Three of the most common economic
indicators that the news media devotes much attention to are the unemployment
rate, the labor force participation rate, and the employment population
ratio. On the first Friday of each, the
U.S. Bureau of Labor Statistics (BLS) publishes the Employment Situation Report
that summarizes the current state of employment, and changes from the previous
month. The December 4th issue
reported minimal changes in November ’15 from recent trends in September ‘15,
October ‘15, and November ’14 (BLS, 2015). Summary Table A (p.4) shows that unemployment
rate was at 5.0 percent in October and November, and was down from 5.8 percent
a year ago. The labor force
participation rate (LFPR) increased from October by 0.1 percent to 62.5 percent,
but is lower than the LFPR in November ’14 by -0.4 percent (62.9 percent). The seasonally adjusted employment-population
ratio (EPOP) is at 59.3, and shows an overall increase by 0.1 between November ’14
and November ‘15 (Summary Table A, p. 4).
To delve into these calculations,
one must be familiar with the variables used to determine each of the
indicators previously described. The
foundation for each of these indicators relies on the adult population
variable. This is the number of
civilians within the U.S. who are at least 16 years old, and are
not-institutionalized. The sum of the
adult population who are seeking jobs, or presently employed, make up the labor
force. The quotient of the labor force divided by the total adult population is
the LFPR, and the EPOP is the ratio of the employed population in the adult
population. Finally, the conditions for
being considered unemployed are being without a pay for at last four weeks, and
have sought a job within the last month.
Taking the proportion of unemployed individuals divided by the labor
force is how the unemployment rate is calculated.
Summary Table A (p. 4) shows that,
the employment rate has been around 5.0 percent over the past three months (Summary
Table B, p. 5) which, is on the low-side of the natural rate of unemployment
range; 5.0-5.5 percent. When expanding
from this past November to November ’13, the unemployment rate has followed a
decreasing trend from 7.0 percent to 5.0 today (Chart 1, p.1). The labor force has been increasing since
last November, however the EPOP has remained relatively stable, despite a reduction
of 0.4 percent in the LFPR (Table A-1., p. 11).
By looking at Chart 2 (p.1), it seems that the month of November has the
largest amount of nonfarm jobs added, over the course of a year; however, the
amount of nonfarm jobs added in November ’15 is roughly half the amount of jobs
added in November ’14, and a third of the amount of jobs added in November ’13. This may be due to the low rate of
unemployment. Although the unemployment
rate is currently low, the adult population is 2.9 million people larger than
it was in November ’14 (Summary Table A., p.4).
As the adult population has increased, the labor force only increased by
899 thousand people which, is responsible for the decrease in LFPR.
If unemployment continues to fall
in early 2016, I expect that the rate will not fall far below 5.0%. This is because many of the retail jobs added
this fall, in light of the holiday season, are only temporary and will come to
an end shortly after Christmas. In the
long-term, when the business cycle drives unemployment to increase, the LFPR
will also increase. However, the influx
of job-seekers who are lagging, relative to the adult population, labor force,
and the nonfarm jobs added since November ’14, could contribute to an increase
in the unemployment rate.
Reference
The U.S. Bureau of labor Statistics. (2012). Employment
situation summary. Retrieved from http://www.bls.gov/news.release/pdf/empsit.pdf
No comments:
Post a Comment