Tag Archives: employment

Good News – The Unemployment Rate Increased

The Bureau of Labor Statistics (BLS) had some good news for us yesterday. The unemployment rate increased from 7.8 percent to 7.9 percent.

You read that right: it’s good news that the unemployment rate increased. In fact, economists have been waiting for it to increase, and have been a little disappointed that it didn’t increase sooner.

This might sound a little balmy, but there’s method to this madness. It’s all in the reason the unemployment rate increased.

The unemployment rate is the number of unemployed people divided by the total number of unemployed plus employed. The BLS collects these numbers by contacting 60,000 households every month.

To be “unemployed”, you have to be actively looking for work. People who are aren’t actively looking aren’t included, even if they’d like to be working.

During a severe recession like we just had, lots of people get so discouraged about finding work that they give up and stop looking – or, as economists say, they exit the workforce. They’re no longer considered either employed or unemployed if they’re not actively looking.

When job markets improve after the downturn, many of these discouraged workers again start to look for work. This is a good sign for the economy, and typically indicates that things will continue to improve.

In October, the number of unemployed in the U.S. increased by 170,000, to 12.3 million. At the same time, the number of employed increased by 410,000, to 143.4 million. As a result, the unemployment rate increased from 7.8 to 7.9 percent.

I’ll be anxious to see the JOLT (Job Openings, Layoffs, and Turnover) data that will be coming out on Tuesday, November 6. It will provide more details about exactly what is going on in the job market, and what is (likely) causing it.

More People Aged 65 and Over Working Than Ever

More older Americans are working than ever before. Of the people aged 65 and over, 17.5 percent are working, according to Bureau of Labor Statistics figures. There are about 42.3 million people in the U.S. aged 65 and over who are not in institutions. Of these, about 7.4 million are employed.

Up until 1985, the percentage of people 65 and over who were working had been trending downward. Before 1952, more than 24 percent of this age group was working. By 1982, this has decreased to less than 12 percent.

But since 1985, the percentage has been increasin. Several factors are driving this change. First, people are living longer, and are physically able to work longer on average. Second, many people are finding that they have not saved enough money for retirement. This has been exacerbated by two brutal stock market declines within 10 years, which decreased what retirement savings people had. A tough economy also has made it harder for older people to rely on children and family for support.

The Nerve of Some People: Multiple Job Holders

These days, when more than 12 million Americans are unable to find jobs, it’s important to remember that some people not only have one job, but more than one. These greedy workers actually have the nerve to be taking someone else’s job from them.

Working more than one job? Why would anyone want to do such a thing?

Well, off the top of my head, maybe … to live. Wages for many jobs are hardly extravagance these days. Someone working full time making the federal minimum wage of $7.25 an hour is going to be grossing $14,500 a year. That comes to just over $1,200 a month, even before any deductions or taxes.

That’s going to be a little rough for, say, a single parent to live off. It’s going to be tough even for a single person. How are they going to get to work? Public transit – where it exists – is expensive; more likely they’re going to have to have a car. Insurance alone is going to take a big bite. And don’t get me started about gas. Then there’s rent. Utilities. Food. Clothes. Child care. It’s pretty hard to find and keep a job unless you have a phone. When people complain that even the “poor” in America have phones and TVs and cars, they’re forgetting that these are virtual necessities for living in our country. If you don’t believe that, try getting by without them for a few months.

And don’t even think about health insurance.

To be fair, there are other reasons people have multiple jobs. Some might not be able to find full-time work, and instead have two or more part-time jobs. Some might be changing careers. Some might just enjoying working, or like variety.

Regardless of the reason, some do. But how many?

According to the Bureau of Labor Statistics, 4.8 percent of the people employed in the U.S. in September 2012 were working at more than one job. That’s actually down from a recent peak of 6.5 percent in November 1996, and it’s the lowest level in the 8 years of data available.

It turns out that when jobs are hard to find, second (and third, and … ) jobs are also hard to find, so that the percentage of workers holding multiple jobs tends to decrease when unemployment increases. In other words, they’re negatively correlated.

But not perfectly. The correlation between the unemployment rate and the percentage of multiple job holders is -0.54. They usually move in opposite directions, but not always.

So who are these job hogs? That 4.8 percent means comes to about 6.9 million people working two or more jobs. They’re pretty evenly split between men (51 percent) and women (49 percent). Most of them (54 percent) have one full-time job and one (or more) part-time job(s). About 25 percent of them have two (or more) part-time jobs. And less than 4 percent have two (or more?) full-time jobs. The rest (17 percent) have jobs with hours that vary.

So here’s to those 6.9 million hard-working, job-hogging multiple job holders. Whether they’re moonlighting just to make ends meet or just enjoying the variety, they’re not just producing extra for the economy. They’re probably paying extra taxes, too.

What Happened to the Unemployed?

According to the numbers released Friday, the number of people unemployed in the U.S. decreased from 12.5 million August to 12.1 million September, and the unemployment rate decreased from 8.1 percent to 7.8 percent.

So what happened to these 12.5 million unemployed people from August to September? It turns out that 7.3 million of these were still unemployed in September. That’s well more than half of them.

Another 2.8 million of the August unemployed had left the Labor Force by September. This could be because they just quit looking because they felt it was useless, or because they’d gone back to school. Or they retired, or had children and decided to stay home. Or maybe they won the lottery. Regardless, by September they were neither working nor looking for work.

Finally, 2.4 million – 19 percent – had found jobs by September.

The reason that the number of unemployed only decreased by 400,000 is that, at the same time these 2.4 million were finding jobs, another 1.9 million lost jobs they had, and 2.9 million entered the labor force and started looking for work.

So here’s the summary:

Here’s hoping that number keeps going down.

A Tale of Three Indicators: How Bad is the Labor Market Really?

It is the best of times. It is the worst of times. It it the worst of times but getting better.

It all depends on how you measure it.

There’s a lot of interest these days in alternative economic measures, particularly with regard to employment. Part of this is driven by real problems with unemployment rates. Even more is driven by a people wanting indicators to tell a different story than they do. And some is driven by a desire for measures that provide different policy incentives. The news yesterday that the unemployment rate fell from 8.1 percent to 7.8 has only exacerbated the situation.

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Probably the three most closely watched macroeconomic indicators in the U.S. are the change in real GDP, the consumer price index (CPI), and the unemployment rate.

When we say “unemployment rate”, we really mean the “U-3 unemployment rate”; there are (at least) five others we could consider. They range from the narrowest U-1 to the broadest U-6 rates.

Basically the U-3 unemployment rate is the percentage of the workforce that is actively looking for work but is not employed.It’s true that the U-3 rate doesn’t capture a lot of the economic pain out there. But it’s the standard measure that policy-makers have focused on for decades.

Politicians who want things to sound worse will throw around phrases like “15 percent underemployment”. This is valid but misleading. The U-6 unemployment rate – the broadest measure that also includes most discouraged workers and others – is at 14.7 percent these days. But the U-6 is not the standard definition. If you’re going to use it as your standard in bad times, you also need to use it in good, or else you’re talking apples and crabapples.

That said, all of the unemployment rates move very much in tandem. In fact, since 1994, the correlation between the U-3 and the U-6 rates is 0.996. They’re practically the same measure. Here’s a graph of the six unemployment measures over the past four years, courtesy of the Washington Post.

But even the broad U-6 unemployment rate doesn’t capture people who have permanently left the labor force because they feel things are hopeless. This is one reason some analysts have proposed using the Labor Force Participation Rate (LFPR) as a main indicator of labor economic health.

I addressed the problems with the LFPR in an earlier post, and there are many. Even though the LFPR does capture long-term discouraged workers, it introduces many other difficulties. The LFPR is mostly driven by long-term demographic changes. It doesn’t reflect the business cycle at all, as is clear from the graph below.

The LFPR thus is pretty much useless as a “how are we doing?” sort of measure.

If you’re really desperate for an alternative labor economics indicator that captures both the long-term unemployed as well as the business cycle, I propose yet a third measure: the Employment-Population Ratio.

The Employment-Population Ratio (EPR) is the percentage of the total (noninstitutional) population aged 16 years and over that is employed. It has the advantage of capturing both shorter-term cyclical unemployment and long-term unemployment of discouraged workers.

The EPR has problems, too, of course. There’s no perfect economic indicator (I addressed problems with GDP in an earlier post as well). Specifically, the EPR is a victim of many of the same demographic realities that the LFPR is. When you have a lot of people reaching retirement age, the EPR will fall. When you have a lot of women entering the work force, the EPR will rise.

But the EPR does capture the business cycle. And it has the added benefit – for those who want the economy to look worse – of making the economy look a little worse.

To be fair, the EPR is being pulled in different directions by different factors. Baby boomers are hitting retirement age and are leaving the labor force in increasing number for legitimate reasons. At the same time, the economy is (slowly) recovering. The net effect is that the EPR has been basically flat since late 2010.

Personally I still prefer the U-3 unemployment rate as my main measure of how the economy’s doing, though I always keep in mind that it has its flaws like any other indictor.

If I were looking for a secondary labor measure to provide supplemental information, I’d choose the Employment-Population Ratio.

But all things considered, just measuring the economy really can scare the dickens out of you.

Economics Area 51: The Great Labor Statistics Conspiracy

The number of jobs in the U.S. increased by 873,000 jobs in September, and the unemployment rate decreased from 8.1 percent to 7.8 percent.

Coming as it does right before an election, this news has been met with skepticism on the part of those who don’t want the economy to improve. Among these of course is Fox.

An article on Fox’s website implies not so subtly that something fishy is going on. According to Fox, former Congressional Budget Office director Doug Holtz-Eakin said “This must be an anomaly. It is out of line with any of the other data.” Holtz-Eakin noted the household survey is smaller, suggesting it is not as reliable. He called estimate of 873,000 new jobs “implausible.”

Never mind that the economy created 847,000 new jobs just this past January. Or that the economy lost 1,100,000 jobs in January 2009.

I have the utmost respect for the Congressional Budget Office. That said, I might point out that Holtz-Eakin was chief economic policy adviser for John McCain’s 2008 presidential campaign and is now head of the conservative American Action Forum.

As a labor economist, I’m in a position to have an opinion on the jobs numbers. I’ve spent many, many hours poring over the detailed survey data that the Bureau of Labor Statistics produces. Just one month of Current Population Survey data is a 150 megabyte text file.

I’m not saying it would be impossible to falsify something. I suppose nearly anything is possible. But the data is so detailed and complex that it would probably take 873,000 workers just to do it.

And thousands of economics and business researchers scrutinize this data. Dissertations and journal articles rise and fall on it. To alter that data in a way that would fool the thousands of  (often critical) researchers who look at this data in detail would be an incredibly difficult task. It would require so many people to be in on it that it would pretty much be impossible to hide.

It’s a lot like open source software. The whole process is all so transparent that it’s nearly impossible to pull something.

Admittedly, a lot of the new jobs were part-time, and we’d much rather have them be full-time. But part-time is better than none at all. No one’s hoping the economy will pick up more than I am, but, as I’ve pointed out in earlier posts, the Great Recession of 2008-2009 was unprecedented in scale and scope in the post-War period. It’s taking time to recover. But it could have been worse – much worse. If you doubt that, I refer you to the 1930s.

I’ll confess that I haven’t yet dug into the details of the September 2012 labor numbers the way I have with some of the earlier data. But I will. And when I do, if I find anything odd or out of the ordinary, I’ll be the first to point it out.

As an economist, I require – nay, crave – accurate labor data above all else. If there’s the slightest chance I’m not getting it, you’ll be hearing from me loud and clear.

Growth in Federal Government Employees Pales Next to State and Local

When people complain about how much government has grown, their harshest criticism usually is reserved for the federal government. In reality, the number of federal government employees hasn’t grown quickly at all, compared with state and local.

Based on data from the Bureau of Labor Statistics, the number of federal government employees has grown at an average annual rate of only 0.4 percent since 1955, from 2.3 million employees to 2.8 million.

Local government, on the other hand, has grown at a rate of 2.4 percent per year, from 3.5 million employees in 1955 to 14.1 million in August 2012. State government growth averaged 2.6 percent per year, from 1.1 million to 5 million.

Of course, number of government employees isn’t the only way to measure government, and using other measures might yield different conclusions. But numbers of employees hardly suggests out-of-control growth of federal government.