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This lesson examines the December 7, 2012, U.S. Department of Labor, Bureau of Labor Statistics, announcement of employment data and the unemployment rate for the month of November, 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, 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 focuses on the December 7, 2012, BLS announcement, "Employment Situation: November 2012."  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 first half of the 2012-2013 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 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 7, 2012 (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?
  • October 5, 2012 (September 2012): details and issues about the measurement and meaning of employment and unemployment, adding concepts such as underemployment, full employment, etc.
  • November 2, 2012 (October 2012): detailed breakdown of the data by region and industry (trends, identifying trends and comparisons of regions and demographic groups
  • December 7, 2012 (November 2012): the relationships of employment and unemployment data to other economic data, such as GDP, CPI, etc., and the business cycle.  [THIS LESSON]

RESOURCES

Key Economic Indicators

as of December 12, 2012

Inflation

On a seasonally adjusted basis, the Consumer Price Index for All Urban Consumers increased 0.1 percent in October after rising 0.6 percent in September. The index for all items less food and energy rose 0.2 percent in October after increasing 0.1 percent in September.

Employment and Unemployment

Total nonfarm payroll employment rose by 146,000 in November, and the unemployment rate edged down to 7.7 percent. Employment increased in retail trade, professional and business services, and health care.

Real GDP

Real gross domestic product increased at an annual rate of 2.7 percent in the third quarter of 2012 (that is, from the second quarter to the third quarter), according to the "second" 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 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, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored.

PROCESS

The Bureau of Labor Statistics reported that the U.S. economy added 146,000 jobs in November.  All things being equal, this should be enough new jobs to more than keep up with the normal growth of the population and labor force.  As a result, the unemployment rate dropped from 7.9 percent to 7.7 percent, the lowest national unemployment level since December of 2008 (7.3 percent.)  Since November of 2011, the level of employment in the U.S. has increased by 2,472,000 jobs and 1,068,00 fewer people are unemployed.

The simple numbers may give us the "official" unemployment rate, but the underlying numbers reveal a much more complicated "employment situation."  Is this good news for the economy?

[Teacher Note: Students can speculate as to why the unemployment rate decreased in November, 2012.  If they have done previous Focus on Economic Data lessons, they should make the connection between the numbers of unemployed and the size of the labor force.]

Take a close look at the employment and unemployment numbers to determine whether or not the November data is really good news.

The Employment Situation – November 2012
U.S. Bureau of Labor Statistics
Released December 7, 2012

"Total nonfarm payroll employment rose by 146,000 in November, and the unemployment rate edged down to 7.7 percent. Employment increased in retail trade, professional and business services, and health care."

Note: Unless otherwise cited, the quoted materials in this lesson are from the December 7, 2012 BLS news release, "Employment Situation - November 2013.  www.bls.gov/news.release/archives/empsit_12072012.htm

Household Survey Data – Unemployment Data

"The unemployment rate edged down to 7.7 percent in November. The number of unemployed persons, at 12.0 million, changed little. (See table A-1.)"

"Among the major worker groups, the unemployment rates for adult men (7.2 percent), adult women (7.0 percent), teenagers (23.5 percent), whites (6.8 percent), and Hispanics (10.0 percent) showed little or no change in November. The unemployment rate for blacks (13.2 percent) declined over the month. The jobless rate for Asians was 6.4 percent (not seasonally adjusted), little changed from a year earlier. (See tables A-1, A-2, and A-3.) "

[Teacher Note:  A reference to a "table" after a set of data refers to the tables following the BLS announcement. Economic News Release www.bls.gov/news.release/archives/empsit_12072012.htm Economic News Release ]

[Teacher Note: Students can look at the historic unemployment rate data to see how many people were unemployed in previous years.  data.bls.gov/timeseries/LNU03000000?years_option=all_years&periods_option=specific_periods&periods=Annual+Data ]

Figure 1, below, shows the monthly U.S. unemployment rates from 2000 to November, 2012.  Note the increases into the recession and the decreases beginning in 2009.  The unemployment rate has decreased slowly from the recent high of 10.0 percent in October, 2009.

figure1

Figure 2, below, shows the November unemployment rates for various demographic groups and for levels of educational attainment. Note the very high unemployment rates for teenagers and for non-high school graduates.      

[Teacher Note: To see  the history of unemployment rates for age, race, and educational attainment, click on the BLS “Top Picks” for labor force statistics, http://data.bls.gov/cgi-bin/surveymost?ln   Select the groups you want and hit the “Search” button at the bottom.  You can select the period of time.]

figure2

Long-term Unemployment

One serious concern during the recent recession was the number of people who were unemployed for an extended period of time.  Unemployment insurance benefits were extended during the recession, but many people’s benefits ended when those limits were reached.  

"The number of long-term unemployed (those jobless for 27 weeks or more) was little changed at 4.8 million in November. These individuals accounted for 40.1 percent of the unemployed. (See table A-12.)"

[Teacher Note: Ask this question: Should unemployment benefits be extended for as long as people are out of work?  Are the benefits a disincentive for people to look for a job?  Unemployment benefit rules and payments are established by each individual state.  To learn more about unemployment benefits, go to: www.bls.gov/cps/#faq ]

Labor Force Participation

"The civilian labor force participation rate declined by 0.2 percentage point to 63.6 percent in November, offsetting an increase of the same amount in October. Total employment was about unchanged in November, following a combined increase of 1.3 million over the prior 2 months. The employment-population ratio, at 58.7 percent, changed little in November. (See table A-1.)"

One factor in the determination of the unemployment rate is the size of the labor force.  In November, the labor force shrunk by 350,000, reducing the labor force participation rate by 0.2 percentage points. The labor force participation rate has shrunk from over 67 percent in early 2001 to the present 63.6 percent.

Part-time and Marginally Attached Workers

Another area of recent concern has been the increasing number of persons who are employed, but not working to their full potential. They may be working part time, involuntarily, or unable to find a job at their level of training.  Again, these numbers have begun to fall.

"The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers), at 8.2 million in November, was little changed over the month. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job. (See table A-8.)"

"In November, 2.5 million persons were marginally attached to the labor force, essentially unchanged 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. (See table A-16.)"

"Among the marginally attached, there were 979,000 discouraged workers in November, 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 November had not searched for work in the 4 weeks preceding the survey for reasons such as school attendance or family responsibilities. (See table A-16.)

[Teacher Note:  Ask your students: Should part-time, marginally attached, and discouraged workers be added to the number of "unemployed" persons?]

Establishment Survey Data – Employment Data

The BLS Establishment Survey gathers employment data from a cross-section of business firms.  This data measures job growth or decline in many industries.  It is separate from the Household Survey, which is data gathered from individuals and determines the unemployment rate.

"Total nonfarm payroll employment increased by 146,000 in November. Since the beginning of this year, employment growth has averaged 151,000 per month, about the same as the average monthly job gain of 153,000 in 2011. In November, employment rose in retail trade, professional and business services, and health care. (See table B-1.)"

Changes in Employment by Major Industry Groups, November 2012

Increased Employment in November 2012:

  • Employment in retail trade increased by 52,600
  • Employment in professional and business services increased by 43,000
  • Employment in leisure and hospitality increase by 23,000
  • Employment in educational and health services increased by 18,000
  • Employment in wholesale trade increased by 13,100
  • Employment in information industries increased by 12,000
  • Employment in mining and logging industries increased by 5,000
  • Employment in transportation and warehousing increased by 3,500
  • Employment in financial services increased by 1,000
     

Decreased Employment in November 2012:

  • Employment in construction decreased by 20,000
  • Employment in manufacturing decreased by 7,000
  • Employment by governments decreased by 1,000

[Teacher Note: For details by more specific industry groups, see the December 7, 2012 BLS “Employment Situation” announcement, Table B-1 .  www.bls.gov/news.release/archives/empsit_12072012.htm ]

[Teacher Note:  Ask your students how their region may be affected by the November employment changes.  Is any industry a very large employer in the local economy?]

The BLS also reports data on the average workweek, "The average workweek for all employees on private nonfarm payrolls remained at 34.4 hours in November. The manufacturing workweek edged up by 0.1 hour to 40.6 hours, and factory overtime was unchanged at 3.2 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls edged up 0.1 hour to 33.7 hours. (See tables B-2 and B-7.)

In addition, average salarles increased somewhat. "In November, average hourly earnings for all employees on private nonfarm payrolls rose by 4 cents to $23.63. Over the past 12 months, average hourly earnings have risen by 1.7 percent. In November, average hourly earnings of private-sector production and nonsupervisory employees edged up by 3 cents to $19.84. (See tables B-3 and B-8.)"

Some bad news was that the employment estimates for the previous two months were revised downward.  September was revised down from +148,000 to +132,000.  October was revised downward from +171,000 to +138,000.

Reviewing The Recession

Although it is officially over, declared ended in June, 2009 by the National Bureau of Economic Research, the effects of the recession linger with slow growth and high unemployment.

The U.S. economy lost 3,623,000 jobs in 2008 and 4,740,000 jobs in 2009.  The U.S. is still million of jobs behind the employment level of December 2007, the date the NBER identified as the beginning of the recession.  

[Teacher Note: To read the December 1, 2008, NBER’s “Business Cycle Dating Committee” recession announcement, go to this site: Determination of the December 2008 Peak in Economic Activity .]

[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.]

2011 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 the growth, peak, decline, and trough phases 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 period of declining GDP and employment it may be in a recession.

Take a look at how the three macroeconomic measurements in the "Focus on Economic Data" lesson series compare over the last few years. Figure 3, below, illustrates a typical business cycle model.

figure3

Employment and Unemployment

"Total nonfarm payroll employment rose by 146,000 in November, and the unemployment rate edged down to 7.7 percent. Employment increased in retail trade, professional and business services, and health care."

Since November, 2012, the unemployment rate has dropped from 8.7 percent to 7.7 percent.  Total employment has increased by 2,648,000 jobs to over 143 million.  The number of unemployed has dropped by 1,294,000 to just over 12 million.

Figure 4, below, again shows the monthly U.S. unemployment rates from 2000 through November, 2012.

figure4

Real Gross Domestic Product (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 2.7 percent in the third quarter of 2012 (that is, from the second quarter to the third quarter), according to the "second" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 1.3 percent."

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.  The economy grew by 1.8 percent in 2011 and has grown by 2.0 percent in Q1 of 2012, 1.3 percent in Q2 of 2012, and 2.7 percent in Q3 of 2012.

Figure 5, 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 below the "0" line are negative GDP growth.

figure 5

Consumer Price Index

"On a seasonally adjusted basis, the Consumer Price Index for All Urban Consumers increased 0.1 percent in October after rising 0.6 percent in September. The index for all items less food and energy rose 0.2 percent in October after increasing 0.1 percent in September."

As has frequently been the case in recent months, energy prices were the major factor in the all items seasonally adjusted price level. A decline in the energy index more than offset small increases in the indexes for food and all items less food and energy. 

The CPI-U, after samll increases an ssoem decreases over the last year, jumped 0.6 percent in August, 2012, and 0.6 percent in September, primarily driven by energy price increases.  Last month, energy oruces fellll and so did the all items CPI-U.

figure 6

Monetary Policy

The Federal Reserve's monetary policy goals have remained consistent - if not more focused - on growth over the past several years.  The recent FOMC meeting press release on December 12, 2012,  restated the long term policy goal of low interest rates, and added more spcific language about the trade-off between prooting growth and avoiding inflation.

"Information received since the Federal Open Market Committee met in October suggests that economic activity and employment have continued to expand at a moderate pace in recent months, apart from weather-related disruptions. Although the unemployment rate has declined somewhat since the summer, it remains elevated. Household spending has continued to advance, and the housing sector has shown further signs of improvement, but growth in business fixed investment has slowed. Inflation has been running somewhat below the Committee’s longer-run objective, apart from temporary variations that largely reflect fluctuations in energy prices. Longer-term inflation expectations have remained stable."

"Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee remains concerned that, without sufficient policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee also anticipates that inflation over the medium term likely will run at or below its 2 percent objective."

"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, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored."

Source: Federal Open Market Committee press release, December 12, 2012. URL: www.federalreserve.gov/newsevents/press/monetary/20121212a.htm

[Teacher Note:  Students should be able to draw conclusions about the relationships of the three data sets - real GDP growth, unemployment and CPI.  They should be able to explain how they are typically directly or indirectly related.  For instance, the real GDP and unemployment data are usually directly related. Normally, they rise and fall in a similar pattern.  Employment and CPI data are most often indirectly related.  Normally, there will be some inflationary pressure when the economy is growing and the unemployment rate is falling.  There will be little inflationary pressure when growth is slow or the unemployment rate is rising.]

CONCLUSION

Once again, the BLS reported “The unemployment rate fell by 0.4 percentage point to 8.6 percent in November, and nonfarm payroll employment rose by 120,000..."  The number of unemployed decreased by almost one-half million, but the labor force shrunk and the number of people "not in the labor force" increased.  Many of the unemployed may have just given-up seeking employment.

The economy is growing at a moderate pace, but job creation is not keeping up an adequate pace for a more robust recovery. 

  1. What do you think about the health of the U.S. economy?  Are we really out of the recession? 
  2. What can government or the private sector do to create a real recovery?

ASSESSMENT ACTIVITY

EXTENSION ACTIVITY

How do other economic indicators compare to the recent changes in real GDP, unemployment rate, and the consumer price index? Take a look at some of the indicators listed below. Click on the name of the indicator to find a definition, the source, and links to more information and recent data. Compare the chart to the figures in this lesson on real GDP, unemployment, and the consumer price index.

 
How does the indicator reflect the current economic conditions?

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


[Note to teachers: Assign one of the indicators to individual or groups of students. They can report on their indicator comparing a chart of that indicator to other indicators.  Are the indicators related?]