Return

This lesson examines the November 2, 2012, U.S. Department of Labor, Bureau of Labor Statistics (BLS), announcement of U.S. employment data and the unemployment rate for the month of October, 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, Employment Rate, Labor Force, Labor Market, Macroeconomic Indicators, Recession, 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 November 2, 2012, BLS announcement, "Employment Situation: February, October."  This lesson will also look at regional data and industry trends.

Teacher Note: Employment and Unemployment Rate Focus on Economic Data Schedule:

During the first half of the 2012-2013 school year, (August-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 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.

  • August 2012: 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? Reported September 7, 2012.
  • September 2012: Details and issues about the measurement and meaning of employment and unemployment, adding concepts such as underemployment, full employment, etc. Reported October 5, 2012.
  • October 2012: Detailed breakdown of the data by region and industry (trends and comparisons of regions and demographic groups (THIS LESSON)
  • November 2012: The relationships of employment and unemployment data to other economic data, such as GDP, CPI, etc., and the business cycle. Reported December 7, 2012.

MATERIALS


Key Economic Indicators

as of November 2, 2012

Inflation

On a seasonally adjusted basis, the Consumer Price Index for All Urban Consumers increased 0.6 percent in September, the same increase as in August. The index for all items less food and energy rose 0.1 percent in September, also the same increase as in August.

Employment and Unemployment

Total nonfarm payroll employment increased by 171,000 in October, and the unemployment rate was essentially unchanged at 7.9 percent, the U.S. Bureau of Labor Statistics reported today. Employment rose in professional and business services, health care, and retail trade.

Real GDP

Real gross domestic product increased at an annual rate of 2.0 percent in the third quarter of 2012 (that is, from the second quarter to the third quarter), according to the "advance" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 1.3 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 economic recovery strengthens. In particular, the Committee also decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015.

PROCESS

According to the Bureau of Labor Statistics, the U.S. economy added  171, 000 jobs in October, 2012. Despite the total non-farm employment increase in October and upward revisions to the August and September employment estimates, the U.S. unemployment rate edged up to 7.9 percent, after falling 0.3 percentage points to 7.8 percent in September.

[Teacher Note:  To introduce the basic concepts of employment and unemployment, show the Council for Economic Education's Virtual Economics online video, "Employment and Unemployment.  URL: www.econedlink.org/interactives/index.php?iid=202.

For a visual demonstration of how the unemployment rate is determined, show the Kahn Academy online video, "Unemployment Rate Primer."  URL: www.khanacademy.org/finance-economics/macroeconomics/v/unemployment-rate-primer

Remember, the “unemployment rate” is determined by a simple formula.  It is the percentage of the labor force that is unemployed.  The “employment rate” is the simply the opposite, the percentage of the labor force that is employed, according to the Bureau of Labor Statistics’ definition of “employed.”

figure 1

Note: The November 2, 2012, BLS announcement added a comment about the impact of Hurricane Sandy. "Hurricane Sandy had no discernable effect on the employment and unemployment data for October. Household survey data collection was completed before the storm, and establishment survey data collection rates were within normal ranges nationally and for the affected areas. For information on how unusually severe weather can affect the employment and hours estimates, see the Frequently Asked Questions section of this release."

Note: Unless otherwise cited, all quoted sections in this lesson are from the BLS November 2, 2013 "Employment Situation - October 2013" press release.

[Teacher Note: Clarify the "math" of determining the unemployment rate.  (Number of unemployed divided by the labor force.)  Define the terms "labor force" and "unemployed." [BLS Glossary: www.bls.gov/bls/glossary.htm ]

The Employment Situation – October 2012
U.S. Bureau of Labor Statistics
Released: November 2, 2012

"Total nonfarm payroll employment increased by 171,000 in October, and the unemployment rate was essentially unchanged at 7.9 percent, the U.S. Bureau of Labor Statistics reported today. Employment rose in professional and business services, health care, and retail trade"

The U.S. unemployment rate has gradually decreased from a recent high of 10.0 percent in October 2009 to the current 7.9 percent. 

Figure 2, below, shows the monthly U.S. unemployment rates from 1990 to the present.  Note the highest recent rate in October, 2009.

figure 2

Total U.S. employment has increased from a low of 137,968,000 in December, 2009, to the current level of 143,384,000.  In that period of time, the U.S. economy has created almost 5 1/2 million jobs.

The number of U.S. unemployed persons has decreased from a recent high of 15,421,000 in October 2009 to the current level of 12,258,000. In this period, almost 3.31 million fewer workers are unemployed. 

How do these numbers add up to the unemployment rates during this time?  A key factor in the determination of the unemployment rate is the size of the labor force.  See Figure 1, above, for the key labor market data

Note: See the November 2, 2012, BLS "Employment Situation - October 2012" announcement for more detailed information. www.bls.gov/news.release/archives/empsit_11022012.htm .Economic News Release

Recovery from the 2008-2009 recession seem to be erratic, both in employment growth and real GDP growth. Most of the recent recessions, although not as deep and long,  have been followed by much faster recoveries.  Again, look at Figure 2.  Note the “cycles” of increases, highs, decreases, and low rates.  These are generally consistent with the business cycles identified by the National Bureau of Economic Research (NBER). Link to NBER business cycle information: www.nber.org/cycles/general_statement.html

[Teacher Note: If necessary, review the concept of the business cycle.   See Figure 3, below for a business cycle graphic representation.]

figure 3

[Teacher Note:  Students should be able to interpret the business cycle model to identify:

  • Periods of the recession since 1990.
  • The recessionary phase of the business cycles.
  • Relationship of the business cycle to employment trends. (See Figure 2.)
  • How does the 2008 to 2009 recession compare to the other recent recessions?

The three recessions in this time period are: July 1990 to March 1991; March 2001 to November 2001; and December 2007 to June 2009.  Source: National Bureau of Economic Research (NBER), www.nber.org/cycles/cyclesmain.html ]

The October, 2012, employment data showed some improvement from recent months  The consensus estimate is that the economy must create about 125,000 to 150,000 jobs each month just to keep up with population and natural labor force growth.  Take another look at the recent employment data (Figures 1 and 2). 

[Teacher Note:  Ask students: Have really we grown out of the recession? [Both employment and GDP have grown significantly in the past several months, past the pre-recession levels. But, the population has also grown and millions have given-up looking for work, are working part-time or are otherwise "underemployed."]

Household Survey Data - Unemployment

The number of unemployed persons in October, 2012, was 12.258 million people, up 170,000 from September, but down almost 500,000 from October, 2011. The unemployment rate in , October increased 0.1 percent, with 369,000 fewer people "not in the labor force."

[NOTE:  For complete labor force data, see the BLS report, Tables A-1, A-2, and A-3. www.bls.gov/news.release/archives/empsit_11022012.htm ]

The BLS now collects more data on part-time employees who would like to work full-time, marginally attached workers, and discouraged workers.  These workers may represent “hidden unemployment.”   To be technically counted as unemployed, you have to be actively looking for work.  If you have given-up, you are no longer “unemployed.”  

Some more good news!  In October, 2012, the number of people working part-time for due to "slack work or business conditions" decreased by 304,000. The number of discouraged worker increased slightly in October, but was down about 150,000 since October 2011.

[Teachers Note:  Ask your students:  Should those who can’t find jobs suited to their skills, those who are involuntarily working part-time, or those who have given-up trying to find a job be counted as unemployed?]

[Teacher Note: This may be an interesting discussion for your students. For definitions of these labor market groups, go to the BLS Glossary. www.bls.gov/bls/glossary.htm

For background information, see the BLS online publication, “Persons Outside the Labor Force Who Want a Job,” www.bls.gov/opub/mlr/1998/07/art3full.pdf .]

U.S. Unemployment is Not Distributed Equally

Among the major demographic groups, the unemployment rates in October, 2012, and changes from September to October were:

Group                             October 2012        One month change

All adults 7.9%   + 0.1
Adult men 7.3%      0
Adult women 7.2%   + 0.2
Teenagers 23.7%      0
Whites 7.0%      0
Blacks 14.3%   + 0.9
Hispanics 10.0%   + 0.1%
Asians   4.9%    - 0.1%


Note
: See Tables A-1, A-2, and A-3 of the BLS report for details of the employment data. www.bls.gov/news.release/archives/empsit_11022012.htm

[Teacher Note:  Ask students: Why are there such differences between the demographic groups?  Students may want discuss the breakdown of unemployment by demographic group.   Almost 24 percent of teenagers (age 16-19) are unemployed and looking for jobs.  What impact might this have on the society and the teenagers?  Why are there such differences between ethic and racial groups?] 

Take a look at the unemployment rates for people with different levels of education in October, 2012.  Do you see a pattern?

 Less than a high school diploma 12.2% unemployed
 High school graduate   8.4% unemployed
 Some college, no diploma   6.9% unemployed
 College graduates   3.8% unemployed


For more information about unemployment rates and income for groups by educational attainment, go to this BLS website: Education Pays .

Establishment Survey Data – Employment

The March 9 BLS report added a comment about the industry groups that grew in October, 2012, “Total nonfarm payroll employment increased by 171,000 in October. Employment growth has averaged 157,000 per month thus far in 2012, about the same as the average monthly gain of 153,000 in 2011. In October, employment rose in professional and business services, health care, and retail trade."

Take a look at the job picture in various industries in Figure 4.  (www.bls.gov/news.release/archives/empsit_11022012.htm , Table 2)  How do you characterize the October, 2012, employment data by industry group?

  • What industries are growing? 
  • What industries are not growing or shrinking?
  • Are there patterns?

figure 4

[Teacher Note: Ask your students if this pattern makes sense to them.  What – if any – is the pattern?  Although their interpretations may be just speculation, they should be able to identify general trends in the economy.]

Regional and State Employment and Unemployment – October 2012

The BLS also collects and releases data on employment and unemployment in the several geographic regions of the nation, the states, and metropolitan areas. The most recent news release on state and regional unemployment data was on October 19, 2012 for September, 2012.

“Regional and state unemployment rates were generally lower in September. Forty-one states and the District of Columbia recorded unemployment rate decreases, six states posted rate increases, and three states had no change, the U.S. Bureau of Labor Statistics reported today. Forty-four states and the District of Columbia registered unemployment rate decreases from a year earlier, while six states experienced increases.”

"In September 2012, nonfarm payroll employment increased in 35 states and the District of Columbia and decreased in 15 states. The largest over-the-month increase in employment occurred in Texas (+21,000), followed by Pennsylvania (+17,800) and the District of Columbia (+14,200). The largest over-the-month decrease in employment occurred in Michigan (-13,000), followed by Ohio (-12,800) and Oregon (-7,900)."

"The District of Columbia experienced the largest over-the-month percentage increase in employment (+2.0 percent), followed by Maine (+0.9 percent) and South Carolina (+0.7 percent). Oregon and Wyoming experienced the largest over-the-month percentage declines in employment(-0.5 percent each), followed by West Virginia (-0.4 percent)."

[Teacher Note:  Students may be very interested in looking at the data for their region or state.   How is their area's employment and unemployment situation similar of different from other regions? Your State Employment Office may have more detailed information about employment in local areas and smaller cities."

Metropolitan Areas Employment and Unemployment

The most recent BLS announcement of the employment and unemployment data for the nation's metropolitan areas was released October 30, 2012.

"Unemployment rates were lower in September than a year earlier in 345 of the 372 metropolitan areas, higher in 22 areas, and unchanged in 5 areas, the U.S. Bureau of Labor Statistics reported today. Two areas recorded jobless rates of at least 15.0 percent, while 41 areas registered rates of less than 5.0 percent. Two hundred sixty-seven metropolitan areas reported over-the-year increases in nonfarm payroll employment, 94 reported decreases, and 11 had no change."

"In September, 267 metropolitan areas reported over-the-year increases in nonfarm payroll employment, 94 reported decreases, and 11 had no change. The largest over-the-year employment increase occurred in New York-Northern New Jersey-Long Island, N.Y.-N.J.-Pa. (+138,300), followed by Houston-Sugar Land-Baytown, Texas (+96,600), and Los Angeles-Long Beach-Santa Ana, Calif. (+90,400). The largest over-the- year percentage gain in employment was reported in Lafayette, La. (+8.7 percent), followed by Columbus, Ind. (+8.6 percent), and Elkhart- Goshen, Ind. (+8.0 percent)."

[Note to Teachers:  If your school is in a metropolitan area, have your students compare their area to other metropolitan areas in their region.]

[Note to Teachers: The BLS also publishes individual "At a Glance" reports for each state and larger cities in those states.   Students may be interested in looking at the data for their local area. www.bls.gov/eag/ ]

[Teacher Note: Ask your students: Do you see any unemployment or employment growth patterns around the country?  Can you explain why some cities are very high or very low? [One key factor is energy exploration and extraction - creating jobs in some Gulf of Mexico cities and north central states.  Some areas that were among the fastest growing prior to the 2008-2009 recession now have some of the highest unemployment rates.]

CONCLUSION

The U.S. economy added 171,000 jobs in October, 2012, but the unemployment rate actually increased by 0.1 percent - primarily a result of rounding the reported number to the nearest tenth.  Most industry groups gained jobs, but over 12 million people in the U.S. remained unemployed.

What does this mean to you?  Good news or bad?

So far in 2012, the U.S. economy had added almost 1.5 million jobs, but the unemployment rate has dropped by less than 1/2 of a percentage point.  The number of unemployed has dropped by only 500,000 since the beginning of 2012.

Interpreting employment and unemployment data in a meaningful way is difficult because of the number of variables in the equation.  Remember, the population and labor force continue to grow, and people move in and out of the labor force.  There are still over 12 million discouraged workers in the United States.

Keep an eye on the employment data report for November and December to see how the economy fairs by the end of this year.

ASSESSMENT ACTIVITY

EXTENSION ACTIVITY

The last sections of the Employment and Unemployment lesson provide highlights of the state, region, and metropolitan area employment and unemployment data.

This data may not be quite as current as the national data that is released the first Friday of each month.  It takes a little longer to organize the localized data. 

Read the two BLS announcements:

  1. How does your state compare to the national average and surrounding states?
  2. Are there regional patterns of unemployment in your area that are higher and lower than the national average?
  3. Which five states had the highest unemployment rates last reported month?  Lowest?
  4. Did the unemployment rate decrease in any states last reported month?
  5. Why do you think your region or state differs from other regions or states, or the national employment and unemployment trends?  

To see the current unemployment rates and recent unemployment rate histories for each state, go to:  URL: www.bls.gov/lau/    Do you see and patterns among the states?