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This lesson examines the April 5, 2013, U.S. Department of Labor, Bureau of Labor Statistics, announcement of U.S. employment data and the unemployment rate for the month of March, 2013. This lesson introduces the basic concepts of the BLS employment and unemployment data. The meaning and importance of the data are discussed. Assessment exercises are included for reinforcing knowledge of the concepts.

KEY CONCEPTS

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

STUDENTS WILL

  • Review the most recently reported U.S. employment and unemployment data.
  • Determine the changes in U.S. employment and unemployment from the past month and year.
  • Determine the factors that have influenced the change in the U.S. unemployment rate.
  • Explain the implications of the employment and unemployment data for individuals, population groups, and the U.S. economy.

Current Key Economic Indicators

as of 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 April 5, 2013, BLS announcement, "Employment Situation: March, 2013."  The lesson will also look at the relationship of employment and unemployment data to other macroeconomic data, such as GDP and CPI, and business cycles.  s........,,mmmm

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

During the second half of the 2012-2013 school year, (January-May), EconEdLink will publish five Focus on Economic Data lessons on "employment and the unemployment rate." The lessons will begin with the 'basics' in January and progressively focus more on complex data, issues and comparisons. All monthly Focuses on Economic Data will include the current data and significant recent changes.

  • December 2012, released January 4, 2013: 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?
  • January 2013, released February 1, 2013: details and issues about the measurement and meaning of employment and unemployment, adding concepts such as underemployment, full employment, etc.
  • February 2013, released March 8, 2013: detailed breakdown of the data by region and industry (trends, identifying trends and comparisons of regions and demographic groups
  • March 2013, released April 5, 2013: the relationships of employment and unemployment data to other economic data, such as GDP, CPI, etc., and the business cycle.  [THIS LESSON]
  • April 2013, released May: 3, 2013: Year-end summary.

RESOURCES

Key Economic Indicators

as of April 5, 2013

Inflation

On a seasonally adjusted basis, the Consumer Price Index for All Urban Consumers increased 0.7 percent in February after being unchanged in January. The index for all items less food and energy rose 0.2 percent in February after rising 0.3 percent in January.

Employment and Unemployment

Nonfarm payroll employment edged up in March (+88,000), and the unemployment rate was little changed at 7.6 percent, the U.S. Bureau of Labor Statistics reported today. Employment grew in professional and business services and in health care but declined in retail trade.

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 0.4 percent in the fourth quarter of 2012 (that is, from the third quarter to the fourth quarter), according to the "third" estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 3.1 percent.

Federal Reserve

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate. The Committee continues to see 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. The target for the federal funds rate will remain at 0 to .25 percent.

PROCESS

In March, 2013, U.S. non-farm employment increased by just 88,000 jobs.  Over the past six months, monthly employment growth had averaged 197,000 jobs.  268,000 U.S. jobs were created in February, 2013, alone.  What happened in March ?

The U.S. unemployment rate dropped to 7.6 percent with a decrease in the number of unemployed by 290,000, but also a decrease in the size of the labor force of 496,000.  In March, there were 290,000 fewer unemployed persons, but, according to the BLS Household Survey, there were also 206,000 fewer employed persons.  How can that be?

Once again, the two surveys that determine the BLS "Employment Situation" announcement give us a mixed message about the health of the U.S. labor market.  What do these labor market numbers really mean?  Take a look at the April 5, 2013, BLS announcement.

The Employment Situation – March 2013
U.S. Bureau of Labor Statistics
Released April 5, 2013

"Nonfarm payroll employment edged up in March (+88,000), and the unemployment rate was little changed at 7.6 percent, the U.S. Bureau of Labor Statistics reported today. Employment grew in professional and business services and in health care but declined in retail trade."

Note:  Unless otherwise cited, all quoted materials in this lesson are from the April 5, 2013, BLS "Employment Situation - March 2012" news release. URL:
www.bls.gov/news.release/archives/empsit_04052013.htm

Initially, the "headline" numbers seem like good news.  There were 88,000 more jobs according to employers.  The unemployment rate decreased to 7.6 percent according to the surveyed households. 

March 2013 Employment and Unemployment Data Highlights

  • The number of unemployed people in the U.S. decreased by 290,000 to 11,742,000.
  • The number of employed persons in the U.S. decreased by 206,000 to 143,286,000.
  • The national unemployment rate fell by 0.1 percent in March to 7.6 percent.
  • The unemployment rate has declined by 0.6 percentage point since March, 2012.
  • The unemployment rates decreased for adult men, and all ethnic groups. 
  • The unemployment rate remained the same for adult women.
  • The unemployment rate for teens (age 16-19) decreased 0.9 percent to 24.2 percent.

Figure 1, below, shows the basic U.S. labor force data for March, 2013.  Take a good look at the March 2013 data.  Do you see any data that impacts you or your family's current life or future?

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

figure 1

Figure 2, below, provides more unemployment data for the month of March, 2013, including unemployment rates by race or ethnicity and educational attainment.  Do you see any interesting data?

Figure 2

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

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

  • Many people who were once in the labor force are no longer seeking work.  The BLS reported that the civilian labor force participation rate decreased from 63.5 percent to 63.3 percent, and the employment-population ratio decreased by 0.1 percent to 58.65 percent.   Until the end of 2008, the labor force participation rate had consistently been over 66 percent for the previous 20 years. The employment-population ratio had been between 62 and 64 percent since 1993.  Why do you think these rates of labor force participation remain so low?
  • Part-time workers.  The BLS also reported, "the number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) fell by 350,000 over the month to 7.6 million. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job."
  • Some people have simply given-up looking for jobs. The BLS reported, "In March, 2.3 million persons were marginally attached to the labor force, essentially unchanged from a year earlier. (The data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey."  If jobs were available, do you think these people would seek them and become counted as in the labor force?

 

A note about the marginally attached, workers:  "Among the marginally attached, there were 803,000 discouraged workers in March, little changed from a year earlier. (These data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.5 million persons marginally attached to the labor force in March had not searched for work for reasons such as school attendance or family responsibilities."

Should those who are not able to find full-time work be counted as unemployed?

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

Establishment Survey Data – Employment Data

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

"Total nonfarm payroll employment edged up in March (+88,000). Over the prior 12 months, employment growth had averaged 169,000 per month. In March, employment increased in professional and business services and in health care, while retail trade employment declined."

Since the recession low number of 153,320,000 employed in February, 2010, the economy has had a net gain of 5.875 million jobs, to date.

Industry Employment Change Highlights, March 2013

Take a look at the change in the employment levels for the major industry groups in March, 2013, in Figure 3, below.

Figure 3

The National Bureau of Economic Research (NBER) announced that the 2008-2009 recession ended in June, 2009, but significant job growth did not begin until many months later.  U.S. non-farm employment has increased by just over 9.1 million jobs in the past year (March 2012 to March 2013).  

Business Cycles and Unemployment

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

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

Figure 4

Macroeconomic Data - Business Cycles, Employment, GDP and CPI

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

Figure 5

Employment and Other Macroeconomic Data

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

"Nonfarm payroll employment edged up in March (+88,000), and the unemployment rate was little changed at 7.6 percent. Employment grew in professional and business services and in health care but declined in retail trade."

After losing over 2.2 million jobs in 2008 and almost 4.7 million jobs in 2009, the U.S. economy reversed the trend since early 2010.  As previously stated in this lesson, the economy has gained over 1.6 million jobs since December, 2009.  Although the number of U.S. non-farm jobs has been increasing, total non-farm employment is still well-below the high level of 146,595,000 U.S. jobs reported in November, 2007.

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 0.4 percent in the fourth quarter of 2012 (that is, from the third quarter to the fourth quarter), according to the "third" estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 3.1 percent." Source: Bureau of Economic Analysis, "Gross Domestic Product, 4th quarter 2012 and annual 2012 (third estimate)," March 28, 2013.

The U.S. rate of GDP growth fell-off considerably in 2008, the beginning of the recession. 2008 saw decreases in real GDP in three of four quarters. The losses continued through the second quarter of 2009, when growth began again. In 2010, U.S. real GDP increased at an annual rate of 2.4 percent. In 2011, the U.S. GDP growth rate slowed somewhat to 1.8 percent.  In 2012, the annual real GDP growth rate was 2.2 percent, but had slowed to a 0.4 percent annualized growth rate in Q4.

[Note to teachers: Ask students to explain how the rate of GDP growth and changes in employment might be related.  (The unemployment rate and the rate of real GDP growth should be inversely related.  As GDP growth slows, unemployment should rise. Increased output should require more employees, typically.  Recently, this economic recovery has seen GDP growth without a corresponding rise in employment.)]

Consumer Price Index

"On a seasonally adjusted basis, the Consumer Price Index for All Urban Consumers increased 0.7 percent in February after being unchanged in January. The index for all items less food and energy rose 0.2 percent in February after rising 0.3 percent in January."

Although many people fear future inflation as a result of the rising federal debt and continued problems in some financial markets, there has been little evidence of inflationary pressures in recent years. The most significant inflation pressure has been fro fluctuating energy prices.

[Note to teachers: Ask students how they think inflation affects people's consumer and saving decisions.  Do people spend less if they think prices are rising?  (If consumers are pessimistic about the future, they may tend to reduce their spending.  If they expect inflation, they may increase short-term purchasing at lower current prices.  In this recovery, there is little evidence of inflation.  Consumer spending may be restrained by uncertainty about the economy, more than anything else.)]

Monetary Policy – Federal Funds Rate

Through its last meeting in March, 2013, the Federal Reserve System’s Federal Open Market Committee (FOMC) has kept its target for the federal funds rate at 0 - 1/4 percent, the level established in December 16, 2008.  The FOMC again stated in March that the rate will be kept low in the near future.  The intent of the low interest rate policy is to stimulate the economy by making borrowing - for consumption and investment – cheaper. 

[Note to teachers: Ash your students: How does recent Federal Reserve monetary policy reflect the state of the economy?  (The current stimulatory policies - low interest rates and bond purchases - are intended to create investment spending, consumer purchases, and employment growth. The Fed has made it clear that the current low interest rate policies will continue until employment increases or there are signs of inflation.)]

[Note to teachers: Ask your students:  Is this employment report good news or bad news about the U.S. economy?  Why?]

CONCLUSION

Once again, the BLS reported that payroll employment increased by just 88,000 jobs in March, 2013.  The drop in the employment rate was primarily a result of the change in the size of the labor force.

The pace of job growth seems to have slowed from the increases in the past few months.  Even with a string of monthly job gains, over 11 million Americans remain unemployed and many more are underemployed or have given-up looking for jobs.

There is still some fear that this recovery will be "jobless," meaning that the increased output is from improved capital resources and productivity increases, not more employed workers. 

Some people are questioning the traditional concept of the "natural rate of unemployment" and the level considered to be "full employment." Remember, full employment may include those who are frictionally unemployed (changing jobs) and some who are structurally unemployed and the jobs they seek no longer exist where they seek them.  The "real" full employment level of unemployment may be those who are cyclically unemployed - not working because of inadequate demand for the products they produce. 

Estimates of the full employment level of unemployment range from 2 to 7 percent.  For the fifteen years prior to the 2008-2009 recession, the U.S. unemployment rate fluctuated between 4 and 6 percent, with one month below 4 percent, the 3.8 percent low level in April, 2000. There are still over 11 million unemployed people in the United States.

Is the "real" level of unemployment 6.7 percent?  If we subtract, say, 5 percent for the frictionally and some structurally unemployed, is the "real" rate 1.7%.  Are these the people we can expect to be re-employed as the economy reaches a peak in the current business cycle?

Then again, what if we add the marginally attached and part-time workers?  Should the real unemployment rate be higher?

[Note to teacher: Have your students write a rationale for one of these as the "official" announced measurement of the unemployment rate:

  1. The unemployment rate as the percentage of the labor force who are not employed by the current BLS definition.
  2. The unemployment rate as the percentage of the labor force who unemployed plus those who are "discouraged" and have given up looking for work.
  3. The unemployment rate as the unemployed, discouraged workers and those working part-time for economic reasons, as a percentage of the labor force.]

ASSESSMENT ACTIVITY

EXTENSION ACTIVITY

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

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

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


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

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

EDUCATOR REVIEWS