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This lesson examines the February 5, 2010, U.S. Department of Labor, Bureau of Labor Statistics, announcement of employment data and the unemployment rate for the month of January, 2010. 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, Economic Growth, Full Employment, Labor Market, 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 is about the BLS February 5, 2010 announcement of the "Employment Situation" for the month of January 2010.

[Note to teachers: During the second half of the 2009-2010 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 Focuses on Economic Data will include the current data and significant recent changes.

January: 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?

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: End of the school year review of employment data and summary of the recent history of labor markets.]

RESOURCES

Key Economic Indicators

as of February 5, 2010

Inflation

On a seasonally adjusted basis, the U.S. CPI-U increased 0.1 percent in December after rising 0.4 percent in November. The index for all items less food and energy rose 0.1 percent in December after being unchanged in November.

Employment and Unemployment

The U.S. unemployment rate fell from 10.0 to 9.7 percent in January, and nonfarm payroll employment was essentially unchanged (-20,000). Employment fell in construction and in transportation and warehousing, while temporary help services and retail trade added jobs.

Real GDP

U.S. real gross domestic product increased at an annual rate of 5.7 percent in the fourth quarter of 2009, according to the "advance" estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 2.2 percent.

Federal Reserve

The FOMC will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

PROCESS

Bureau of Labor Statistics: The Employment Situation – January 2010

Released February 5, 2010

The February 5, 2010, BLS “Employment Situation” report, at first, seemed to be very good news. “The unemployment rate fell from 10.0 to 9.7 percent in January, and nonfarm payroll employment was essentially unchanged (-20,000)...” The report added that “the number of unemployed persons decreased to 14.8 million...” Unfortunately, the trend of monthly job losses continued. Employers are not hiring enough workers and more potential workers are leaving the labor force. This combination can result in lob losses and a lower unemployment rate.

The BLS report broke down the employment and unemployment data by demographic groups and other criteria. How did the various groups do in January 2010? And, how did they do in January 2010 compared to one year ago?

Source: BLS Unemployment Situation News Release for January 2010 , Summary Table A. Household data (seasonally adjusted)

Employment Status
Age 16 & Over
Jan. 2009 Jan. 2010
Civilian non-institutional population 234,739,000 236,832,000
Civilian labor force 154,140,000 153,170,000
Labor Force Participation Rate 65.7% 64.7%
Employed 142,221,000 138,333,000
Employed-population Rate 60.6% 58.4%
Unemployed 11,919,000 14,837,000
Unemployment Rate 7.7% 9.7%
Not in Labor Force 80,599,000 83,663,000

While the U.S. population has grown over the past year, the size of the labor force has declined by over 2 million. The economy has lost almost 4 million jobs and the unemployment has grown by 2 percent. The good news is that the unemployment rate reached a high of 10.2 percent in November 2009. In addition, the number of potential workers “not in the labor force” has increased by over 3 million.

For definitions of these categories, see the EconEdLink Lesson, “Focus on Economic Data: Employment and the Unemployment Rate, January 8, 2010,” or the BLS “Glossary .”

[Note to Teachers:  This is a good time to discuss the high rate of unemployment among young workers.  What are the possible reasons?  Why do employers seem to value, age and experience?]

Figure 1, below shows the changes in the U.S. unemployment rates from 1990 to the present.  Note the up and down cycles over time - generally following the business cycles.  The increased rates in 2008-2009 show. the current recession

Figure 1 Unemployment

 

Unemployment Rates by
Demographic Group
Jan. 2009 Jan. 2010 Percent Change
Total
16 years & over
7.7% 9.7% 26.0%
Adult men (20+) 7.% 10.0% 28.2%
Adult women (20+) 6.4% 7.9% 23.4%
Teenagers (16-19) 20.9% 26.4% 23.3%
White 7.0% 8.7% 38.6%
Black or African American 12.8% 16.5% 26.9%
Asian
(not seasonally adjusted)
6.2% 8.4% 35.5%
Hispanic or Latino Ethnicity 9.9% 12.6% 27.3%

The big increase in unemployment over the last year impacted every primary demographic group. The groups with normally the lowest unemployment rates were impacted more. The unemployment rate for whites, normally lower than the average, increased by over 38 percent. While the unemployment rate for blacks, normally much higher increased by 27 percent. Women have faired relatively better than men during the recession. The industries with the largest job losses – construction and manufacturing – have traditionally had proportionately more male employees. Teenagers remain the most unemployed group, by far.  In lean times, employers have more choices and can be more selective. Job seekers with more experience and more skills (education) benefit.

The BLS report included this comment about the status of women in the labor force. “This release includes a new establishment survey table with information about women employees. In January, women made up 49.9 percent of total nonfarm payroll employment, compared with 48.8 percent when the recession began in December 2007.”

For definitions and more details about demographic categories, go to the BLS web page, “Demographics .”

Unemployment Rate by
Educational Attainment
Jan. 2009 Jan. 2010 Percent Change
Adults
(25 years and over)
6.5% 8.2% +26.2%
Less than a high school diploma 12.4% 15.2% +22.6%
High School graduates
(No college)
8.1% 10.1% +24.7%
Some college or associate degree 6.4% 8.5% +32.8%
Bachelor's degree or higher 3.9% 4.9% +25.6%

Generally, the relationship between educational attainment (number of years in school and/or level of degree) and income is very clear. This is also true about unemployment. The less educated suffer much more from unemployment. The impact on unemployment during the past year has been spread among all groups. Actually, those with some college or associate degrees have faired worse. This group benefited greatly during the growth period of the early 2000s, especially with the growth of technology-driven jobs during that period.

The BLS tracks the relationship between educational attainment level, unemployment and weekly earnings and reports them annually on a web page called “Education Pays.” In the chart below, note that more education is a significant determinant of employment success.

Education Pays
Highest Educational Unemployment Median Weekly
Attainment Rate (2008) Earnings (2008)
Doctoral Degree 2.0% $1,561
Professional Degree 1.7% $1,531
Master's Degree 2.4% $1,233
Bachelor's Degree 2.8% $1,012
Associate Degree 3.7% $757
Some College (no degree) 5.1% $699
High School Diploma 5.7% $618
Less than a HS Diploma 9.0% $453
Source: "Education Pays", Bureau of Labor Statistics, Current Population Survey

Note: Education Pays Data are 2008 annual averages for persons age 25 and over. Earnings are for full-time wage and salary workers.

[Note to Teachers:  This is a great illustration of the value of education.  The numbers are clear - education enables people to earn more income.]

Reason for Unemployment Jan. 2009 Jan. 2010
Job losers and persons who
completed temporary jobs
7,251,000 9,323,000
Job leavers 912,000 914,000
Re-entrants 2,792,000 3,585,000
New entrants 792,000 1,235,000

So, how has the level of employment and the unemployment rate been determined over the past year? The vast majority of the unemployed have lost their jobs involuntarily – most likely due to the recession and slower consumer demand – cyclical or possibly some structural unemployment. A few have left voluntarily – the frictionally unemployed. A large number of unemployed are those just entering the labor force and those who are reentering after some period of time. This has not been a very good time to enter the labor force compared to prior years.                

Go to this link for more information and answers to Frequently Asked Questions (FAQs) about “How the Government Measures Unemployment .” 

Duration of Unemployment Jan. 2009 Jan. 2010
Less than 5 weeks 3,633,000 3,008,000
5 to 14 weeks 3,622,000 3,362,000
15 to 26 weeks 2,073,000 2,632,000
27 weeks and over 2,689,000 6,313,000

One clear impact of the current recession has been the increase in length of unemployment for millions of workers. Look at the increase in the number of those who have been out of work for 27 weeks or more. Unemployment benefits have been extended over the past two years and may be further extended if the federal government provides funding. Many of the states have exhausted most of their unemployment compensations funds.                    

Unemployment compensation is both federally and state funded, and administered by the individual states. Each state sets the eligibility and payment rules, and may add additional compensation to the federal funds. For more information about the federally funded unemployment compensation system, see the IRS online publication, “Federal Unemployment Tax .”

Employed Persons at Work Part-Time Jan. 2009 Jan. 2010
Part-time for economic reasons 7,897,000 8,316,000
Slack work or business conditions 5,833,000 5,873,000
Could only find part-time work 1,689,000 2,295,000
Part-time for non-economic reasons 18,879,000 18,563,000
Marginally attached to the labor force 2,130,000 2,539,000
Discouraged workers 734,000 1,065,000

One clear impact of this recession has been the increase in those working part-time – unable to find full-time employment and not part-time by choice. Related this are those who have simply been discouraged from seeking employment and are now “marginally attached” to the labor force.

Marginally attached workers are defined by the BLS as “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 are defined by the BLS as, “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.”

Source: BLS Unemployment Situation News Release for January 2010 , Summary Table A. Household Data (seasonally adjusted)

[Note to Teachers:  Students can discuss the validity and reliability of the current BLS method of measuring unemployment.  Should the unemployment rate somehow include the underemployed?]

Impact of Unemployment

A Wall Street Journal "MarketWatch" column by Rex Nutting, dated October 2, 2009, commented on the real impact of persistent long-term unemployment, "More than a half a million people dropped out of the labor force, and the employment participation rate fell to 65.2%, the lowest in 23 years. The average duration of unemployment rose to 26.2 weeks, a record high. An alternative gauge of unemployment, which includes discouraged workers and those with part-time employment, rose from 16.8% to 17% -- the highest in the 15-year history of the data." 

LINK: Job Losses Accelerate to 263,000 in September

This raises questions about the real meaning of the BLS employment and unemployment data. Does the BLS undercount the "unemployed" by using such a narrowly defined  measurement? The BLS provides all of the data available from the household and establishment surveys. Those who use the data must decide what it really means.

New BLS Data

Beginning with the February 5, 2010 employment report, the BLS has begun reporting information about the employment and unemployment of veterans, persons with a disability, and foreign born workers.

“In January, the unemployment rate of veterans from Gulf War era II (September 2001 to the present) was 12.6 percent, compared with 10.4 percent for nonveterans.”

Persons with a disability had a higher jobless rate than persons with no disability--15.2 versus 10.4 percent. In addition, the labor force participation rate of persons with a disability was 21.8 percent, compared with 70.1 percent for those without a disability.”

“The unemployment rate for the foreign born was 11.8 percent, and the rate for the native born was 10.3 percent. (The data in these new tables are not seasonally adjusted.)”

[Note to teachers:  Gulf War Veterans, the foreign born, and people with disabilities are unemployed at greater rates than average.  What might be the reasons?  A great topic for students to consider.  What does it mean for our society?

Establishment Survey Data – Details for the Major Industry Groups

“Total nonfarm payroll employment was essentially unchanged in January (-20,000). Job losses continued in construction and in transportation and warehousing, while employment increased in temporary help services and retail trade. Since the start of the recession in December 2007, payroll employment has fallen by 8.4 million. Over the last 3 months, however, employment has shown little net change.”

Construction employment declined by 75,000 in January, with nonresidential specialty trade contractors (-48,000) accounting for the majority of the decline. Since December 2007, employment in construction has fallen by 1.9 million.”

“In January, transportation and warehousing employment fell by 19,000, due to a large job loss among couriers and messengers (-23,000).”

“Employment in manufacturing was little changed in January (11,000). After experiencing steep job losses earlier in the recession, employment declines moderated considerably in the second half of 2009. In January, job gains in motor vehicles and parts (23,000) and plastics and rubber products (6,000) offset small job losses elsewhere in the industry.”

“In January, temporary help services added 52,000 jobs. Since reaching a low point in September 2009, temporary help services employment has risen by 247,000.”

Retail trade employment rose by 42,000 in January, after showing little change in the prior 2 months. Job gains occurred in January among food stores (14,000), clothing stores (13,000), and general merchandise retailers (10,000).”

Health care employment continued to trend up in January. Ambulatory health care services added 15,000 jobs over the month.”

“In January, the federal government added 33,000 jobs, including 9,000 temporary positions for Census 2010. Employment in state and local governments, excluding education, continued to trend down.”

[Note to teachers:  Ask students if this data suggests anything significant about their future career opportunities.  Studnets can look at industry trends to make some generalizations about how career opportunities have changed.  How will they change in future years?]

Average Weekly Hours and Earnings

“The average workweek for all employees on private nonfarm payrolls was up by 0.1 hour to 33.9 hours in January. The manufacturing workweek for all employees rose by 0.3 hour to 39.9 hours, and factory overtime increased by 0.1 hour over the month. Since June, the manufacturing workweek has increased by 1.2 hours. In January, the average workweek for production and nonsupervisory employees on private nonfarm payrolls rose by 0.1 hour to 33.3 hours.” Fewer individual workers are working more hours, a sign of the reluctance of employers to commit themselves to more permanent hiring.

“In January, average hourly earnings of all employees on private nonfarm payrolls increased by 4 cents, or 0.2 percent, to $22.45. Over the past 12 months, average hourly earnings have risen by 2.0 percent. In January, average hourly earnings of private production and nonsupervisory employees rose by 5 cents, or 0.3 percent, to $18.89.” Those who are working are earning slightly more, most likely due to a combination of annual wage adjustments and more working hours. The economic gap between the employed and unemployed continues to widen.

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.   The lost output from unemployment in a recessionary period is called the "Recessionary Gap."

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 teachers: For a full explanation of the seasonal adjustment process, see the BLS article Revision of Seasonally Adjusted Labor Force Series in 2008 .

CONCLUSION

Take another look at the most recent data. U.S. nonfarm payroll employment declined by 20,000 more jobs in January, although the unemployment rate decreased.  In recent months, U.S. Real gross domestic product has begun to increase.  The real GDP increase of 5.7 percent  for Q4 2009 (annual rate) was good news, but may not be sustainable.  The U.S. Consumer Price Index for all Urban Consumers (CPI-U) has shown little sign of significant inflation after a short period of disinflation (a short term of lower price level).   All signs point to some continuation of the recession that began in December, 2007. The Federal Reserve has kept the target range for the federal funds rate at 0 to 1/4 percent to keep interest rates low and stimulate borrowing. Congress continues to provide tax and spending policies to support the banking system, and improve consumer spending and private investment.

The January "Employment Situation" report showed that the downturn in the labor market has continued, although at a lesser rate of decline. With fewer employed people, income for consumption spending will continue to decrease. Are we at the bottom? Will current conditions worsen and create a "W" shaped cycle? (A bottom with a brief recovery and then another decline to a bottom.)

The bottom can take several shapes:

V - A sharp decline to a bottom and a fast recovery creating a "V" shape.
U - A decline to a bottom with a period of time at that level prior to a recovery.
W - The "double dip - decline, bottom, slight recover, more decline, bottom and recovery.

The key difference is the length of the bottom. Will the U.S. economy remain in a stagnant state for a period of time prior to recovery? 
If the economy does not create jobs, have we recovered? Many economists and planners fear a "jobless" recovery. Conditions may improve through increases in productivity and increasing output in ways that do not create as many jobs as were lost.

Only time will tell.

ASSESSMENT ACTIVITY

Short Answer Question: 


1. 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.)]

2. 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."]

EXTENSION ACTIVITY

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, our economy, and our lives?

U.S. Labor Force Demographics

The BLS also provides information about the Demographics of the U.S. labor force, including age, youth, women, educational attainment. etc.   Take a look at any special group you wish to research.