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This lesson examines the April 2, 2010, U.S. Department of Labor, Bureau of Labor Statistics, announcement of employment data and the unemployment rate for the month of March, 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, Labor Force, Macroeconomic Indicators, Unemployment, Unemployment Rate

STUDENTS WILL

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

Current Key Economic Indicators

as of May 5, 2013

Inflation

On a seasonally adjusted basis, the Consumer Price Index for All Urban Consumers decreased 0.2 percent in March after increasing 0.7 percent in February. The index for all items less food and energy rose 0.1 percent in March after rising 0.2 percent in February.

Employment and Unemployment

Total nonfarm payroll employment rose by 165,000 in April, and the unemployment rate was little changed at 7.5 percent. Employment increased in professional and business services, food services and drinking places, retail trade, and health care.

Real GDP

Real gross domestic product increased at an annual rate of 2.5 percent in the first quarter of 2013 (that is, from the fourth quarter to the first quarter), according to the "advance" estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 0.4 percent.

Federal Reserve

To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent...

INTRODUCTION

Each month, the 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 April 2, 2010, BLS announcement, "Employment Situation: March 2010."  This lesson will also look at regional employment and unemployment trends, similarities, and differences.

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

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.]

MATERIALS

  • BLS Employment Situation News Release for March 2010: Here is the Economic News Release for April 2, 2010.
    www.bls.gov/news.release/archives/empsit_04022010.htm

  • Employment Situation Frequently Asked Questions:  This BLS site provides answers to FAQ's about the employment situation press releasees.
    www.bls.gov/news.release/empsit.faq.htm
  • Bureau of Labor Statistics: The Current Population Survey (CPS):  This site contains 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.
    www.bls.gov/cps/

  • Revision of Seasonally Adjusted Labor Force Series in 2008:  This is a BLS article on seasonal data adjustments.
    www.bls.gov/cps/cpsrs2008.pdf

  • BLS Glossary:  This glossary provides economics terms used by the BLS in their reports.
    www.bls.gov/bls/glossary.htm
     
  • Determination of the December 2008 Peak in Economic Activity:  This is a NBER recession announcement made on December 1, 2008.
    www.nber.org/cycles/dec2008.html
     
  • Assessment Activity:  This interactive quiz tests students' understanding of the Employment lesson.
    Click Here

Key Economic Indicators

as of April 2, 2010

Inflation

On a seasonally adjusted basis, the CPI-U was unchanged in February after increasing 0.2 percent in January. The index for all items less food and energy rose 0.1 percent in February after falling 0.1 percent in January.

Employment and Unemployment

Nonfarm payroll employment increased by 162,000 in March, and the unemployment rate held at 9.7 percent, the U.S. Bureau of Labor Statistics reported today. Temporary help services and health care continued to add jobs over the month. Employment in federal government also rose, reflecting the hiring of temporary workers for Census 2010. Employment continued to decline in financial activi ties and in information.

Real GDP

Real gross domestic product increased at an annual rate of 5.6 percent in the fourth quarter of 2009, (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 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

Is the Recession Over?   162,000 New Jobs!

The number of U.S. nonfarm jobs increased by 162,000 jobs in March, possibly reversing a long trend of employment declines that began in January of 2008.  We have seen a couple of months of very small increases in employment, but each was offset by decreases in the following month.  The March employment report shows the first significant level of employment increase in over two years. 

The bad news?  The U.S. unemployment rate remained at 9.7% despite the increased number of employed.  How did this happen?
 
What did the April 2, 2010 “Employment Summary” announcement say? 

“Nonfarm payroll employment increased by 162,000 in March, and the unemployment rate held at 9.7 percent, the U.S. Bureau of Labor Statistics reported today. Temporary help services and health care continued to add jobs over the month. Employment in federal government also rose, reflecting the hiring of temporary workers for Census 2010. Employment continued to decline in financial activities and in information.” 

“In March, the number of unemployed persons was little changed at 15.0 million, and the unemployment rate remained at 9.7 percent.” 

[Teacher Note:  Students may wonder how the economy can create 162,000 new jobs and the unemployment rate did not decrease.  Remind them that there are two variables that determine the unemployment rate.  One is the number of unemployed.  The other is the size of the labor force.  In March, the number of unemployed actually increased by 134,000.  At the same time, the labor force grew by 398,000 persons.   More people entered (or re-entered) the labor force in March and many of them were unemployed.  The net effect was that the “rate” remained the same.]

The Recession 

The U.S. economy lost 3,623,000 jobs in 2008 and 4,740,000 jobs in 2009 (including an increase of 64,000 jobs in November).  So far, 2010 has seen a net increase of 162,000 jobs, since a 14,000 increase in January was offset by a 14,000 decrease in February.  The U.S. is still 8.2 million jobs behind the employment level of December 2007, the date the National Bureau of Economic Research (NBER) identified as the beginning of the current recession.  

To read the December 1, 2008, go to NBER’s “Business Cycle Dating Committee” recession announcement, Determination of the December 2008 Peak in Economic Activity .

Figure 1, 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.]

 Unemployment Figure 1 

March Unemployment 

Who were the unemployed in March 2010?  The BLS announcement included a variety of demographic and category data.   Note in Figure 3, below, the breakdown by demographic (racial/ethnic) groups and by educational attainment. 

There continues to be very significant differences between the unemployment rates for whites, Hispanics and African-Americans.  Young adults (teenagers), aged 16-19 continue to have the highest unemployment rate, by far.  

Further breakdown of the rates by age show that 11.2 percent of men aged 25 to 34 are unemployed, while only 7.4 percent of men aged 55 and over are unemployed.  The figures for women by age group show a similar pattern, with women aged 55 and over having the lowest unemployment rates of just 6.0 percent.  

There seems to be an employment benefit to being married, as the rates for married men and married women are lower than the averages for all men and all women.  See BLS Employment Situation News Release for March 2010 Table A-10 for detail by age and gender.

Education matters.   Those with less education tend to be unemployed at higher rates.  The group with the lowest identified unemployment rate in March was people with a Bachelors Degree or higher, at 4.9 percent.  Those without a high school diploma had an unemployment rate almost 3 times higher, at 14.5 percent. 

[Teacher Note:  Point out the differences between unemployment rates for different levels of educational attainment.  Can student make the connection between education level and employability?]

Figure 2:  U.S. Unemployment Rates, March 2010
U.S. Unemployment Rate by Demographic Group
Civilian Non-institutionalized Population 9.7%
Men (20 years and over) 10.0%
Women (20 years and over) 8.0%
Teenagers 26.1%
Whites 8.8%
Black/African Americans 16.5%
Hispanics/Latino Ethnicity 12.6%
Asians 7.5%
U.S. Unemployment Rates by Educational Attainment
All adults, 25 years and over 8.3%
Less than HS Diploma 14.5%
HS Graduates, no college 10.8%
Some College, Associate Degree 8.2%
Bachelors Degree and Higher 4.9%

Additional Unemployment Data 

“The number of long-term unemployed (those jobless for 27 weeks and over) increased by 414,000 over the month to 6.5 million. In March, 44.1 percent of unemployed persons were jobless for 27 weeks or more.”  As the recession continues, larger numbers are unemployed for a longer time.  Those analysts concerned that this will be a “jobless recovery” believe that many of the long-term unemployed will not find jobs in their old industries, as investments in technology replace employees. 

“The civilian labor force participation rate (64.9 percent) and the employment-population ratio (58.6 percent) continued to edge up in March.” 

“The number of persons working part time for economic reasons (sometimes referred to as involuntary part-time workers) increased to 9.1 million in March. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.” 

“About 2.3 million persons were marginally attached to the labor force in March, compared with 2.1 million 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.” 

“Among the marginally attached, there were 1.0 million discouraged workers in March, up by 309,000 from a year earlier. (The 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 1.3 million persons marginally attached to the labor force had not searched for work in the 4 weeks preceding the survey for reasons such as school attendance or family responsibilities.”  Many have simply given-up looking for work.  Others are working only part-time, not by choice. 

[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 validity of statistics.] 

Establishment Survey Data - Employment 

“In March, nonfarm payroll employment rose by 162,000. Job growth continued in temporary help services and in health care. Federal government employment increased due to the hiring of temporary workers for Census 2010. (The Census Bureau hired 48,000 new workers) Job losses continued in financial activities and in information.” 

Temporary help services added 40,000 jobs in March. Since September 2009, temporary help services employment has risen by 313,000.”  Some speculate that this increase reflects the uncertainty of employers about future demand and unwillingness to commit to hiring more full-time workers.”
 

Industry Groups - Highlights 

“Employment in health care continued to increase in March (27,000), with the largest gains occurring in ambulatory health care services (16,000) and in nursing and residential care facilities (9,000).” Is this a sign of an aging population? 

“In March, employment in mining increased by 8,000. Monthly job gains in mining have averaged 6,000 over the past 5 months.” 

“Manufacturing employment continued to trend up in March (17,000); the industry has added 45,000 jobs in the first 3 months of 2010. Over the month, job gains were concentrated in fabricated metal products (9,000) and in machinery (6,000).” 

“Employment in construction held steady (15,000) in March. The industry had lost an average of 72,000 jobs per month in the prior 12 months.” 

“Over the month, employment changed little in transportation and warehousing, leisure and hospitality, retail trade, and wholesale trade.” 

“In March, financial activities shed 21,000 jobs, with the largest losses occurring in insurance carriers and related activities (-9,000). Employment in the information industry decreased by 12,000.”
 

Workweek and Earnings 

“The average workweek for all employees on private nonfarm payrolls was up by 0.1 hour to 34.0 hours in March. The manufacturing workweek for all employees increased by 0.2 hour to 39.9 hours, and factory overtime was up by 0.1 hour over the month. In March, the average workweek for production and nonsupervisory employees on private nonfarm payrolls increased by 0.2 hour to 33.3 hours.” 

“In March, average hourly earnings of all employees on private nonfarm payrolls fell by 2 cents, or 0.1 percent, to $22.47, following a 4-cent gain in February. Over the past 12 months, average hourly earnings have risen by 1.8 percent. In March, average hourly earnings of private production and nonsupervisory employees fell by 2 cents, or 0.1 percent, to $18.90.” 

Hourly and weekly earnings for most industry groups have trended up very slightly over the last year.  From February to March, earning in “wage producing” industries fell slightly, while most other industry groups saw slight increases.  For more earning details by industry, see the BLS Employment Situation News Release for March 2010 , table B-3. 

[Teacher Note:  How significant is it that average wages fell?   Ask students what this might mean.  Maybe wages were impacted by the high unemployment rate – more workers competing for jobs?  In previous months, when unemployment was increasing, wages rates for those who were working were increasing slightly.]

Links to Additional Employment and Unemployment Data

(BLS Employment Summary – March 2010) 

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, as we are now, in a recession. Let's take a look at how the three macroeconomic measurements in the "Focus on Economic Data" lesson series compare over the last year and the current recession. Figure 3, below, illustrates a "typical" business cycle. 

Unemployment Figure 3 
 Employment and Unemployment (Recap of this Month’s Data) 

In March, 2010, U.S nonfarm payroll employment increased by 162,000 jobs.  The number of unemployed persons was little changed at 15.0 million, and the unemployment rate remained at 9.7 percent.  

March reversed the long-term trend of job losses. The U.S. economy lost 3,623,000 jobs in 2008 and 4,740,000 jobs in 2009.  So far, 2010 has seen a net increase of 162,000 jobs, since a 14,000 increase in January was offset by a 14,000 decrease in February.  The U.S. is still 8.2 million jobs behind the employment level of December 2007 when the recession began.

 
Real Gross Domestic Product (Real GDP) 

U.S. real gross domestic product increased at an annual rate of 5.6 percent in the fourth quarter of 2009, according to the "third" estimate released by the Bureau of Economic Analysis.  In the third quarter, U.S. real GDP increased 2.2 percent.  U.S. real GDP grew at a 2.1 percent annual rate in 2007 and slowed to 0.4 percent annual growth in 2008.  In total, real GDP decreased by 2.4 percent in 20009, including the 5.6 percent (annual rate) in the fourth quarter.  

The Q4 increase in real GDP reflected positive contributions from private inventory investment, exports, personal consumption expenditures (PCE), and nonresidential fixed investment.  Imports, which are a subtraction in the calculation of GDP, increased.
 

Consumer Price Index 

The U.S Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in February, the U.S. Bureau of Labor Statistics reported in March. Over the 12 months from February 2009 to February 2010, the CPI-U increased 2.1 percent before seasonal adjustment. 

The unchanged CPI-U in February for all items included a decline in the energy index, which was offset by slight increases in the indexes for food and for all items less food and energy. Within the latter group, declines in the indexes for apparel and household furnishings and operations were more than offset by continuing increases in the indexes for medical care and used cars and trucks. The 12-month increase in the index for all items less food and energy through February 2010 was 1.3 percent, the lowest year-long increase since February 2004.
 

Monetary Policy – Federal Funds Rate

Through March, 2010, 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 chart below provides a summary of four key macroeconomic measurements over the past ten years. 

[Teacher note: Students can look at the ten years of economic data to identify patterns of relationships. For instance, what is the relationship between GDP growth and employment? Is there a relationship between inflation and unemployment?] 

 

Selected Macroeconomic Data, 1999-2009

 

Year

Real GDP
Change
(Annual)

Unemployment
Rate
(Annual)

CPI-U
(annual)

Fed Funds
Rate Target
(March)

1999

4.5

4.2

2.2

4.75

2000

3.7

4.0

3.4

6.00

2001

0.8

4.3

2.8

5.00

2002

1.6

5.7

1.6

1.75

2003

2.6

5.9

2.3

1.00

2004

3.6

5.8

2.7

1.00

2005

2.9

5.2

3.4

2.75

2006

2.8

4.7

3.2

4.75

2007

2.0

4.4

2.8

5.25

2008

1.1

5.1

3.8

2.25

2009

-2.4

9.8

0.2

0 to .25

2010*

NA

9.7

0.2

0 to .25

 

* Data for or through March, 2010.

Unemployment and Real GDP Growth 
 
Looking at the above data, you will notice a general relationship between real GDP growth and the unemployment rate. From 1999 to 2008, as real GDP growth declined, generally, the unemployment rate increased. Real GDP growth is a coincident indicator and unemployment is a lagging indicator, so when looking at quarterly changes, you will notice that the decreases in real GDP growth were followed by increases in unemployment. The real GDP data for the last two quarters of 2008 was negative, followed by significant increases in unemployment - month to month. The comparison is complicated by the fact that GDP data is only announced by quarter. 
 
To better see this relationship, look at Figure 4 and Figure 5. Figure 4 shows the rates of growth of real GDP in recent years. Compare it to Figure 5, illustrating monthly unemployment rates over several years. Both GDP growth and employment data are considered in the determination of business cycles and recessions. Both the GDP and unemployment data show cycles of growth and decline. Of course, the two rates have an inverse relationship. Generally, as the economy slows (smaller or negative GDP growth), unemployment increases. 

Unemployment Figure 4

Unemployment Figure 5

 

Real GDP Growth and Monetary Policy 

Take a look at the data for real GDP growth and the federal funds rate targets for 1999 to the present (Figure 6, below). As the most commonly used monetary policy tool, open market operations, the fed funds rate target is used to manipulate the money supply to either stimulate or contract the economy. In the early 2000s, the fed funds target was typically increased as the economy grew, and inflationary pressures increased, the fed funds rate was increased. In times of economic contraction, the rate was lowered to stimulate employment and output.

Unemployment Figure 6

In the most recent Federal Open Market Committee meetings, the rate has been kept at a historically low level of 0-1/4 percent. Further rate decreases are not a viable option at this time, so the Fed has taken other actions to increase liquidity and support the banking system. Monetary policies tend to follow the same flows as the business cycles - using contractionary policies (increasing interest rates) in times of rapid growth and inflationary pressure, and stimulatory policies (decreasing increasing rates) during slowdowns. Figure 4 shows the level of the federal funds rate target in recent years. Compare it to the changes in real GDP and unemployment to see their general relationship.
 
 
What About Prices? 

In the March 16, 2010, press release on monetary policy, the Federal Open Market Committee (FOMC) made this statement about the prospects for inflation. "With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.” “The Committee 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.”

The Federal Reserve is not now concerned with inflation, despite the many efforts that have been made to stimulate growth - stimulus often comes with some inflationary pressures. Recently, some economists and business leaders have warned against the negative effects of deflation - a persistent decrease in the general price level. The BLS reports on the consumer price index in the past two months have indicated that we are not experiencing deflation but that the price level is stagnant. Energy prices are the "wild card." When energy prices increase, producer input costs increase and investment may suffer. If energy prices remain somewhat stable, investment decisions may be easier.   

Business investment is critical for job creation. Although interest rates are low and inflation is not on the near-term horizon, future expectations of consumer demand and tough credit conditions have kept private investment slow. Deflation also inhibits investment. Businesses may be less likely to invest if they perceive that their product prices are decreasing. 

A Last Note about Comparing Economic Data 

Although this analysis has made comment about the relationships of various economic indicators, there are obviously many variables that impact output, employment, etc., independent of their "general" relationships. For instance, we have had periods of substantial growth that have not been accompanied by similar increases in employment - when the increase in output has been more the result of improvements in productivity.   
 
It is worthwhile to compare and contrast various economic data to identify current trends in the economy and, hopefully, to be better able to predict future conditions.

ASSESSMENT ACTIVITY


Essay Questions:

 

  1. How are changes in real GDP and the unemployment rate related? [Real GDP is a measurement of output of goods and services. Output is a determinant of the demand for labor and thus, the number of jobs. As output has decreased and the demand for labor has decreased, the unemployment rate has increased.]
     
  2. What change in what macroeconomic indicator will convince you that the recession is over? Why? [Student answers will vary. The key is that they can explain the meaning of the indicator relative to the general definition of a recession.]

CONCLUSION

To review:  The number of U.S. nonfarm jobs increased by 162,000 jobs in March, possibly reversing a long trend of employment declines that began in January of 2008.  We have seen a couple of months of very small increases in employment, but each was offset by decreases in the following month.  The March employment report shows the first significant level of employment increase in over two years. 

The bad news?  The U.S. unemployment rate remained at 9.7% despite the increased number of employed.  How did this happen?

Many signs indicate that the U.S. and other global economies are recovering slowly.   U.S. real GDP has begun to grow again.  Job losses have stopped or even reversed to growth.  Remember, employment is a laggng indicator and may not catch up to the real recovery for months.  The unemployment rate may remain high for some time, even as the economy continues to grow.  When employers are more confidant that things are better, they may be willing to take on the costs of hiring more permanent employees.