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This lesson examines the May 7, 2010, U.S. Department of Labor, Bureau of Labor Statistics, announcement of employment data and the unemployment rate for the month of April, 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, 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 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 May 7, 2010, BLS announcement, "Employment Situation: April 2010."  This lesson will also look at  the recent history of employment and unemployment data. 

[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. THIS LESSON]

RESOURCES

Key Economic Indicators

as of May 14, 2010

Inflation

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

Employment and Unemployment

Nonfarm payroll employment rose by 290,000 in April, the unemployment rate edged up to 9.9 percent, and the labor force increased sharply. Job gains occurred in manufacturing, professional and business services, health care, and leisure and hospitality. Federal government employment also rose, reflecting continued hiring of temporary workers for Census 2010.

Real GDP

U.S. real gross domestic product increased at an annual rate of 3.2 percent in the first quarter of 2010, (that is, from the fourth quarter to the first quarter). In the fourth quarter, real GDP increased 5.6 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

How Can It Be?  More Jobs and Higher Unemployment?

The U.S. economy created almost 300,000 new jobs in April, but the unemployment rate increased. 

Apparently, there is more to the story than just the total number of jobs and the rate of unemployment. Take a closer look at the April 2010 employment data and find out why.

The Employment Report – April 2010
U.S. Bureau of Labor Statistics
Released: May 7, 2010

 “Nonfarm payroll employment rose by 290,000 in April, the unemployment rate edged up to 9.9 percent, and the labor force increased sharply, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in manufacturing, professional and business services, health care, and leisure and hospitality. Federal government employment also rose, reflecting continued hiring of temporary workers for Census 2010.”  

Not only did the number of jobs increase by 290,000 in April, but the BLS also revised the February jobs number from a loss of 14,000 jobs to a gain of 39,000. The January estimate was an increase of 14,000 jobs. In total, the economy has created 573,000 jobs so far in 2010.   More good news is that a large majority, 231,000, of the new jobs were in the private sector. The federal government also added jobs, including 66,000 temporary census worker jobs. 

[Teacher Note:  Ask your students what they think is the "good news" in this summary of the report.   They can discuss how the numbers might mean different things in diffferent contexts or when compared to other numbers.]

Household Survey Data - Unemployment

“In April, the number of unemployed persons was 15.3 million, and the unemployment rate edged up to 9.9 percent. The rate had been 9.7 percent for the first 3 months of this year.”

Figure 1, below, shows the monthly U.S. unemployment rates from 1990 through April, 2010. Note the high points of unemployment in 1991, 2003, and 2009, consistent with the troughs of recessions. The low unemployment rates in 1990, 2000 and 2008 roughly indicate the peaks of business cycles. The highest level of the unemployment rate during the current recession was 10.1 percent in October, 2009.

"Unemployment

[Teacher Note:  Students should be able to identify the recent business cycle as they look at the unemployment data.] 

Figure 2, below, summarizes the key employment and unemployment data for March and April, 2010, also indicating the monthly changes. Note that although more jobs were created, the size of the labor force increased by much more. Thus, an increase in the unemployment rate. 

Figure 2:  Employment Status
March and April 2010
  March 2010 April 2010 Change
Civilian non-institutionalized population 237,159,000 237,329,000 +170,000
Civilian Labor Force 153,910,000 154,715,000 +805,000
Participation Rate 64.9% 65.2% +0.3%
Employed 138,905,000 139,455,000 +550,000
Employment-  Population Ratio 58.6% 58.8% +0.2%
Unemployed 15,005,000 15,260,000 +155,000
Unemployment Rate 9.7% 9.9%

+0.2%

Not in Labor Force 83,249,000 82,614,000 -635,000
Persons who currently want a job 6,044,000 5,951,000 -93,000

Determining the Unemployment Rate

Remember that the unemployment rate is the number of unemployed divided by the labor force. The U.S. labor force increased by 805,000 persons from March to April, 2010. The number of unemployed persons actually increased by 255,000 in April because a large number of those who entered (or reentered) the labor force did not find employment in April. Perhaps the fact that they are now looking for work is a positive sign of optimism among those who had previously given up looking for a job.

March Number of unemployed persons in March, 2010 15,005,000
  Total size of the labor force in March, 2010 153,910,000
  Unemployment Rate in March, 2010 9.7%
April Number of Unemployed Persons in April, 2010

15,260,000
(+255,000)

  Total Size of the Labor Force in April, 2010 154,715,000
(+805,000)
  Unemployment Rate in April, 2010 9.9%

[Teacher Note:  Have your students "do the math" to determine the March and April unemployment rates.]

Figure 3, below, shows the key U.S. employment and unemployment data for the period of November, 2008 (just prior to the official beginning of the current recession) through April, 2010. Note the data for the month with the highest unemployment rate, October, 2009. 

Figure 3:  Employment Status
November 2008 - April 2010
Selected Months
  Nov. 2008 Ap. 2009 Oct. 2009 Apr. 2010
Civilian Non-institutionalized Population 234,828,000 235,271,000 236,550,000 237,329,000
Civilian Labor Force 154,524,000 154,718,000 153,854,000 154,715,000
Participation Rate 65.8% 65.8%

65.0%

65.2%
Employed 143,907,000 140,902,000 138,242,000 139,455,000
Employment-Population Ratio 61.3%

59.9%

58.4% 58.8%
Unemployed 10,517,000 13,816,000 15,612,000 15,260,000
Unemployment Rate 6.9% 8.9% 10.1% 9.9%
Not in Labor Force 80,304,000 80,554,000 82,696,000 82,614,000
Persons Who Currently Want a Job 5,466,000 5,928,000 6,031,000 5,951,000

Key Labor Market Definitions

As a reminder, the following are the definitions of the key categories used to report employment and unemployment data from the BLS “Employment Report.” These definitions are from the BLS “Glossary.”

  • Civilian non-institutionalized population:  Included are persons 16 years of age and older residing in the 50 States and the District of Columbia who are not inmates of institutions (for example, penal and mental facilities, homes for the aged), and who are not on active duty in the Armed Forces.      
      
  •  Civilian labor force:  The labor force includes all persons classified as employed or unemployed (16 and over, non-institutionalized).  
     
  • Labor force participation rate: The labor force as a percent of the civilian non-institutional population.        
     
  • Employed Persons:  Persons 16 years and over in the civilian non-institutional population who, during the reference week, (a) did any work at all (at least 1 hour) as paid employees; worked in their own business, profession, or on their own farm, or worked 15 hours or more as unpaid workers in an enterprise operated by a member of the family (plus those temporarily absent absent from employment.)
     
  • Employment-population ratio: The proportion of the civilian non-institutional population aged 16 years and over that is employed. 
     
  • Unemployed:  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.
     
  • Unemployment rate:  The unemployment rate represents the number unemployed as a percent of the labor force. 
     
  • Not in labor force:  Includes persons aged 16 years and older in the civilian non-institutional population who are neither employed nor unemployed in accordance with the definitions contained in this glossary. Information is collected on their desire for and availability for work, job search activity in the prior year, and reasons for not currently searching.   
         
  • Persons who currently want a job:  Persons who want a job, have searched for work during the prior 12 months, and were available to take a job during the reference week, but had not looked for work in the past 4 weeks.
Unemployment Rates in April 2010
by Demographic Groups
  April 2010 Change
All 9.9% +0.2%
Whites 9.0% +0.2%
Adult Men 10.1% +0.1%
Adult Women 8.2% +0.2%
Teenagers 25.4% -0.7%
Blacks 16.5% 0%
Hispanics 12.5% -0.1%
Asians 6.8% 0%

Unemployment continues to be unevenly distributed among racial groups and age levels. Young workers are more than twice as likely to be unemployed than workers over 24 tears of age. The unemployment rate for Blacks/African Americans significantly exceeds other racial groups.

An interesting note about the Hispanic/Latino population. The unemployment rate for the U.S. Hispanic/Latino population decreased by 0.1% in April, 2010. A closer look at the data shows that although the overall U.S. Hispanic/Latino population increased, the Hispanic/Latino labor force shrunk by 102,000 workers. At the same time, employment of the Hispanic/Latino population increased in April by 222,000.   A smaller labor force and more employment equals a lower unemployment rate for the group.

Unemployment by Educational Attainment
(25 years and over)
  April 2010 Change
All persons 25 and over 8.3% 0%
Less than a HS diploma 14.7% +0.2%
HS Graduates 10.6% -0.2%
Some College (Associate's Degree) 8.3% +0.1%
Bachelor's Degree or Higher 4.9% 0%

Education is a strong indicator of potential for unemployment. There is a clear relationship between educational attainment and unemployment rates. The more education you have, the less chance of unemployment. What is a high school diploma worth?   You will make more income, for sure (on average), but also a greatly decreased risk of unemployment.

 [Teacher Note:  Data on income and educational attainment is available at this BLS web page: ' ]

Reasons for Unemployment
  April 2009 Change
Job losers and persons who completed temporary jobs 9,246,000 -108,000
Job Leavers 938,000 +44,000
Reentrants  3,739,000  +195,000
New Entrants 1,231,000 +34,000

BLS Comment: “Among the unemployed, the number of reentrants to the labor force rose by 195,000 over the month.”

Duration of Unemployment
  April 2010 Change
Less than 5 weeks 2,682,000 +36,000
5 - 14 weeks 2,991,000 -237,000
15 - 26 weeks 2,253,000 -183,000
27 weeks or over 6,716,000 +169,000

BLS Comments: “The number of long-term unemployed (those jobless for 27 weeks and over) continued to trend up over the month, reaching 6.7 million. In April, 45.9 percent of unemployed persons had been jobless for 27 weeks or more.”

Employed Persons at Work Part-Time   
  April 2010 Change
Part-time for economic reasons 9,152,000 +98,000
Slack work or business conditions 6,268,000 +91,000
Could only find part-time work 2,489,000 +101,000
Part-time for non-economic reasons 18,140,000 -239,000

 

 Persons Not in the Labor Force
(Not seasonally adjusted)    
  April 2010
Marginally attached to the labor force 2,432,000
Discouraged workers 1,197,000

BLS Comments: “The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was about unchanged at 9.2 million in April. 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 2.4 million persons were marginally attached to the labor force in April, 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 1.2 million discouraged workers in April, up by 457,000 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 1.2 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.”

Employment - Establishment Survey Data

BLS Comment: “In April, nonfarm payroll employment rose by 290,000. Sizable employment gains occurred in manufacturing, professional and business services, health care, and in leisure and hospitality. Federal government employment increased due to the hiring of temporary workers for Census 2010. Since December, nonfarm payroll employment has expanded by 573,000, with 483,000 jobs added in the private sector. The vast majority of job growth occurred during the last 2 months.

Change in Employment by Industry Sector
April 2010
Manufacturing +44,000
Construction +14,000
Professional and Business Services +80,000
Health Care +20,000
Leisure and Hospitality +45,000
Government (All levels) +65,000
Wholesale Trade +4,000
Retail Trade +12,300
Information -3,000
Financial Activities +3,000
Transportation and Warehousing -20,000

Average Workweek, April 2010

BLS Comment: “In April, the average workweek for all employees on private nonfarm payrolls increased by 0.1 hour to 34.1 hours. The manufacturing workweek for all employees increased by 0.2 hour for the second straight month to 40.1 hours, and factory overtime was up by 0.1 hour over the month. The average workweek for production and nonsupervisory employees on private nonfarm payrolls increased by 0.1 hour to 33.4 hours in April.”

Hourly Earnings, April 2010

BLS Comment: “Average hourly earnings of all employees in the private nonfarm sector increased by 1 cent to $22.47 in April. Over the past 12 months, average hourly earnings have increased by 1.6 percent. In April, average hourly earnings of private-sector production and nonsupervisory employees increased by 5 cents to $18.96.”

Detailed Online Resources – Employment Report

Click on these BLS links for more details from the May 6, 2010 Employment Report.

A Note about Productivity

How can the U.S. economy increase its output with fewer jobs?   The answer is productivity. According to the BLS, labor productivity or output per hour, “is calculated by dividing an index of real output by an index of hours of all persons, including employees, proprietors, and unpaid family workers.” When a nation’s economy is more productive, it can increase its output of goods and services with fewer hours worked. The BLS also reports monthly on labor productivity – estimates for each fiscal quarter. The most recent report, released March 6, 2010, focused on labor productivity for the first quarter (January-March) of 2010.

Productivity and Costs, First Quarter 2010 (Preliminary)
U.S. Bureau of Labor Statistics
Released: May 6. 2010

“Nonfarm business sector labor productivity increased at a 3.6 percent annual rate during the first quarter of 2010, the U.S. Bureau of Labor Statistics reported today, with output rising 4.4 percent and hours worked rising 0.8 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the first quarter of 2009 to the first quarter of 2010, output increased 3.1 percent while hours fell 3.0 percent, yielding an increase in productivity of 6.3 percent.

During the last year, U.S. labor productivity has increased at a rapid pace by historical standards. The BLS added this comment. “This gain in productivity from the same quarter a year ago was the largest since output per hour increased 7.0 percent over the four-quarter period ending in the first quarter of 1962.”

Increased productivity also impacts unit production costs. “Unit labor costs in nonfarm businesses fell 1.6 percent in the first quarter of 2010, as the 3.6 percent increase in productivity outpaced a 1.9 percent gain in hourly compensation. Unit labor costs fell 3.7 percent over the last four quarters, as the 6.3 percent increase in productivity outpaced a 2.3 percent rise in hourly compensation. Those who were working during this period of recession earned more income and produced even more output.

The BLS defines unit labor costs as “the ratio of hourly compensation to labor productivity; increases in hourly compensation tend to increase unit labor costs and increases in output per hour tend to reduce them.”   The net effect for the past year was lower unit costs.

The BLS cited manufacturing as an example. “Manufacturing sector productivity grew 2.5 percent in the first quarter of 2010, as output rose 7.5 percent and hours worked increased 4.9 percent, the first increase in hours since the second quarter of 2007. Gains in productivity, output, and hours were each larger in the durable goods sector than in the nondurable goods sector. Unit labor costs in manufacturing declined 3.7 percent in the first quarter of 2010 and fell 6.1 percent over the last four quarters. The four-quarter decline was the largest in the series, which begins in the first quarter of 1988.”

Full historical annual and quarterly measures are available on the Labor and Productivity Costs home page.


Detailed Online Resources – Productivity and Costs Report

Click on these BLS links for more details from the May 6, 2010 Productivity and Costs Report.

CONCLUSION

In April, the U.S. unemployment rate increased for all of the right reasons.  The labor force increased in size by 805,000 persons - possibly indicating that many of those who had left the labor market are now more optimistic about finding a job.   The U.S. economy created 290,000 jobs, the biggest monthly increase in employment since March of 2006.

Link: Historical Changes in Employment

In 2008 and 2009, the U.S. economy lost over 8.3 million jobs.  Even with an increase of 563,000 jobs in the first four months of 2010, it may take a long time to revver to the pre-recession level of employment.

In the first quarter of 2010, the U.S. real gross domestic product increased by 3.2 percent, after an increase of 5.6 percent in the last quarter of 2009.  Output seems to be increasing more quickly than employment - perhaps a "jobless recovery." 

The National Bureau of Economic Research has yet to declare the business cycle to have reached a peak.  Watch the news for an NBER business cycle announcement.  In the meantime, look for your own evidence of an economic recovery. 

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 does the "unemployment rate" reported monthly by the Bureau of Labor Statistics tell you about the economy?  Is it an accurate measurement of the "health" of the economy [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"? They may cite the fact that changes in the labor force can increase the unemployment rate, even though more people are working.]

EXTENSION ACTIVITY

The U.S. 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.

Read the report.  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?