More data on income and educational attainment is available at this BLS web page: Education Pays .  This webpage shows the relationships of educational attainment, 2011 unemployment rates, and 2011 median incomes.]

Employment - Establishment Survey Data

"Total nonfarm payroll employment rose by 115,000 in April. This increase followed a gain of 154,000 in March and gains averaging 252,000 per month for December to February. In April, employment rose in professional and business services, retail trade, and health care. Transportation and warehousing lost jobs over the month."

Job Gains by Industry

  • Retail trade employment increased by 29,300.
  • Professional and business services employment increased by 62,000.
  • Health care employment increased by 18,400.
  • Leisure and hospitality employment increased by 12,000.
  • Financial activities employment increased by 1,000.
  • Manufacturing employment increased by 16,000.
  • Mining and logging employment was the same in March and April.


Job Losses by Industry

  • Construction employment decreased by 2,000.
  • Federal/state/local government employment decreased by 24,000.
  • Information services employment decreased by 2,000
  • Transportation and warehousing employment decreased by 16,600
  • Mining and logging employment was the same in March and April.

[Teacher Note: For more details about employment by industry group, go to: www.bls.gov/news.release/empsit.b.htm .  Students can research the recent history of employment in different industries and information about careers in those industries.  Another source is the "Occupational Outlook Handbook. www.bls.gov/oco/ .]

Average Workweek

Along with the employment and unemployment numbers, the BLS also reports data on the average workweek for private nonfarm employees and their average earnings. 

"The average workweek for all employees on private nonfarm payrolls was unchanged at 34.5 hours in April. The manufacturing workweek edged up by 0.1 hour to 40.8 hours, and factory overtime rose by 0.1 hour to 3.4 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls was unchanged at 33.8 hours.

An increase in the average workweek may be an indicator of economic growth that does not show-up in the employment numbers.  An employer may offer more hours or overtime to existing employees in response to increased demand, but not hire new employees when the anticipated demand is uncertain.  Hiring new employees is costly and risky without good information about future demand.

The recent high level for the average workweek for nonfarm employees was 34.7 hours in June, 2007, prior to the onset of the recession.  The average workweek decreased to a low of 33.7 hours in June, 2009, the end of the recession.  Average workweek is one indicator used  by the BEA to identify recessions.  The average workweek has been between 34.4 and 34.6 hours in recent months. When employers are more confident in future demand, they may be more willing to hire new workers.

Average Earnings

"In April, average hourly earnings for all employees on private nonfarm payrolls rose by 1 cent to $23.38. Over the past 12 months, average hourly earnings have increased by 1.8 percent. In April, average hourly earnings of private-sector production and nonsupervisory employees rose by 3 cents to $19.72."

Although the average workweek has not increased recently, payrolls for existing employees have increased at just about the same rate as the consumer price index over the past year.  The purchasing power of nonfarm private employees has remained steady by these measures.

[Teacher Note:  Students can find earning data for various industries and specific occupations.  Assign one occupation to each student to research and report back to the class.  Link: Table 1. National employment and wage data from the Occupational Employment Statistics survey by occupation, May 2011, www.bls.gov/news.release/ocwage.t01.htm

Detailed Online Resources – Employment Report

Click on these BLS links for more details from the May 4, 2012 Employment Report.

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 does the "unemployment rate" reported monthly by the Bureau of Labor Statistics tell you about the economy?  Is it an accurate measurement of the "health" of the economy

[Student answers will vary greatly.  They should assess whether or not the way the unemployment rate is determined is accurate and meaningful.  Are enough people counted as "unemployed"? They may cite the fact that changes in the labor force can increase the unemployment rate, even though more people are working.]

CONCLUSION

In April, 2012, the U.S. unemployment rate decreased, despite the increase of only 115,000 jobs in the economy.  More of the unemployed have given-up looking for work and/or were otherwise not counted as employed or unemployed.  The size of the labor force decreased. The recent history of changes in the labor force, employment and unemployment is somewhat erratic - possibly reflecting much uncertainty in the economy.

 

U.S. economic growth, as measured by real GDP growth, slowed in the first quarter of 2012, after a robust growth rate of 3.0 percent in the fourth quarter of 2011.  Recent economic growth has not resulted in the new number of jobs needed for a true economic recovery.   Many economists anticipate that, even though jobs growth may continue, the unemployment rate may remain stubbornly high for some time.

EXTENSION ACTIVITY

The U.S. Bureau of Labor Statistics publishes a variety of reports on current issues in labor markets and labor market data. The April, 2009, online edition of “Issues in Labor Statistics” included a report called, “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.

Read the report.  Students should summarize the arguements for including discouraged and marginally attached workers in the labor force and the officially reported unemployment rate.  Should the discouraged or marginally attached workers be counted as unemployed?  What does the increase in the number of discouraged and marginally attached workers mean for our economy?