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This lesson examines the December 3, 2010, U.S. Department of Labor, Bureau of Labor Statistics, announcement of employment data and the unemployment rate for the month of November, 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 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 focuses on the December 3, 2010, BLS announcement, "Employment Situation: November 2010."  The lesson will also look at the relationship of employment and unemployment data to other macroeconomic data, such as GDP and CPI, and business cycles.  s........,,mmmm

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

During the first half of the 2010-2011 school year, (September - December), EconEdLink will publish four Focus on Economic Data lessons on "employment and the unemployment rate." During this time period, the lessons will begin with the 'basics' in September 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.

  • September: 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?
  • October: details and issues about the measurement and meaning of employment and unemployment, adding concepts such as underemployment, full employment, etc.
  • November: detailed breakdown of the data by region and industry (trends, identifying trends and comparisons of regions and demographic groups
  • December: the relationships of employment and unemployment data to other economic data, such as GDP, CPI, etc., and the business cycle.  THIS LESSON]

RESOURCES

Key Economic Indicators

as of December 3, 2010

Inflation

On a seasonally adjusted basis, the CPI-U increased 0.2 percent in October after increasing 0.1 percent in September. The index for all items less food and energy was unchanged in October, as it was in September.

Employment and Unemployment

The unemployment rate edged up to 9.8 percent in November, and non-farm payroll employment was little changed (+39,000), the U.S. Bureau of Labor Statistics reported today.

Real GDP

Real gross domestic product located in the United States increased at an annual rate of 2.5 percent in the third quarter of 2010, (that is, from the second quarter to the third quarter), according to the "second" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 1.7 percent.

Federal Reserve

The Federal Open Market Committee (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 for the federal funds rate for an extended period.

PROCESS

The December 3, 2010, “Employment Situation” report from the U.S. Bureau of Labor Statistics was disappointing to many.  Far fewer jobs were created in November than had been expected by most observers.  The private sector created fewer jobs than expected, mostly in healthcare and temporary employment, but governments reduced employment to offset much of the gain. 

More than 15 million people were unemployed in November and 6.3 million of them have been jobless for six months or more.  Many will soon run out of unemployment compensation benefits, which have been extended several times during the recession.  Analysts generally agree that the U.S. economy must add 100,000 - 125,000 jobs each month, just to keep up with new entrants into the labor force.  What happened in November?

The Employment Situation – November 2010
U.S.Bureau of Labor Statistics
Released December 3, 2010

“The unemployment rate edged up to 9.8 percent in November, and nonfarm payroll employment was little changed (+39,000), the U.S. Bureau of Labor Statistics reported today. Temporary help services and health care continued to add jobs over the month, while employment fell in retail trade. Employment in most major industries changed little in November.”

Household Survey Data – Unemployment Data

"The number of unemployed persons was 15.1 million in November. The unemployment rate edged up to 9.8 percent; it was 9.6 percent in each of the prior 3 months.”

Figure 1, below, is the U.S. Labor Force and Employment Data, November 2010.  Take a good look at the November data.

A.  Labor Force – Employment Status

Note that the actual number of employed persons decreased by 173,000 in November.  One startling number is that the number of persons not in the labor force increased by almost 1.7 million in the past year, while the civilian population increased by just a few less than 2 million.

The civilian labor force participation rate held at 64.5 percent in November, and the employment-population ratio was essentially unchanged at 58.2 percent.

B.  Unemployment Rates by Race/Ethnicity and Age

The unemployment rate for adult males decreased by 0.4 percent, while the rates for all other groups, aged 20 and over, increased.  Interestingly, the unemployment rates for teenagers decreased by 2.2 percent over the last year.  This is somewhat due to the fact that the size of the 16-19 year old labor force decreased by almost 50,000 persons.  The teen labor force participation rate decreased by 1.3 percentage points since November of 2009.

C.  Unemployment Rates by Educational Attainment

Pay particular attention to the correlation between educational attainment and unemployment rates.  As educational attainment increases, unemployment rates decrease, from just 5.8 percent for college graduates and 8.7 percent for those with associate degrees, to 10 percent for high school graduates and over 15 percent for those without a high school diploma.

[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?]

[Teacher Note:  The BLS web page “Education Pays,” shows unemployment rate and median weekly income by level of educational attainment.  Link: www.bls.gov/emp/ep_chart_001.htm .]

Figure 1: U.S. Labor Force and Employment Data, November 2010
Seasonally adjusted, unless indicated.  
Numbers are in thousands
.

  Nov.
2009
Oct.
2010
Nov.
2010
Change
Oct. 2010 to
Nov. 2010

Change
Nov. 2009 to
Nov. 2010

A.  Labor Force - Employment Status 
Civilian non-institutional population 236,743 238,530 238,715 185 1,972
Civilian labor force 153,720 153,904 154,007 103 287
Employed 138,381 139,061 138,888 -173 507
Unemployed 15,340 14,843 15,119 276 -221
Not in the labor force 83,022 84,626 84,708 82 1,686
Labor force participation rate 64.9% 64.5% 64.5% 0.0 -0.4%
Employment-population ratio 58.5% 58.3% 58.2% -0.1% -0.3%
Unemployment rate, total labor force 10.0% 9.6% 9.8% 0.2% -0.2%
B.  Unemployment Rates by Race/Ethnicity and Age (percentages)
Total, 16 years and over   10.0 9.8 9.2 0.2 -0.2
Adult men (20 years and over) 10.4 9.7 10.0 0.3 -0.4
Adult women (20 years and over) 8.0 8.1 8.4 0.3 0.4
Teenagers (16 to 19 years)   26.8 27.1 24.6 -2.5 -2.2
White 9.3 8.8 8.9 0.1 -0.4
 Black or African American 15.6 15.7 16.0 0.3 0.4
Asian (not seasonally adjusted)   7.3 7.1 7.6 0.5 0.3
Hispanic or Latino ethnicity    12.7 12.6 13.2 0.6 0.5
 C.  Unemployment Rates by Educational Attainment (percentages)
Total (25 years and over)    8.5 8.2 8.4 0.2 -0.1
Less than a high school diploma 15.0 15.3 15.7 0.4 0.7
 High school graduates, no college 10.4 10.1 10.0 -0.1 -0.4
Some college or associate degree 9.0 8.5 8.7 0.2 -0.3
Bachelor's degree and higher 4.9 4.7 5.1 0.4 0.2

                

Figure 2, below, provides additional employment and labor market data for the month of November,

A.  Unemployment by Reason for Unemployment

The number of job losers and persons who completed temporary jobs rose by 390,000 to 9.5 million in November. The number of long-term unemployed (those jobless for 27 weeks and over) was little changed at 6.3 million and accounted for 41.9 percent of the unemployed.”

B.  Duration of Unemployment                                      

The number of long-term unemployed (unemployed for 27 weeks or more) was little changed at 6.3 million and accounted for 41.9 percent of the unemployed.

C.  Employed persons Working Part Time     

The number of persons working part time for “economic reasons” (involuntary part-time workers) was little changed in November at 9.0 million. These individuals were working part time usually because their hours had been cut back or because they were unable to find a full-time job.

D.  Persons Not in the Labor Force

In November, 2.5 million people were “marginally attached” to the labor force. This is up from 2.3 million in November 2009.  These people were not counted in the labor force, but wanted to find jobs and were available for work.  They had looked for a job sometime in the prior year.

1.3 million of the marginally attached workers in November were classified as “discouraged workers.”  This number was up 421,000 from a year earlier. Discouraged workers are persons not currently looking for work because they believe no jobs are available for them.

[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.]

Figure 2: Unemployment Data, November 2010
Seasonally adjusted, unless indicated.  
Numbers are in thousands.

  Nov.
2009
Oct.
2010
Nov.
2010
Change
Oct. 2010 to
Nov. 2010

Change
Nov. 2009 to
Nov. 2010

A.  Unemployment by Reason for Unemployment

Job losers, plus workers who completed temporary jobs

9,965 9,108 9,498 390 -467
  929 854 862 8 67
Reentrants 3,221 3,512 3,451 -61 230
New entrants 1,270 1,273 1,238 -35 -42
B.  Duration of Unemployment
Less than 5 weeks 2,774 2,657 2,828 171 54
5 to 14 weeks 3,517 3,458 3,359 -99 -158
15 to 26 weeks 3,075 2,519 2,576 57 -499
27 weeks and over 5,901 6,206 6,313 107 412
C.  Employed persons Working Part Time
Part time for economic reasons 9,225 9,154 8,972 -182 -253
Slack work or business conditions 6,684 6,232 6,038 -194 -646
Could only find part-time work      2,238 2,572 2,569 -3 331
Part time for noneconomic reasons 18,354 18,211 18,365 154 11
D.  Persons Not in the Labor Force (not seasonally adjusted)
Total not in the labor force 83,022 84,626 84,708 82 1,686
Marginally attached to the labor force 2,323 2,602 2,531 -89 208
Discouraged workers 861 1,219 1,282 63 421


Establishment Survey Data – Employment Data

“Total nonfarm payroll employment changed little in November (+39,000). Job gains continued in temporary help services and in health care, while employment fell in retail trade. Since December 2009, total payroll employment has increased by an average of 86,000 per month.”

Industry Group Highlights

“Within professional and business services, employment in temporary help services continued to increase in November (+40,000) and has risen by 494,000 since September 2009.”

Health care continued to add jobs over the month, with a gain of 19,000. Much of the increase occurred in hospitals (+8,000).”

“Employment in mining continued to trend up over the month. Support activities for mining added 6,000 jobs in November and has added 74,000 jobs since October 2009.”

Retail trade employment fell by 28,000 in November. Job losses occurred in department stores (-9,000) and in furniture and home furnishings stores (-5,000).”

Employment in manufacturing was little changed over the month (-13,000). Following job growth earlier in 2010, employment has been relatively flat, on net, since May.

Employment in most other major industries changed little in November.”

Figure 3, below, shows the complete BLS breakdown of industry employment data, “Monthly Changes in Employment by Selected Industry, November 2010.” 

Note the industries with growth of over 20,000 jobs in the month of November: professional and business services, temporary help services, education and health services, and health care and social services.  The largest loss in November was in retail trade.

Figure 3: Monthly Changes in Employment by Selected Industry
November 2009 to November 2010

(1,000s)

  Nov.
2009
Sept.
2010
Oct.
2010
Dec.
2010
Total U.S. nonfarm employment 64 -24 172 39
Total private employment 75 112 160 50
    Goods-producing -33 -10 3 -15
    Mining and logging 7 7 11 3
    Construction -15 -11 3 -5
    Manufacturing -25 -6 -11 -13
    Durable goods (1)    -23 5 -4 -5
    Motor vehicles and parts -4.6 -0.9 1.2 -1.5
    Nondurable goods -2 -11 -7 -8
Private service-providing (1) 108 122 157 65
    Wholesale trade -6.2 4.5 10.0 4.7
    Retail trade    8.8 -3.9 13.0 -28.1
    Transportation and warehousing 7.2 16.5 0.7 11.6
     Information -12 -7 -1 1
    Financial activities   2 4 0 -9
    Professional and business services (1) 106 28 50 53
    Temporary help services                94.7 27.3 34.7 39.5
    Education and health services (1)            31 26 64 30
    Health care and social assistance 26.1 34.2 39.9 23.1
    Leisure and hospitality -21 38 -10 11
    Other services -6 17 30 -8

 


Workweek and Earnings Data

"The average workweek for all employees on private nonfarm payrolls held at 34.3 hours in November. The manufacturing workweek for all employees also was unchanged, at 40.3 hours, and factory overtime remained at 3.1 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls decreased by 0.1 hour to 33.5 hours."

"In November, average hourly earnings of all employees on private nonfarm payrolls increased by 1 cent to $22.75. Over the past 12 months, average hourly earnings have increased by 1.6 percent. In November, average hourly earnings of private-sector production and nonsupervisory employees were unchanged at $19.19."

For details about the November 2010 Employment Situation report, go to these sites:

The Recession

Although it is officially over, declared ended in June, 2009, by the National Bureau of Economic Research, the effects of the recession linger with slow growth and high unemployment.

The U.S. economy lost 3,623,000 jobs in 2008 and 4,740,000 jobs in 2009.  The U.S. is still million of jobs behind the employment level of December 2007, the date the NBER identified as the beginning of the recession.  

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

To read the NBER's September 20, 2010, announcement of the end of the recession, go to this site:  www.nber.org/cycles/main.html

Figure 4, 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.]

Figure 4

 

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 5, below, illustrates a "typical" business cycle. 

Figure 5

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

“The unemployment rate edged up to 9.8 percent in November, and nonfarm payroll employment was little changed (+39,000), the U.S. Bureau of Labor Statistics reported today. Temporary help services and health care continued to add jobs over the month, while employment fell in retail trade. Employment in most major industries changed little in November.”

After losing over 2.2 million jobs in 2008 and almost 4.7 million jobs in 2009, the U.S. economy reversed the trend in early 2010, gaining almost a million jobs in the first five months.  The gains were short-lived as the economy lost jobs in each of the next four months.  Although the number of jobs increased by 172,000 in October, the growth rate slowed again in November - the current BLS announcement.

 
Real Gross Domestic Product (Real GDP)

U.S. real gross domestic product increased at an annual rate of 2.5 percent in the third quarter of 2010, according to the "second" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 1.7 percent.  The economy is growing again, although at a somewhat anemic rate.

The U.S. rate of GDP growth fell-off considerably in 2008, the beginning of the recession. 2008 saw decreases in real GDP in three of four quarters. The losses continued through the second quarter of 2009, when growth began again, at annualized rates of 3.7 percent in Q1, 1.7 percent in Q2 and 2.5 percent growth in Q3.

Figure 6, below, shows the quarterly changes in real GDP growth over the last few years.  Note the "cycles" of increased and decreased growth rates. Those periods below the ")"line are negative growth.Figure 6

Consumer Price Index

On a seasonally adjusted basis, the U.S. CPI-U increased 0.2 percent in October after increasing 0.1 percent in September. The index for all items less food and energy was unchanged in October, as it was in September.

As has frequently been the case in recent months, an increase in the energy index was the major factor in the all items seasonally adjusted increase. The gasoline index rose for the fourth month in a row and accounted for almost 90 percent of the all items increase; the household energy index rose as well.

Although many fear future inflation, there has been little evidence of inflationary pressures in recent years.

figure 7

Monetary Policy – Federal Funds Rate

Through its last meeting in October 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 intent of the low interest rate policy is to stimulate the economy by making borrowing - for consumption and investment - cheaper.

The chart below, Figure 8, compares the primary macroeconomic data. real GDP, CPI. Unemployment rate, and the federal funds rate target, from 1999 to the present.  Are there patterns in their relationships?

[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?]

 

Figure 8:  Selected Macroeconomic Data, 1999-2010

Year

Real GDP
Change
(Annual)

Unemployment
Rate
(Annual)

CPI-U
(annual)

Fed Funds
Rate Target

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*

2.5

9.8

0.2

0 to .25

* 2010 data are through or for the month of November.

CONCLUSION

The U.S. unemployment rate increased to 9.8 percent in November, as the economy created only 39,000 new jobs.  Over 15 million people remained unemployed in November.

The U.S. economic recovery remains stagnant as real GDP growth was just 2.5 percent in the third quarter of 2010.  At this time, the Obama administration and Congress are debating the extension of existing tax cuts, another extension of unemployment benefits, and other actions to further stimulate growth and job creation.  The Federal Reserve's Federal Open Market Committee continues to keep the federal funds rate at a historic low to keep interest rates low, and to encourage consumer spending and business investment.

In December, many will carefully watch the holiday sales figures as an indicator of consumer sentiment.  Good sales will be a positive sign for the future of the economy.  Look for the January employment report and real GDP growth for an update.

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?

[The key is that they can explain the meaning of the indicator relative to the general definition of a recession.]

EXTENSION ACTIVITY

How do other economic indicators compare to the recent changes in real GDP, unemployment rate, consumer price index, and the federal funds rate target? Take a look at some of the indicators listed below. Click on the name of the indicator to find a definition, the source, and a PDF file chart of its recent history. Compare the chart to the figures in this lesson on real GDP, unemployment, consumer price index, and the federal funds target rate.

[Note: Thanks to the Federal Reserve Bank of New York for making National Economic Indicators available online.]

  1. How does the indicator reflect the current economic problems?
  2. Is the recent history of the indicator similar or related to the GDP, unemployment, or CPI?
  3. How are people or businesses impacted by the economic data?