The unemployment rate, among other statistics, is an important tool used by decision makers in the US economy. This statistic and others like it: the labor force participation rate, and the employment population ratio, can have immediate and lasting effects on an individual in the economy and are therefore very important and should be carefully studied.
According to the Bureau of Labor Statistics the unemployment rate has slowly climbed since January 2014. Using seasonally adjusted household data one sees a .1% increase from January to March of 2014. This means that .1% of workers lost their jobs and remained unemployed, while still looking for a job, for a prolonged time. With this extra .1% the official over age 16 unemployment rate is fairly stable at 6.7%. This means that 6.7% of the work force have be unemployed for a while, have failed to find a job, and are still looking. This number has far reaching impacts into many areas of the economy but is understated. The 6.7% figure is the U3 number, which fails to take discouraged workers or marginally attached workers into account. If the unemployment rate does not recognize those who have lost hope of finding a job or those who work very few hours then the statistic could be very low and thus misleading. Another measure, the U5 unemployment rate, takes these two factors into consideration. The seasonally adjusted U5 number from January to March of 2014 drops by .1% but holds steady at 8.0% in March. By comparing these two figures one can see that the official unemployment rate is understated by about 1.3%. A change of this size has the potential to alter the choices of decision makers and therefore broader unemployment figures should be equally considered.
Like the unemployment rate the labor force participation rate is an important indicator of economic performance. This is the percentage of the population that is in the labor force, employed or unemployed. However, this number is only derived from the percentage of the civilian population that is 16 years or older and in the labor force. In March of 2014 this number slightly increased to 63.2%. A BLS table shows that the labor force participation rate has fallen by ~3% since 2004. This means that just less than two thirds of the employable population is in the labor force and this number is slowly dropping. This change could be due to older workers retiring, however, it could also partly be due to workers becoming discouraged and dropping out of the labor force. This figure is immensely important because government programs such as Social Security or Medicare benefit those who are not in the labor force at the expense of those in the labor force. A declining labor force participation rate is alarming because it shows that the ability of the labor force to support those not in the labor force could be in jeopardy.
A final figure, the employment population ratio, measures the ratio between the employed and the employable population in an economy. This figure is important because it measures the percentage of the population that is able to work that is actually employed. The BLS report states that this figure is 58.9% for March of 2014. This means that approximately 60% of the employable population is working, or about 40% are not working. This figure has similar applications to the labor force participation rate in that it is important for understanding the ability to maintain government programs like Social Security, Medicare, Medicaid, or various welfare programs. Even if one assumes that the ~40% is entirely composed of retired individuals (which is not probable) this figure calls into question the sustainability of the aforementioned government programs.
The three statistics mentioned above: the unemployment rate, the labor force participation rate, and the employment population ratio, are all indicators of economic activity that has far reaching effects. The U3 unemployment rate is showing modest increases while conversely the U5 rate is decreasing by the same amount. One would expect that if economic policy is unchanged then the unemployment rate will also remain relatively unchanged and the difference between the U3 and U5 rates will stay around 1-2%. Conversely the labor force participation rate dropped by 3% in 10 years and one expects that this trend will continue if there is no change in policy. One also sees a similar trend in the employment population ratio. These trends promise future economic disaster if not reversed. If policies are left unchanged one expects that the labor force participation rate will drop by another 3% or more in 10 years, and the employment population ratio to also drop by a significant percentage.
Works Cited:
The Empolyment Situation-March 2014. (2014, April 4). Bureau of labor Statistics. Retrieved April 17, 2014, from http://www.bls.gov/news.release/pdf/empsit.pdf
Databases, Tables & Calculators by Subject. (n.d.). Bureau of Labor Statistics Data. Retrieved April 18, 2014, from http://data.bls.gov/timeseries/LNS11300000
Sunday, April 20, 2014
Current state of the Labor Market: Blog 2 - Morgan Routt
Current state of the Labor Market
Morgan Routt
According to the most recent labor statistics, 6.7% of the work
force was unemployed as of March 2014. The
highest rates of adult unemployment were centered on the nation's 2 largest
minority groups; African Americans were at 12.4% and Hispanics at 7.9%. Unemployment among Caucasians was at 5.8%,
while Asians had the lowest unemployment at 5.4%. The labor force participation rate was at
63.2%, which is slightly up from last month but still down from a year ago. Economists believe the harsh January and
February winter months of this year were responsible for the stagnant start to
the year.
The unemployment rate is reflecting a positive trend overall
with a reduction of .8% since March of last year. This trend is true for all groups except
Asians, who have had a .4% increase in unemployment over the past year. While these rates are at their lowest since
the economic crisis of 2008, the unemployment rate would need to drop another
1% to 1.5% for the central bank to begin raising interest rates. Current low interest rates are designed to
spur borrowing to help businesses grow and hire more workers. These rates have also allowed more affordable
payments on homes and autos. Low rates and
nicer weather have allowed for a 1.1% increase in retail spending in March on
items such as autos, furniture, and clothing.
This trend is expected to continue into April with continued nicer weather
and an improved job market.
Kiplinger projects unemployment will continue to modestly
decline to around 6.3% by the end of 2014.
While good for the economy, this decline will most likely create
inflation heading into 2015. This
inflation, while a concern, would result in higher wages. There will be more spending resulting in
higher retail prices and interest rates on borrowing. As verification of this, the unemployment
rate's gradual decline over the past year has caused an increase in overall
wages by 2.1%. This trend can be
expected to continue into 2015. While
these numbers all appear to be good, they are still well below the pace of
growth achieved during past economic expansions under President Reagan or
President Clinton. Anemic growth in key
foreign markets like China and Europe have also allowed us to remain
competitive globally.
While private sector jobs have shown a slow but steady
increase, federal government positions have fallen by 85,000. Referring to overall job growth and
unemployment rates, the United States has about another 2 years before it can
be considered at normal employment according to Fed Chief Janet Yellen. The Conference Board Consumer Confidence
Index also moderately rebounded in March.
While consumers' assessment of the current job market has remained
unchanged, the number of consumers who believe the job market will grow over
the next few months slightly increased.
Overall for the remainder of 2014, we can expect continued
slow to moderate growth in most employment sectors, a slight increase in
consumer confidence, and a slight increase to interest rates towards the end of
2014 heading into early 2015.
Sources:
The Employment Situation – March 2014. Bureau of Labor
Statistics. (2014, April 4). Retrieved April 17, 2014,
from: http://www.bls.gov/news.release/pdf/empsit.pdf
Payne, D., Somerville, G., Patterson, J., & White, G.
(2014, April 3). Economic Outlook, Indicators, Forecasts - Your
Business-Kiplinger. www.kiplinger.com. Retrieved April 18, 2014, from
http://www.kiplinger.com/tool/business/T019-S000-kiplinger-s-economic-outlooks/
Prial, D. (2014, April 4). U.S. Adds 192,000 March Jobs,
Unemployment Rate Holds at 6.7%. Fox Business. Retrieved April 17, 2014,
from http://www.foxbusiness.com/economy-policy/2014/04/04/us-adds-12000-march-jobs-unemployment-rate-holds-at-67/?Intcmp=jobsreports
Barnes, P., Gasparino, C., & Freeman, J. (2014, April
16). Yellen: 'Normal' employment is two years away. Fox Business.
Retrieved April 17, 2014, from
http://video.foxbusiness.com/v/3475870353001/yellen-normal-employment-is-two-years-away/#sp=show-clips
Courter, C. (2014, March 25). The Conference Board. Consumer
Confidence Index®. Retrieved April 17, 2014, from https://www.conference-board.org/data/consumerconfidence.cfm
Employment Report
The Employment Situation Summary for March released on April
4 gives a look into the overall employment situation for the US. To gauge the overall
employment situation of the nation, a few different numbers are used. One figure
that the bureau of Labor Statistics uses is the unemployment rate. This number
looks at the number of people who are in the labor force, that are currently
looking for work.
The overall unemployment rate for March is
6.7% of the population, which remains unchanged since February. Although this is a raise since January, it is
a major decline from where the number was a year ago, almost a full percent
decline. As the economy continues to recover from the Great Recession that
started in 2008, we would hope to see this number continue to decline and go
back to the natural rate of unemployment which is usually between 5 and 6%. The
largest group that remains unemployed is teenagers, which remains constant from
last month and from the previous year. When looking at different ethnicities,
the group that has the highest unemployment rate are those that identify as
Black or African American. This is a trend that was true for the past couple of
months and for the previous year’s figures. A safe prediction for this
percentage would be a continually decrease as the economy continues to recover.
Another popular figure that used by the Bureau of Labor
Statistics is the employment population ratio. This is the ratio of the number
of employed workers over the total population of a country, in this case the
United States. This ratio (58.9) has changed little over the past couple of
months. This could be due to an increase in sector specific jobs that tend to
increase in certain seasons and an increase in reentrants to the workforce.
Because this number has had little growth over the last couple of months and
with the changing seasons, I would expect for this trend to continue and if we
were to see a change it would only be a few tenths of a percent upwards.
A third figure used by the BLS to gauge the employment
situation is the labor force participation rate. This number looks at the proportion
of the people that are eligible to be in the labor force against those that are
actually participating in it. The rate for the month of March was 63.2%, which
is a slight raise over where the number was in the previous two months. This could
reflect the increased willingness for more people to enter the workforce,
either because they are no longer discouraged or there is a new incentive for
them to enter the labor force. This is in line with the shrinking unemployment rate
and the employment population ratio trends and we would expect that this number
would change similarly remaining either constant or with a slight rise.
Works Cited
The Employment Situation – March 2014. Bureau of Labor
Statistics. Retrieved
from: http://www.bls.gov/news.release/pdf/empsit.pdf
"Employment-To-Population Ratio Definition |
Investopedia." Investopedia. Investopedia, n.d. Web.
Friday, April 18, 2014
Employment Situation
The Bureau of Labor Statistics has the responsibility of measuring unemployment. Adults
age 16 or over are divided and surveyed into different categories for best results. First being is employed, referring to people who are working (full or part time) as well as those
taking a leave of absence for vacation, pregnancy, etc. The next category is for those that are unemployed. Unemployed refers to people that do not have a
job, but are capable of working, and have actively searched for a job within the past four
weeks. The third and final category covers those that are not in the labor
force due to college, children, and so on. The
BLS measures this data every month for about 60,000 households and produces a
report called the Current Population Survey (Mankiw, 2012, p. 298-9) This data is accessible to the public and analyzed frequently by economists and students across the country.
Mankiw states that the unemployment rate can be defined as “the percentage of the
labor force that is unemployed” (p. 299). Unemployment has consistently decreased over the last two years, beginning at 8.2 in March of 2012
and ending at 6.7 in March of 2014. However, this statistic does not mean that the rate did not
fluctuate through small changes throughout the years. Around December of each year, the unemployment rate increased and then rapidly decreased again after a time period of one month. Demographics such as race and sex are important to take into consideration when analyzing this data. This report shows that more women became unemployed while more men became employed. Whites, blacks, Hispanics, Asians, and teenagers had very slight changes in their unemployment
rates. Out of those categories, teenagers hold the highest unemployment rate of
20.9% and Asians hold the lowest of 5.4% (Employment Situation, 2014, p.
1). The long-term unemployed are those that have not held a job for over 27 weeks. This category of people decreased over the year, thus concluding that more people were capable of finding a job. With these statistics and ideas in mind, it assumed that these trends will
relatively stay the same for upcoming years. Society today proves that teenagers will continue to hold the fewest
jobs due to the evident lack of higher education and overall need for a high substantial income. Discrimination is alive and well throughout this country. Until policy makers take this more seriously in regards to employment, these statistics will also remain relatively the same.
The
labor-force participation rate is explained by Mankiw as “the percentage
of the total adult population of the United States that is in the labor force”
(p. 299) or further defined as “the fraction of the population that has chosen to
participate in the labor market” (p. 300). For whites, blacks, Asians
and Hispanics over 20 years old the participation rate increased the slightest bit in
March. This data shows more people participated in the work force. However,
for white and Hispanic teenagers the participation rate increased by almost 2.5
and for black teenagers the participation rate decreased slightly (Employment
Situation, 2014, p. 12-14). One can assume that people with a lower education had more participation in the work force, and those with a higher education had less participation in the work force (Employment Situation, 2014,
p. 15). With more jobs being created, government legislation participation
rates will increase as well. These statistics regarding race and education were not surprising, and it is expected to stay relatively close unless policies are made to prevent these factors from effecting the employment rate as strongly as they do.
To conclude, the slightest differences were seen in the employment-population
ratio, which includes the individuals of the working age that are both employed
and unemployed (“Employment-To-Population Ratio”, 2014). There
seems to be a direct correlation between participation rate and the
employment-population ratio, when one increased the other increased as well. This data is essential to policy makers to improve the employment situation for the country. Economists and policy makers can team up to help prevent a crisis regarding employment through using both there areas of expertise.
Works Cited
The Employment Situation – March 2014. Bureau of Labor Statistics. Retrieved from: http://www.bls.gov/news.release/pdf/empsit.pdf
Mankiw, Gregory. (2012). Principles of Macroeconomics: Sixth Edition. Mason, OH: South-Western Cengage Learning.
Employment Situation Report
Ryan Raphael
Macroeconomics
Blog Write Up #2
Employment
Situation Report
Some of
the major labor market statistics in this report include unemployment rate, unemployed
persons, labor force participation rate, employment population ratio, and
discouraged workers. This data is collected by the Bureau of Labor Statistics
based on a survey of 60,000 households.
The
unemployment rate is one of the major labor market statistics, defined as the
percent of the labor force that is unemployed. This is the number employed
divided by the labor force. The labor force includes the total number of
workers including the employed and unemployed. The report indicates that the
current unemployment rate is 6.7 percent, and the number of unemployed persons
is 10.5 million. Since January, there hasn’t been much fluctuation in the
unemployment rate. In January, it was at 6.6, then in February it was at 6.7,
and now it is currently at 6.7. These numbers are based on the total
unemployment rate, 16 years and older. When looking at the data, there are
higher rates of unemployment among certain races/ ethnic groups. For example African
Americans have had a rate around 12 percent for the past three months. The rate
for Latinos has slowly been decreasing from 8.4 to 7.9 in the past three
months, but this is still higher than the overall unemployment rate. Another
high category for unemployment is teenagers. They have an unemployment rate of
20.9 percent, which has been pretty consistent over the past three months. For
the rest of 2014, I predict that the unemployment rate will fall slightly,
staying in the 6th percentile.
One of the major problems of the unemployment
rate is that it doesn’t account for discouraged workers. Discouraged workers
would like to work, but gave up looking for a job, so they are classified as
not in the labor force. This causes the unemployment rate to fall, making it
seem like employment conditions are improving, when they really aren’t.
Another
key labor market statistic is the labor force participation rate. This is
defined as the percentage of the adult population that is in the labor force.
It can be calculated as he labor force divided by adult population. The current
labor force participation rate is 63.2 percent. The trend of the data is very
consistent. In November 2013 the rate was at 63 percent, December 2013 was at
62.8, January 2014 was at 63, and February 2014 was at 63. Participation rates
do not vary much by ethnicity or gender. The most significant difference in
participation rates are between white men over 20, and everyone else. White men
over 20 have participation rates in 72nd percentile, while everyone
else have rates near 60 percent. The only other significant difference in
participation rates are those between 16 and 19 years old. They fall under the
30th percentile for labor force participation rates. Since there
hasn’t been any significant fluctuations in the data, I predict that the labor
force participation rate will stay close to the 63rd percentile in
2014.
One
other important labor market statistic is employment population ratio. This has
a very close trend to the labor force participation rate. The current
employment population ratio is 58.9 percent. White males had the highest
ratios, in the 68th percentile, while white and African American women
were in the 54th percentile. I predict that the data will remain
fairly similar in 2014 because there hasn’t been much variation in the past few
months.
Overall,
the labor market categories I examined had fairly consistent data. The data
mostly varied between ethnic groups and genders, but within those groups, the
data had a consistent trend.
Bibliography
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