This lesson examines the February 6, 2009, U.S. Department of Labor, Bureau of Labor Statistics, announcement of employment data and the unemployment rate for the month of January 2009. 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.
- 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 Indicatorsas of November 10, 2014
The Consumer Price Index for All Urban Consumers increased 0.1 percent in October on a seasonally adjusted basis. The core inflation rate increased the same amount. For the previous 12 months, the index increased 1.7%, the same rate as reported in the September report.
According to the October report of the Bureau of Labor Statistics, the unemployment rate fell from 5.9% to 5.8%, and the number of individuals unemployed also decreased. Total nonfarm employment rose by 214,000 in October. Employment gains were concentrated in retail trade, food services and health care.
The advance estimate for real GDP growth in the third quarter of 2014 was 3.5%, a decrease from the revised second quarter growth of 4.6%. Inventory investment reduced third quarter growth, while it added to second quarter growth. In addition, consumer spending increased at a lower rate in the third quarter, compared to the second. Finally, business investment increased in the third quarter, but at a lower rate than in the second quarter.
The FOMC believes that the labor market has shown considerable improvement and the risks of inflation rising above its 2% target are low. Therefore, the Federal Reserve announced plans to end its purchase of financial assets. In addition, the federal funds rate will remain at its current low level. However, the FOMC has signaled its willingness to increase the federal funds rate if inflation shows signs of rising above the 2% target.
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 focuses on the BLS announcement, "Employment Situation," February 6, 2009.
[Note to teacher: Employment and Unemployment Rate Focus on Economic Data Schedule:
During the second half of this 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 lessons will include the current data and significant recent changes.
- January: employment and unemployment basics. What is the level of employment? What is the unemployment rate? How are they measured? 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: school year-end review and final analysis.]
The February 6, 2009, BLS Employment Situation Press Release: This release discusses the U.S. Employment Situation in January of 2009.
Employment Situation Frequently Asked Questions: This BLS site provides answers to FAQ's about the employment situation press releasees.
BLS Current Population Survey: This site provides databases, tables and reports on labor force statistics.
Revision of Seasonally Adjusted Labor Force Series in 2008: This is a BLS article on seasonal data adjustments.
BLS Glossary: This glossary provides economics terms used by the BLS in their reports.
Historical Hours and Earnings: This site provides a detailed breakdown of the hour and wage data by industry group.
Assessment Activity: This interactive quiz tests students' understanding of the Unemployment lesson.
Women in the Labor Force: A Databook: This article provides a brief history of the changes in the labor force participation of women.
Key Economic Indicatorsas of February 6, 2009
The Consumer Price Index for All Urban Consumers (CPI-U) decreased 1.0 percent in December, before seasonal adjustment. The December CPI-U level of 210.228 was 0.1 percent higher than in December 2007." (January 16, 2009)
Nonfarm payroll employment decreased by 598,000 in January and the unemployment rate rose from 7.2 to 7.6 percent. (February 6, 2009)
Real gross domestic product decreased at an annual rate of 3.8 percent in the fourth quarter of 2008. In the third quarter, real GDP decreased 0.5 percent. (January 30, 2009)
At its January 28, 2009 meeting, the Federal Open Market Committee decided to keep its target range for the federal funds rate at 0 to 1/4 percent.(January 28, 2009)
BLS Announcement: The Employment Situation, February 6, 2009
"Nonfarm payroll employment fell sharply in January (-598,000) and the unemployment rate rose from 7.2 to 7.6 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Payroll employment has declined by 3.6 million since the start of the recession in December 2007; about one-half of this decline occurred in the past 3 months. In January, job losses were large and widespread across nearly all major industry sectors."
The chart below shows the U.S. employment data by demographic group, illustrating the relative population, labor force and employment sizes of the groups included in the BLS data reporting.
U.S. Employment by Demographic Group
|Group||Total Labor||Labor Force Number||Unemployment||Population Force Participation||
*Aged 20 years and over **Ages 16-19 years
Unemployment (Household Survey Data)
Figure 1 shows the levels of the U.S. nonfarm payroll unemployment rate since 1990. Note the two most recent high levels of 7.8% in June, 1992, and 6.3% in June, 2003.
The BLS announcement added, "Both the number of unemployed persons (11.6 million) and the unemployment rate (7.6 percent) rose in January. Over the past 12 months, the number of unemployed persons has increased by 4.1 million and the unemployment rate has risen by 2.7 percentage points."
The chart below shows the U.S. unemployment rates by demographic group and the changes from December, 2007, to January, 2008. Note the significantly greater increase in the unemployment rate for Asians from December to January. Unfortunately, the BLS report did not include an explanation of this data.
|Unemployment Rates and Monthly Changes (December to January) by Demographic Group|
|Adult men||7.6% + .4%|
|Adult women||6.2% + .3%|
|Whites||6.9% + .3%|
|Blacks||12.6% + .7%|
|Hispanics||9.7% + .5%|
|Asians||6.2% + 1.1%|
|Teenagers||20.8% no change|
The number of job losers and persons who completed temporary jobs increased to 7.0 million in January. Job losers are, "unemployed persons who involuntarily lost their last job or who had completed a temporary job. This includes persons who were on temporary layoff expecting to return to work, as well as persons not on temporary layoff." The number of these unemployed has increased by 3.2 million in the last year.
Length of Unemployment
The BLS announcement added that, "The number of long-term unemployed (those jobless for 27 weeks or more) was little changed at 2.6 million in January. Over the past 12 months, the number of long-term unemployed was up by 1.3 million. The number of persons unemployed less than 5 weeks rose to 3.7 million in January." Not only is initial unemployment increasing, but duration is also increasing.
Over the last ten years, the average duration of unemployment has fluctuated with general economic conditions. The January, 1999, average duration was just 13.4 weeks. The average duration increased gradually to a high of 20.1 weeks in February 2004. After averaging 16-17 weeks form 2004-2008, it reached 19.8 weeks again in October, 2008.
The current BLS announcement reports that 39.2 percent of the unemployed have been jobless for 15 or ore week. 22.4 percent have been unemployed for more than 27 weeks. The newly unemployed, 5 weeks or less, were 31% of the total.
Duration of unemployment: "The length of time in weeks that persons classified as unemployed had been looking for work. For persons on layoff who are counted as unemployed, duration of unemployment represents the number of full weeks they had been on layoff. The data do not represent completed spells of unemployment."
Total Employment and the Labor Force (Household Survey Data)
The BLS announcement included, "the civilian labor force participation rate, at 65.5 percent in January, has edged down in recent months. The employment-population ratio declined by 0.5 percentage point to 60.5 percent over the month, and by 2.4 percentage points over the year."
|Civilian Labor Force||153,716,000|
|Number of Employed||142,099,000|
|Number of Unemployed||11,616,000|
|Number Not in Labor Force||81,023,000|
|Labor Force Participation Rate||65.5%|
- Labor force participation rate: The percentage of the civilian noninstitutional population that is employed or unemployed.
- Employment-population ratio: The percentage of the civilian noninstitutional population aged 16 years and over that is employed.
- Unemployment rate: The percentage of the labor force that is unemployed.
The BLS announcement added, "The number of persons who worked part time for economic reasons (sometimes referred to as involuntary part-time workers) was essentially unchanged in January at 7.8 million; however, this measure was up by 3.1 million over the past 12 months. Included in this category are persons who would like to work full time but were working part time because their hours had been cut back or because they were unable to find full-time jobs.
- Part-time workers: "Persons who work less than 35 hours per week."
Within the group of employed and part-time workers is a group often referred to as the "underemployed." This includes people who are employed part-time, but desire full-time employment, or those who are employed at lower paying jobs that require less skill or training than they possess. Some refer to these persons as "underutilized workers."
Persons Not in the Labor Force (Household Survey Data)
The BLS reported on February 6 that, "About 2.1 million persons (not seasonally adjusted) were marginally attached to the labor force in January, about 400,000 more than 12 months earlier. These individuals 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."
"Among the marginally attached, there were 734,000 discouraged workers in January, up by about 270,000 from a year earlier. Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The other 1.4 million persons marginally attached to the labor force in January had not searched for work in the 4 weeks preceding the survey for reasons such as school attendance or family responsibilities."
- Marginally attached workers: "Persons not in the labor force who want and are available for work, and who have looked for a job sometime in the prior 12 months (or since the end of their last job if they held one within the past 12 months), but were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. Discouraged workers are a subset of the marginally attached."
- Discouraged workers: "Persons not in the labor force who want and are available for a job and who have looked for work sometime in the past 12 months (or since the end of their last job if they held one within the past 12 months), but who are not currently looking because they believe there are no jobs available or there are none for which they would qualify."
Industry Payroll Employment by Industry Group (Establishment Survey Data)
The BLS broke down the January 2009 job loss numbers for various industry groups. The following data is summarized from the report. Note: This data does not include government employment, ie. public school.
- Total nonfarm payroll employment: 598,000 jobs
- Manufacturing employment: 207,000
- Durable goods manufacturing: 157,000
- Fabricated metal products: 37,000
- Motor vehicles and parts: 31,000
- Machinery: 22,000
- Nondurable goods manufacturing: 50,000
- Construction: 111,000
- Temporary help: 76,000
- Professional and technical services: 29,000
- Retail trade: 45,000
- Automobile dealerships: 14,000
- Building material,garden supply: 10,000
- Department stores: 9,000
- Furniture and home furnishing: 7,000
- Wholesale trade: 31,000
- Transportation and warehousing: 44,000
- Truck transportation: 25,000
- Support for transportation: 9,000
- Couriers and messengers: 4,000
- Financial activities: 42,000
- Securities/commodities/investments: 15,000
- Credit intermediation: 10,000
- Health care: +19,000
- Private education: +33,000
Weekly Hours ( and Weekly Earnings (Establishment Survey Data)
Also included in the "Employment Situation" report is average work week and earnings data. In January, the average workweek for production and nonsupervisory workers on private nonfarm payrolls remained the same at 33.3 hours (seasonally adjusted). Both the manufacturing workweek and factory overtime decreased by 0.1 hour over the month.
The index of weekly hours of production and nonsupervisory workers on non-farm payrolls fell by 0.7 percent in January. The manufacturing payroll index declined by 2.1 percent over the month.
In January, the average hourly earnings of production and nonsupervisory workers increased by 5 cents, or 0.3 percent. This followed gains of 7 cents in December and 6 cents in November. Over the past 12 months, average hourly earnings increased by 3.9 percent, and average weekly earnings rose by 2.7 percent.
Average work week: 32.9 hours
For a detailed breakdown of the hour and wage data by industry group, go to Historical Hours and Earnings.
What is "Full Employment"
When analyzing business cycles, economists define an unemployment rate that is "full employment." Full employment exists when nearly all persons willing and able to work at the prevailing wages and working conditions are employed. Generally, this is called the an acceptable level of "natural" unemployment, when cyclical unemployment is at a minimum. This often referred to as the non-accelerating inflation rate of unemployment (NAIRU).
Economists do not agree or know for certain what the full employment rate is. A consensus estimate is that the full employment rate of unemployment is currently between 4.5 and 5.0 percent of the labor force being unemployed. The measure of full employment will exclude frictional unemployment and structural unemployment.
Remember, there are three general types or causes of unemployment.
- Frictional unemployment is temporary unemployment arising from the normal job search process.
- Structural unemployment is the result of changes in the economy caused by technological progress and shifts in the demand for goods and services.
- Cyclical unemployment is unemployment caused by a drop in economic activity.
When the economy is at full employment and other productive resources are being utilized to their fullest, the economy may be reaching its "full employment GDP." At this point, the economy is reaching or is at its potential output or GDP, given existing productive resources.
Seasonally Adjusted Household Survey Data
Short-run trends in labor force are influenced by seasonal and periodic fluctuations associated with recurring events such as weather, holidays, and the opening and closing of schools. Seasonal adjustment eliminates the influence of these fluctuations and makes it easier for users to observe fundamental changes in the level of the series, particularly changes associated with general economic expansions and contractions.
At the end of each calendar year, BLS updates the seasonal adjustment factors for the labor force data derived from the Current Population Survey (CPS), or household survey. This past year, seasonally adjusted data for January 2008-November 2008 were subject to revision. For example, the unemployment rate in November 2008 was originally reported at 6.7 percent and revised to 6.8 percent by the time of the January 9 announcement.
[Note to teacher: For a full explanation of the seasonal adjustment process, see the BLS article Revision of Seasonally Adjusted Labor Force Series in 2008 .]
Short Answer Question:
What people are considered to be "not in the labor force"? ["Not in the labor force" includes persons aged 16 years and older in the civilian noninstitutional population who are neither employed nor unemployed in accordance with the BLS definitions. (Those under sixteen, retired, not working or looking for work, institutionalized, in school full time, etc.)]
- What is a "discouraged worker"? ["Discouraged workers" are "persons not in the labor force who want and are available for a job and who have looked for work sometime in the past 12 months (or since the end of their last job if they held one within the past 12 months), but who are not currently looking because they believe there are no jobs available or there are none for which they would qualify."]
Real gross domestic product decreased at an annual rate of 3.8 percent in the fourth quarter of 2008. In the third quarter, real GDP decreased 0.5 percent. Nonfarm payroll employment decreased by 598,000 in January and the unemployment rate rose from 7.2 to 7.6. The Consumer Price Index for All Urban Consumers (CPI-U) decreased 1.0 percent in December.
All signs point to the continuation of the recession that began in December, 2007. The Federal Reserve decided to keep the target range for the federal funds rate at 0 to 1/4 percent to keep interest rates low and stimulate borrowing. Congress is finalizing a stimulus plan of tax and spending policies to support the banking system, and improve consumer spending and private investment.
The February 6, 2009, BLS "Employment Situation" report showed that the downturn has contimued and deepened. Most economists and planners indicate that they expect things to get worse before the turn-around begins. With fewer employed people, income for consumption spending will continue to decrease. Keep an eye out for next month's GDP and employment reports.
Women in the Labor Force
The past several decades have been seen significant changes in women’s participation in the labor force and employment. Since the 1970s, women’s labor force participation has risen substantially, particularly among women with children, and a larger share of women work full time and year round than ever before. Although the average hours worked and average wage rates for women lag those of men, the gaps are narrowing.
Go to the BLS online publication, "Women in the Labor Force: A Databook ," to read a brief history of the changes in the labor force participation of women.
How do you think these changes in the status of women have affected our society and economy?