Return

This lesson examines the May 8, 2009, U.S. Department of Labor, Bureau of Labor Statistics, announcement of employment data and the unemployment rate for the month of April 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.

KEY CONCEPTS

Full Employment, Labor Force, Labor Market, Macroeconomic Indicators, Types of 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.
  • Compare employment data trends with price indexes and real GDP growth trends. 

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 focuses on the BLS announcement, "Employment Situation," May 8, 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.]

MATERIALS


Key Economic Indicators

as of May 8, 2009

Inflation

On a seasonally adjusted basis, the CPI-U decreased 0.1 percent in March after rising 0.4 percent in February. The index for all items less food and energy increased 0.2 percent in March, the same increase as in February.

Employment and Unemployment

Nonfarm payroll employment continued to decline in April (-539,000), and the unemployment rate rose from 8.5 to 8.9 percent. Since the recession began in December 2007, 5.7 million jobs have been lost. In April, job losses were large and widespread across nearly all major private-sector industries. Overall, private-sector employment fell by 611,000.

Real GDP

Real gross domestic product decreased at an annual rate of 6.1 percent in the first quarter of 2009 (advance estimate). In the fourth quarter, real GDP decreased 6.3 percent.

Federal Reserve

The FOMC will maintain the target range for the federal funds rate at 0 to 1/4 percent and anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

PROCESS

May 8, 2009, Bureau of Labor Statistics Announcement: The Employment Situation

"Nonfarm payroll employment continued to decline in April (-539,000), and the unemployment rate rose from 8.5 to 8.9 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Since the recession began in December 2007, 5.7 million jobs have been lost. In April, job losses were large and widespread across nearly all major private-sector industries. Overall, private-sector employment fell by 611,000."

The data in this BLS report is derived for two surveys.

  1. Household Survey: The Current Population Survey (CPS) (also referred to as the "household survey") is a monthly survey of households conducted by the Bureau of Census for the Bureau of Labor Statistics. It provides a comprehensive body of data on the: labor force, employment, unemployment and persons not in the labor force.
     
  2. Establishment Survey: Each month the Current Employment Statistics (CES) (also referred to as the establishment survey) program surveys about 150,000 businesses and government agencies, representing approximately 390,000 individual worksites, in order to provide detailed industry data on employment, hours, and earnings of workers on nonfarm payrolls.

Unemployment (Household Survey Data)

"The number of unemployed persons increased by 563,000 to 13.7 million in April, and the unemployment rate rose to 8.9 percent.  Over the past 12 months, the number of unemployed persons has risen by 6.0 million, and the unemployment rate has grown by 3.9 percentage points." 

The U.S. unemployment rate reached 8.9 percent, the highest level since 1983.  Figure 1 shows the monthly U.S. unemployment rates for 1990 to April, 2009.  Note the cycles of increasing and decreasing unemployment. These cycles generally follow the cycles of gross domestic product growth over the time period. The high points of the unemployment cycles in 1991-1992 and 2002-2003 reflect the most two recent recessions. Unemployment data is a lagging indicator, slightly following in time other indicators of a downturn or recession. Note that the 1991 and 2003 high rates were followed by long periods of almost consistent decreases in the unemployment rate.

[NOTE: By BLS definition, the unemployed are "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."]

[Note to teachers: Students may want  be interested in discussing whether or not this is a meaningful definition of unemployment..  Do they have any suggestions?]


Unemployment Figure 1

Unemployment by Demographic Group

"Unemployment rates rose in April for adult men (9.4 percent) and blacks (15.0 percent).  The jobless rates for adult women (7.1 percent), teenagers (21.5 percent), whites (8.0 percent), and Hispanics (11.3 percent) were little changed over the month.  The unemployment rate for Asians was 6.6 percent in April, not seasonally adjusted, up from 3.2 percent a year earlier."

Adult men and blacks bore the brunt of the April unemployment increase. The increases in rates of Asians, women and whites lagged the national average. The highest unemployment rate was for teenagers (aged 16-20) at 21.5 percent, but that was not a significant increase from March.

"Among the unemployed, the number of job losers and persons who completed temporary jobs rose by 571,000 in April to 8.8 million. This group has more than doubled in size over the past 12 months." 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 long-term unemployed (those jobless for 27 weeks or more) increased by 498,000 to 3.7 million over the month and has risen by 2.4 million since the start of the recession in December 2007."  In January of 2009, 22.4 percent of the unemployed had been unemployed for over 26 week.  By April, that group had increased to 27.2 percent of total unemployment. This is the largest percentage of unemployed for over 26 weeks since the BLS started calculating this statistic in 1948. In April, 6,211,000 people had been unemployed for at least 15 weeks and 3,680,000 people had been unemployed for over 26 weeks. These numbers indicate that finding new employment is becoming more difficult.

[Note to teachers:  Do students think the differences in the unemployment rates of various demographic groups tell us anything about the U.S. economy and society? How can we explain the different rates?]

Total Employment and the Labor Force (Household Survey Data)

"The civilian labor force participation rate rose in April to 65.8 percent, and the employment-population ratio was unchanged at 59.9 percent.  The employment-population ratios for adult men and women showed little or no change over the month.  However, since December 2007, the men's ratio was down by 4.4 percentage points, while the women's ratio was down by 1.3 percentage points."  As noted earlier, job losses for men have exceeded those of women in recent months.

"In April, the number of persons working part time for economic reasons (sometimes referred to as involuntary part-time workers) was essentially unchanged at 8.9 million; however, the number of such workers has risen by 3.7 million over the past 12 months." 

Persons Not in the Labor Force (Household Survey Data)

"About 2.1 million persons (not seasonally adjusted) were marginally attached to the labor force in April, 675,000 more than a year 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 740,000 discouraged workers in April, up by 328,000 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 April had not searched for work in the 4 weeks preceding the survey for reasons such as school attendance or
family responsibilities."

[NOTE: See the expanded comments about "discouraged and marginally attached workers" later in this lesson.]

Industry Payroll Employment (Establishment Survey Data)

From the May 8 BLS announcement, "Nonfarm payroll employment fell by 539,000 in April to 132.4 million; private-sector employment declined by 611,000.  Since the recession began in December 2007, payroll employment has fallen by 5.7 million.  In April, job losses continued in most major private-sector industries.  Employment rose in the federal government mainly due to hiring of temporary workers for Census 2010."

"Employment in manufacturing fell by 149,000 over the month, with widespread job losses among the component industries.  Three durable goods industries--transportation equipment (-34,000), fabricated metal products (-29,000), and machinery (-22,000)--accounted for more than half of the decline. Since September 2008, manufacturing has lost 1.2 million jobs."

"Construction employment declined by 110,000 in April, with losses spread throughout the sector.  Over the past 6 months, job losses have averaged 120,000 per month, compared with 46,000 per month from December 2007 through October 2008."

"The professional and business services industry lost 122,000 jobs in April. This industry has shed an average of 139,000 jobs per month since October 2008. Half of the April decline occurred in temporary help services." 

"Employment in retail trade fell by 47,000 in April. Job losses in department stores (-14,000), automobile dealers (-9,000), and building material and garden supply stores (-8,000) accounted for most of the decline.  Wholesale trade employment was down by 41,000 over the month, with much of the decrease among durable goods wholesalers."

"Employment in transportation and warehousing declined by 38,000 in April, with losses concentrated in truck transportation (-16,000) and warehousing and storage (-8,000).  Employment in financial activities declined by 40,000 over the month.  Job losses occurred throughout the sector, including real estate and rental and leasing (-15,000) and credit intermediation and related activities
(-14,000).  The leisure and hospitality industry lost 44,000 jobs in April."

"Health care employment grew by 17,000 in April. Job gains in health care have averaged 17,000 per month thus far in 2009, down from an average of 30,000 per month during 2008."

"Employment in federal government rose by 66,000 over the month largely due to the hiring of temporary workers for Census 2010 preparatory work."  The 66,000 jobs increase in federal government employment for the 2010 census negates that number of losses in the private sector when determining the total number of jobs. The private sector lost a total 0f 611,000 jobs in April.

[Note to teachers: Students may be interested in looking at their local area. How has their area been affected by the recession? What about the dominant local industries? Click on this link for Local Area Unemployment Statistics .]

Upward revisions of Previous Employment Data

"The change in total nonfarm employment for February was revised from -651,000 to -681,000, and the change for March was revised from -663,000 to -699,000. Monthly revisions result from additional sample reports and the monthly recalculation of seasonal factors." Over 30,000 more were added to the unemployment count for March 2009. 

Weekly Hours (Establishment Survey Data)

"In April, the average workweek for production and nonsupervisory workers on private nonfarm payrolls was unchanged at 33.2 hours, seasonally adjusted. The manufacturing workweek increased by 0.2 hour to 39.6 hours, and factory overtime rose by 0.1 hour to 2.7 hours."  In some good news, the reported weekly hours has remained constant and increased in manufacturing industries.

Hourly and Weekly Earnings (Establishment Survey Data)

"In April, average hourly earnings of production and nonsupervisory workers on private nonfarm payrolls was essentially unchanged. This followed a gain of 4 cents in March. Over the past 12 months, average hourly earnings increased by 3.2 percent, and average weekly earnings rose by 1.3 percent." As millions of jobs have been eliminated, those still working have increased their incomes slightly. 

Review:  The basic concepts of employment and unemployment

There are three basic categories of labor force participation:

  1. Employed: People with jobs
  2. Unemployed: People who are jobless, looking for jobs, and available for work.
  3. Not in the Labor Force:  People who are neither employed nor unemployed.

Who is employed?

  • All persons who did any work for pay or profit during the survey reference week. 
  • All persons who did at least 15 hours of unpaid work in a family-owned enterprise operated by someone in their household.
  • All persons who were temporarily absent from their regular jobs, whether they were paid or not.

Not all of the wide range of job situations in the American economy fit neatly into a given category. For example, people are considered employed if they did any work at all for pay or profit during the survey reference week. This includes all part-time and temporary work, as well as regular full-time, year-round employment. Persons also are counted as employed if they have a job at which they did not work during the survey week because they were: on vacation, ill, experiencing child-care problems, taking care of some other family or personal obligation, on maternity or paternity leave, involved in an industrial dispute (strike), or prevented from working by bad weather.

Who are the unemployed?

Persons are classified as unemployed if they do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work.

Workers expecting to be recalled from layoff are counted as unemployed, whether or not they have engaged in a specific jobseeking activity. In all other cases, the individual must have been engaged in at least one active job search activity in the 4 weeks preceding the interview and be available for work (except for temporary illness).

Who is "not in the labor force?"

Persons not in the labor force are those who are not classified as employed or unemployed during the survey reference week.

What is the Labor Force?

Labor force measures are based on the civilian noninstitutional population 16 years old and over. (Excluded are persons under 16 years of age, all persons confined to institutions such as nursing homes and prisons, and persons on active duty in the Armed Forces.) The labor force is made up of the employed and the unemployed. The remainder—those who have no job and are not looking for one—are counted as "not in the labor force." Many who are not in the labor force are going to school or are retired. Family responsibilities keep others out of the labor force.

How large is the U.S. labor force?

The labor force is not a fixed number of people. It increases with the long-term growth of the population, it responds to economic forces and social trends, and its size changes with the seasons. On average in 2008, there were roughly 145 million employed and 9 million unemployed making up a labor force of 154 million persons. There were about 80 million persons not in the labor force.

What are seasonal fluctuations?

The seasonal fluctuations in the number of employed and unemployed persons reflect not only the normal seasonal weather patterns that tend to be repeated year after year, but also the hiring (and layoff) patterns that accompany regular events such as the winter holiday season and the summer vacation season. These variations make it difficult to tell whether month-to-month changes in employment and unemployment are due to normal seasonal patterns or to changing economic conditions. To deal with such problems, a statistical technique called seasonal adjustment is used.

When a statistical series has been seasonally adjusted, the normal seasonal fluctuations are smoothed out and data for any month can be more meaningfully compared with data from any other month or with an annual average. Many time series that are based on monthly data are seasonally adjusted.

Source: How are Seasonal Fluctuations Taken Into Account?

The recession continues and the trend of job losses that began in January, 2008, continues, although at a slightly smaller rate this month.  GDP declined in the first quarter of 2009, although at a slightly smaller pace than in the last half of 2009.  Whether or not we have "hit the bottom" of the business cycle is unknown.  The lasting impact of this recession is unknown, but there are some theories.

The Lasting Effects of the Recession?

On May 10, 2009, two days after the BLS employment report, a Bloomberg News article by Matthew Benjamin and Rich Miller, titled “Recession to Redefine Full Employment” was published in newspapers across the nation. Benjamin and Miller raised an issue of how “Post-recession America may be saddled with high unemployment even after good times finally return.”

Benjamin and Miller focused on the concept of the “natural” rate of unemployment, a level a level that does not significantly impact inflation. This level is often referred to as the "full employment” level. They suggest that there will be significant structural changes in the economy as a result of the recession and that many of the manufacturing and financial services jobs may not ever be recreated or that wage levels in some industries may never recover to pre-recession levels.

Many economists have estimated the “natural rate” to be about 4 to 5 percent – composed of frictional and structural unemployment. If that estimate is correct, the current recession may be responsible for the remaining 4 to 5 percent of the April 8.9 percent unemployment rate.

What some suggest, pointed out by Benjamin and Miller is that even in the coming economic recovery, the unemployment rate may remain high, perhaps 6 to 7 percent for a long period of time. If this is true, some portion of what seems to be “cyclical” unemployment driven by reduced demand has become “structural” in nature, possibly reflecting a permanent change in the economy and labor market. Today, almost one-fourth of the unemployed have been out of work for at least 27 weeks, mass layoffs have increased and permanent layoffs (jobs that will never be reopened) have increased.

Some raise the issue of a possible “jobless recovery,” with growth resulting from increased productivity or new productive activities that are less labor intensive, such as resulted after the recessions in 1990-91 and 2001. Increased productivity growth in the 1990s may have lowered the natural rate of unemployment from 6 percent to 5 percent. Half of the auto-industry jobs being cut "are gone for good," says Sean McAlinden, chief economist at the Center for Automotive Research in Ann Arbor, Mich. In this recession, 376,00 jobs have been lost in the financial sector alone. 

Benjamin and Miller added that, “layoffs now taking place are similar to those in the 1981- 1982 recession, when unemployment peaked at 10.8 percent and 2.8 million jobs disappeared, leaving industries such as durable-goods manufacturing permanently smaller. Some 14 percent of durable-goods positions vanished in that slump, and the sector never regained the employment level of June 1981.”

Given the “stimulus” goals do creating millions of jobs, a jobless recovery and a persistently higher unemployment rate will add to the budget deficit, already projected to be over $1 trillion, by reducing tax revenues and the increased unemployment benefits. Congress, the Treasury and the Federal Reserve may have to risk inflation through even more stimulatory policies to create jobs.  Can productivity increases contribute to a jobless recovery?
 
[Note to teachers: Students may want to discuss the possible impact of substantial structural changes, such as a permanently smaller auto industry?  Where do they think future job growth will occur?]

Productivity and Costs, First Quarter 2009

On May 7, 2009, the Bureau of Labor Statistics reported preliminary productivity data for the first quarter of 2009. Productivity is measured by output per hour of all persons. The seasonally adjusted annual rates of productivity growth in the first quarter were 1.1 percent in the business sector and 0.8 percent in the non-farm business sector. Productivity gains in both sectors were due to hours declining faster than output. In the manufacturing sector, the productivity change was -3.4 percent in manufacturing, -10.0 percent in durable goods manufacturing, and -0.1 percent in nondurable goods manufacturing.

“Productivity in the non-farm business sector increased 0.8 percent in the first quarter of 2009, as output declined 8.2 percent and hours of all persons dropped 9.0 percent (seasonally adjusted annual rates).  The decrease in hours, 9.0 percent, was the largest since the first quarter of 1975, when hours fell 12.0 percent. Over the last four quarters, productivity in the non-farm business sector grew 1.8 percent. This was lower than the 2.5 percent average rate of growth from 2000 to 2007.”  

“Hourly compensation in the non-farm business sector grew at a 4.1 percent annual rate in the first quarter of 2009. Real hourly compensation increased 6.6 percent, due to a 2.3 percent decline in consumer prices (seasonally adjusted annual rates).”

“Unit labor costs grew 3.3 percent in the first quarter of 2009 and the implicit price deflator for non-farm business increased 2.9 percent. Over the last four quarters, unit labor costs rose 2.4 percent, greater than the 1.4 percent average annual growth rate from 2000 to 2007.”

Source: BLS Productivity and Costs Press Release, First Quarter 2009 First Quarter 2009.

CONCLUSION

On May 8, the BLS reported that another 539,000 people had lost jobs (net) in the United States and the unemployment rate rose from 8.5 to 8.9 percent.  Since the recession began in December 2007, 5,738,000 U.S jobs have been lost.  All major industry sectors have been adversely impacted except health care and government employment.  The chart below shows the net loss of U.S. jobs (non-farm payroll employment) each month since the current recession began.

U.S. Job Losses, 2008 through April 2009

January 2008                     -72,000
February 2008                  -144,000
March 2008                       -122,000
April 2008                          -160,000
May 2008                           -137,000
June 2008                         -161,000
July 2008                           -128,000
August 2008                     -175,000
September 2008             -321,000
October 2008                   -380,000
November 2008              -597,000
December 2008              -681,000
Janaury 2009                   -741,000
February 2009                 -681,000
March 2009                      -699,000
April 2009                         -539,000
Recession total           -5,738,000 (net number of jobs)

Finding a Job in the Recession

At the end of March, 2009, “job openings in the U.S. numbered 2.7 million, the lowest job openings level since the BLS began measuring job openings over 8 years ago. The number of job openings has trended downward since mid-2007, and, at 2.7 million in March, the number of monthly job openings was down 2.1 million (or 44 percent) since the most recent high point in June 2007. The decline in job openings was due to a significant decline in retail trade, and small declines in nearly every other industry.”  The job opening number and rate have decreased, meaning that there are fewer available jobs for the unemployed - those looking for employment. 

The BLS defines “job openings" as, “a specific position of employment to be filled at an establishment; conditions include the following: there is work available for that position, the job could start within 30 days, and the employer is actively recruiting for the position.”

 Source: U.S. Bureau of Labor Statistics, The Editor’s Desk, “Number of Job Openings at New Low ,” May 13, 2009.

When will the recession and trend of job losses end?  No one knows for sure.  Some current data seems to indicate that things are still very bad.  Some economists and business leaders see evidence that the pace of decline has slowed.  Personal consumption expenditures increased in the last quarter, but private investment was down significantly.  Do the 66,000 new government jobs created in preparation for the 2010 Census reflect meaningful job growth?  Or, is a recovery dependent on private sector growth?

Keep an eye on the GDP and jobs data this summer to, maybe, answer some of these questions.

ASSESSMENT ACTIVITY


Essay Question:
 

 

  1. What does the "unemployment rate" reported monthly by the Bureau of Labor Statistics tell you about the economy? [Answers will vary. Student should mention that unemployment data is a lagging indicator, rises or declines in unemployment verify trends in economic downward or upward respectively.]
     
  2. Is it an accurate measurement of the "health" of the economy? Answers will vary. [Students should mention that unemployment in one of many way in which economic activity is measured. ]


[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"?]

EXTENSION ACTIVITY

 The 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.

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?