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 January 7, 2011 BLS announcement, "Employment Situation: December 2011 ." This lesson will also look at the recent history of employment and unemployment data.
- Review the reported U.S. employment and unemployment data for December, 2011.
- 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.
The U.S. unemployment rate dropped 0.4 percentage point to 9.4 percent in December 2010, the lowest monthly unemployment rate since May, 2009.
The number of unemployed persons in the U.S. decreased by 556,000 in December 2010.
The U.S. economy created a net gain of 103,000 jobs in December, and the previous BLS estimates of job growth in October and November were increased by another 70,000 jobs.
Sounds good, right? Maybe not?
The economy is growing again and creating some jobs, but what does it really mean to the 14 1/2 million U.S. workers who remain unemployed? Though employment is increasing, it is not increasing at a rate that will replace the millions of jobs lost during the recession for many years.
Take a close look at the unemployment rate and employment data for the U.S. economy through the latest news release from the Bureau of Labor Statistics.
[Students: You may want to read the full BLS press release prior to completing this lesson. Identify the positive and negative data points and references in the release.]
U.S. Bureau of Labor Statistics
The Employment Situation - December 2010
Released: January 7, 2011
Unemployment Data - from the Household Survey
"The unemployment rate fell by 0.4 percentage point to 9.4 percent in December, and nonfarm payroll employment increased by 103,000, the U.S. Bureau of Labor Statistics reported today. Employment rose in leisure and hospitality and in health care but was little changed in other major industries."
What is the unemployment rate?
The unemployment rate is the number unemployed persons as a percent of the labor force. For instance, if there are one million people in a nation's labor force and 100,000 of them are unemployed, the nation's unemployment rate is 10 percent. 100,000 divided by 1,000,000 is .10 - expressed as 10 percent.
The U.S. unemployment rate in December was 9.4 percent, slightly less than previous months. Figure 1, below, shows the recent history of the U.S. unemployment rate since 1990. Notice the periods of increases and decreases that correspond with the business cycles. The higher levels of unemployment begriming in December 2007 and reaching over 10 percent in 2009 represent the most recent recession.
[Students: Do you recognize the "business cycles" in Figure 1? Remember, the business cycles consist of periods of growth, peak, decline and trough. You may see the cycles in the employment and the real GDP growth figures in the EconEdLink lessons. For more about business cycles, go to the NBER webpage, www.nber.org/cycles/recessions_faq.html
Who is counted as unemployed?
According to the BLS web site glossary, the unemployed are, "Persons aged 16 years and older who had no employment during the reference week, were available for work, except for temporary illness, and had made specific efforts to find employment sometime during the 4-week period ending with the reference week. Persons who were waiting to be recalled to a job from which they had been laid off need not have been looking for work to be classified as unemployed."
The two pieces of data used to determine the unemployment rate are the number of unemployed as determined through the BLS Current Population Survey (explained later in the lesson) and the size of the labor force.
What is the labor force?
According to the BLS glossary, the labor force includes "all persons classified as employed or unemployed..."
Who are the "employed"?
According to the BLS, employed persons are, "persons 16 years and over in the civilian noninstitutional 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; and (b) all those who were not working but who had jobs or businesses from which they were temporarily absent because of vacation, illness, bad weather, childcare problems, maternity or paternity leave, labor-management dispute, job training, or other family or personal reasons, whether or not they were paid for the time off or were seeking other jobs.
[NOTE: if you worked just one hour for pay during the week, you were "employed."]
[Students: Is one hour of paid work in a week meaningful employment? Should someone who works for, say, just five hours of work in a week be counted as fully "employed"?]
"Employment Data - from the Establishment Survey
"Total nonfarm payroll employment increased by 103,000 in December. Employment rose in leisure and hospitality and in health care but changed little in other major industries. Since December 2009, total payroll employment has increased by 1.1 million, or an average of 94,000 per month."
In December 2010, 139.2 million people in the U.S. were employed. That is 58.3 percent of the total population aged 16 and over. 153.7 million people, or 64.3 percent of the total population aged 16 and over, were counted as participating in the labor force.
Employment Data Includes only "Payroll Employment"
Employment data includes "persons on establishment payrolls employed full or part time who received pay for any part of the pay period which includes the 12th day of the month. Temporary and intermittent employees are included, as are any workers who are on paid sick leave, on paid holiday, or who work during only part of the specified pay period. A striking worker who only works a small portion of the survey period, and is paid, would be included as employed under the CES definitions. Persons on the payroll of more than one establishment are counted in each establishment. Data exclude proprietors, self-employed, unpaid family or volunteer workers, farm workers, and domestic workers. Persons on layoff the entire pay period, on leave without pay, on strike for the entire period or who have not yet reported for work are not counted as employed. Government employment covers only civilian workers."
Who "works" but is not counted as employed?
According to the BLS, some people who "work" are not counted as employed. "Excluded are persons whose only activity consisted of work around their own house (painting, repairing, or own home housework) or volunteer work for religious, charitable, and other organizations."
[NOTE: The key to the definition of employed is that a person is paid for his or her work.]
Who else is not included in the employment and unemployment data?
The labor force includes only those aged 16 and over who are working or seeking employment. The assumption here is that those under age sixteen are expected to be full-time students, even though they may be working for wages in some way.
Since the labor force includes only those who are employed or unemployed, large number of people who do not fit into those categories are not included - those who are retired, those who do not want to work f or some reason, those who do not have to earn income and, thus, do not work, those in the military (civilian noninstitutional population), those in prisons or other institutions (civilian noninstitutional population) who are not able to work for wages.
Who is "not in the labor force"?
Again, to be counted as part of the labor force, you must be working for a wage or seeking employment for a wage. Those working are "employed" and those seeking employment are "unemployed." In December, 2010, of the population aged 16 and over, 85.2 million people were not employed or unemployed and were classified as "not in the labor force."
To better understand this data and the terminology, take a look at the key BLS labor market definitions in the BLS Glossary .
The unemployment rate formula:
In December 2010, 14.485 million people were unemployed from a labor force totaling 139.206 million people. Thus, the unemployment rate was 9.4 percent
14,485,000 / 153,690,000 = 0.0942 or 9.42 percent - rounded to 9.4 percent.
Figure 2, below, shows the numbers of employees on non-farm payrolls, unemployed, and the size of the U.S. labor force from 2006, just prior to the recent recession, through 2010. Notice the increases and decreases in the total labor force as people entered and left the labor force.
Figure 2: U.S. Labor Force Data
|*Totals do not add-up due to rounding.|
[Students: Do you see the pattern of employment data that defined the recession?]
More Details from the December 2010 Unemployment Data
There are significant differences in the unemployment rates among demographic groups. The rates for African-Americans and Hispanics are higher than the average and for whites. Asians have had the lowest unemployment rate in recent years.
Teenagers, aged 16-19, are unemployed at a rate much higher than other age groups. In December, the unemployment rate for teenagers was almost 2 1/2 times that of adults. The chart below shows the rates for the major demographic groups.
Unemployment Rates by Demographic Group
Nov. to Dec. 2010
|All workers (age 16 years and over)||9.4%||-0.4|
|Adult men (age 20 years and over)||9.4%||-0.5|
|Adult women (age 20 years and over)||8.1%||-0.2|
|Teenagers (Ages 16-19)||25.4%||+0.9|
|*Not seasonally adjusted.|
Another significant difference among the unemployment rates of groups of people is determined by their level of educational attainment. Not only do high school dropouts make far less income, on average, but they also have a much higher unemployment rate. The chart below shows the unemployment rates for people with different levels of education.
Unemployment Rates by Educational Attainment
Nov. to Dec. 2010
|Total (25 years and over)||8.1%||-0.3|
|Less than a high school diploma||15.3%||-0.4|
|High school graduates, no college||9.8%||-0.2|
|Some college or associate degree||8.1%||-0.6|
|Bachelor's degree and higher||4.8%||-0.3|
[Students: For a graphic representation of the annual unemployment rates and median wages for different levels of educational attainment, see the BLS "Education Pays" webpage. http://www.bls.gov/emp/ep_chart_001.htm
Industry Employment Data in December
The December 2010 employment data showed improvement in employment in some industries and job losses in others. Both the education and health, and leisure and hospitality industries increased employment by over 40,000 jobs. Construction lost the largest number of jobs, minus 16,000.
|Key Industry Groups||Employment Growth/Decline|
|Mining and logging||+4|
|Transportation & Warehousing||+9|
|Professional & business services||+7|
|Temporary help services||+16|
|Education & health services||+44|
|Lesiure & hospitality||+47|
[Students: What industries are large employers in your area? How is your region doing? For regional employment data, see the BLS report, "Regional and State Employment and Unemployment Summary" November, 2010. www.bls.gov/news.release/laus.nr0.htm
Why does the Government collect statistics on the unemployed?
From the BLS webpage:
"When workers are unemployed, they, their families, and the country as a whole lose. Workers and their families lose wages, and the country loses the goods or services that could have been produced. In addition, the purchasing power of these workers is lost, which can lead to unemployment for yet other workers."
"To know about unemployment—the extent and nature of the problem—requires information. How many people are unemployed? How did they become unemployed? How long have they been unemployed? Are their numbers growing or declining? Are they men or women? Are they young or old? Are they white or black or of Hispanic ethnicity? Are they skilled or unskilled? Are they the sole support of their families, or do other family members have jobs? Are they more concentrated in one area of the country than another? After these statistics are obtained, they have to be interpreted properly so they can be used—together with other economic data—by policymakers in making decisions as to whether measures should be taken to influence the future course of the economy or to aid those affected by joblessness."
How is the employment and unemployment data collected?
"The Government conducts a monthly sample survey called the Current Population Survey (CPS) to measure the extent of unemployment in the country. The CPS has been conducted in the United States every month since 1940, when it began as a Work Projects Administration project. It has been expanded and modified several times since then. For instance, beginning in 1994, the CPS estimates reflect the results of a major redesign of the survey."
"There are about 60,000 households in the sample for this survey. This translates into approximately 110,000 individuals, a large sample compared to public opinion surveys which usually cover fewer than 2,000 people. The CPS sample is selected so as to be representative of the entire population of the United States. In order to select the sample, all of the counties and county-equivalent cities in the country first are grouped into 2,025 geographic areas (sampling units). The Census Bureau then designs and selects a sample consisting of 824 of these geographic areas to represent each State and the District of Columbia. The sample is a State-based design and reflects urban and rural areas, different types of industrial and farming areas, and the major geographic divisions of each State."
For a detailed explanation of CPS sampling methodology, see Chapter 1, of the BLS Handbook of Methods.www.bls.gov/opub/hom/homch1_a.htm .
For just the basics, go to the BLS "Frequently Asked Questions" webpage about unemployment. www.bls.gov/cps/cps_htgm.htm#why
Is the unemployment rate reported accurately?
In recent years, the BLS has recognized that the reported unemployment rate may not provided a meaningful picture of "real" unemployment. Larger numbers of people have been identified who may represent "hidden unemployment. Some have dropped out of the labor force because they have given-up looking for a job. Some have involuntarily held part-time jobs despite their want for full-time employment. Here are the new BLS definitions:
Marginally Attached Workers. BLS definition: "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."
From the December 7, 2010, BLS press release: "About 2.6 million persons were marginally attached to the labor force in December, little different than 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."
Discouraged Workers. BLS definition: "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."
From the December 7, 2010, BLS press release: "Among the marginally attached, there were 1.3 million discouraged workers in December, an increase of 389,000 from December 2009. (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."
Part-time workers. BLS definition: "Persons who work less than 35 hours per week." The BLS now reports the number of those who work part-time involuntarily. Some people also work part-time by choice.
From the December 7, 2010, BLS press release: "The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was essentially unchanged in December at 8.9 million. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job."
Students: Should discouraged workers and marginally attached workers be counted as unemployed? What about part-time workers? If someone is working half-time but wants to work full-time, should that person be counted as 1/2 unemployed person?
Types of Unemployment
There are generally three types of unemployment typically identified by economists, each of which describes the particular circumstances of the individual and their employment situation.
Frictional unemployment is temporary unemployment arising from the normal job search process. Frictional unemployment helps the economy function more efficiently as it simply refers to those people who are seeking better or more convenient jobs and those who are graduating and just entering the job market. Some frictional unemployment will always exist in any economy.
Example: Mary Smith quit her factory job to look for a new job using her training as a practical nurse. During the time she was unemployed and looking for a new job, she was frictionally unemployed.
Structural unemployment is the result of changes in the economy caused by technological progress and shifts in the demand for goods and services. Structural changes eliminate some jobs in certain sectors of the economy and create new jobs in faster growing areas. Persons who are structurally unemployed do not have marketable job skills and may face prolonged periods of unemployment, as they must often be retrained or relocate in order to find employment.
Example: Bill Jones worked in a steel mill for many years. Because the mill was old and inefficient, the company closed it and opened a new "mini-mill" in another part of the country. Bill did not have the technology of skills required to operate the new mill equipment. While Bill looked for a new job, he was structurally unemployed.
Cyclical unemployment is unemployment caused by a drop in economic activity. This type of unemployment can hit many different industries and is caused by a general downturn in the business cycle. Lower demand for goods and services reduces the demand for workers. Much of the increase in unemployment in 2008 was cyclical as a result of the economic downturn and recession.
Example: Sam Brown's company laid off 100 workers because the demand for their products decreased during the recession. While hoping to be recalled to work at his old job, he looked for jobs in other industries. During the time he looked for work, he was cyclically unemployed.
At the levels of unemployment that economists consider to be the lowest possible sustainable levels (discussed below), the only unemployment that exists is due to friction in labor markets and structural changes in the economy.
Economists define the approximate unemployment rate that is 'full employment'. If unemployment falls to a very low rate, there will be upward pressure on prices. If unemployment rises to a very high rate, there will downward pressure on prices or prices will remain steady. In the middle is a level, or more likely a range, where there is not pressure on wages to rise or fall. That is the full employment rate of unemployment.
Economists do not agree or know for certain what that rate is and it does change over time. 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.
Students: With the unemployment still at 9.4 percent, how long will it take for the U.S. to grow by enough jobs to near the full employment level? What does this mean for your future education and career choices?
The year 2011 began with a lower unemployment rate than at any time during the year 2010 - 9.4 percent. The U.S. economy created over 100,000 new jobs in December, but not enough to signal a stronger recovery. To better understand the significance of the employment data, it must be considered in context with other economic data.
What do the levels of employment and unemployment tell us about the current, future and past states of the economy? Leading, Concurrent and Lagging Economic Indicators.
The level of employment (non-agricultural payroll employment) most often seen as a coincident indicator of economic activity. This means that it indicates the current trend and will increase or decrease directly and at the same time with current state of the economy (other measures of current economic activity). It is included as one of four measures in the Conference Board’s “Coincident Economic Index.”
The Conference Board’s “Leading Economic Index” uses ten economic measurements, including “average weekly hours worked by manufacturing workers” and “average number of initial applications for unemployment insurance.” It makes sense that the earliest sign of problems in employment might be a reduction in average work hours as employers cut back hours or reduce overtime, rather than lay-off workers. An increase in initial unemployment claims then is the first sign of actual job losses. This is then followed by a change in the level of payroll employment (a coincident indicator) and, most likely, a change in the unemployment rate (assuming all other factors are constant.) The coincident indicators more clearly show the current trend.
The Conference Board’s “Lagging Economic Index” includes “the average duration of unemployment.” This would naturally follow the level of employment and confirm the earlier signs of labor market problems. As economic conditions worsen, the duration of unemployment will tend to increase. Between December 2009 and December 2010, the average duration of unemployment increased from 29.3 weeks to 34.2 weeks. Over 6.4 illion of the unemployed in December 2010 had been unemployed for at least 27 weeks.
What do you think are the other eight indicators of future economic problems (leading indicators)?
Make your own list of indicators of future problems in employment, output or price level? What do the indicators you have identified tell us about the future of the economy? After you have completed your list, compare it to the Conference Board’s list of the ten components of the “Leading Economic Index.” Go to the Conference Board's "Global Business Cycle Indicators," www.conference-board.org/data/bci.cfm .
Next, answer the following essay questions on the interactive notepad.
1. How is the unemployment rate determined?
2. What is a "marginally attached" worker?
In August, the BLS released data concerning youth employment and unemployment during the late Spring and Summer of 2010. Take a look at this data and compare it to your experiences.
Employment and Unemployment Among Youth - Summer 2010
Bureau of Labor Statistics
Released: August 27, 2010
From April to July 2010, the number of employed youth 16 to 24 years old rose by 1.8 million to 18.6 million, the U.S. Bureau of Labor Statistics reported today. This year, the share of young people who were employed in July was 48.9 percent, the lowest July rate on record for the series, which began in 1948. (The month of July typically is the summertime peak in youth employment.) Unemployment among youth increased by 571,000 between April and July , about half as much as in each of the two previous summers. (Because this analysis focuses on the seasonal changes in youth employment and unemployment that occur each spring and summer, the data are not seasonally adjusted.)
Youth Labor force
The youth labor force--16- to 24-year-olds working or actively looking for work--grows sharply between April and July each year. During these months, large numbers of high school and college students search for or take summer jobs, and many graduates enter the labor market to look for or begin permanent employment. This summer, the youth labor force grew by 2.4 million, or 11.5 percent, to a total of 22.9 million in July.
The labor force participation rate for all youth--the proportion of the population 16 to 24 years old working or looking for work--was 60.5 percent in July, the lowest July rate on record. The July 2010 rate was down by 2.5 percentage points from July 2009 and 17.0 percentage points below the peak for that month in 1989 (77.5 percent).
The July labor force participation rate for 16- to 24-year-old men, at 62.7 percent, was down by 2.2 percentage points from a year earlier, and the rate for women, at 58.1 percent, was down by 3.0 percentage points over the year. For several decades prior to 1989, the July labor force participation rate for young men showed no clear trend, ranging from 81 to 86 percent. Since July 1989, however, their participation rate for the month has trended down, falling by about 20 percentage points. The July labor force participation rate for young women peaked in 1989 at 72.4 percent, following a long-term upward trend; their rate has since fallen by about 14 percentage points.
The July participation rate for whites declined by 2.8 percentage points from a year earlier, to 63.2 percent. The rate for blacks, at 51.6 percent, was down slightly, and the rate for Hispanics, at 56.1 percent, decreased by 3.3 percentage points. For all three groups, labor force participation rates were substantially lower than their peaks reached in July 1989. The participation rate for Asian youth was 48.3 percent in July 2010, little changed from July 2009.
In July, 18.6 million 16- to 24-year-olds were employed. This summer's increase in youth employment was slightly larger than last year's (1.8 million vs.1.6 million) and about the same as in 2008. The employment-population ratio for youth--the proportion of the 16- to 24-year-old civilian noninstitutional population that was employed--was 48.9 percent in July, down 2.5 percentage points from July 2009. The ratio has dropped by about 20 percentage points since its peak in July 1989. July 2010 marks the first time in the history of the series that less than half of all youth 16 to 24 years old were employed in that month. The sharp decline in recent years reflects continued weak labor market conditions experienced during the recession that began in December 2007.
The employment-population ratio for young men was 49.9 percent in July, down from 52.2 percent in July 2009. The employment-population ratios for women (48.0 percent), whites (53.0 percent), and Hispanics (43.6 percent) in July 2010 also were substantially lower than a year earlier.
In July, 25 percent of employed youth worked in the leisure and hospitality sector (which includes food services), the same as a year earlier. Another 20 percent were employed in the retail trade industry, also the same proportion as a year earlier.
In July 2010, 4.4 million youth were unemployed, essentially the same as in July 2009. The youth unemployment rate edged up over the year to 19.1 percent in July 2010, the highest July rate on record for the series, which began in 1948. In recent years, higher youth unemployment reflects the weak job market. Among major demographic groups, the unemployment rates for young men (20.5 percent), blacks (33.4 percent), and Asians (21.6 percent) continued to trend up from a year earlier; the jobless rates for young women (17.5 percent), whites (16.2 percent), and Hispanics (22.1 percent) were virtually unchanged.
Take a look at the entire Youth Unemployment report: www.bls.gov/news.release/youth.nr0.htm.
Does this report reflect your experiences?