June 1, 2012
The Bureau of Labor Statistics, while showing 69,000 jobs were added in May, also saw the unemployment rate move upwards from 8.1% to 8.2%. While the addition of any jobs is a good thing, most economists were predicting in the neighborhood of 150,000 new jobs, not 69,000. These employment figures shows that there are still underlying weaknesses in the US economy.
In addition to the unemployment rate, Labor Statistics also publishes a myriad of other data points, that paint a far more complete picture of the job market.
Here are a three interesting take away points from the May data:
1) Labor force participation rate increased from 63.6% to 63.8%
Essentially the labor force participation rate measures of all the people in the country over the age of 16, how many of them can be considered a part of the labor force. An increase in this percentage means there are more people in the workforce.
While the participation rate did increase over last month, (the increase probably cause the uptick in the unemployment figures) the fact that the last time it was this low was in the early 1983 is cause for major concern.
In the chart below, from the Labor Statistics shows the trends of the last 50 year with the boom from the mid-1960s to 1990 caused by the influx of women entering into the work force.
The downward trend from 2008 to the present however is largely because of the lackluster economy. Rather than continue try to find a job, roughly 4.6 million have left the workforce entirely. Many commentators have correctly pointed out, that were workforce participation levels the same now that they were at the beginning of 2008, unemployment rate would be north of 10%.
2) U-6 Unemployment Figures Increased from 14.5% to 14.8%
The Bureau of Labor Statistics has a number of metrics that they measure unemployment by, numbered U-1 through U-6. As the number goes up, the classification has a wider definition. The most common one heard on the news, and considered the “Official Unemployment Rate” is referred to as the U-3 rate.
The U-6 rate however, includes everyone considered under the U-3 rate, “plus all persons marginally attached to the labor force, total employed part time for economic reasons, as a percent of the civilian labor force and all persons marginally attached to the labor force.” In layman’s terms, it includes everyone who would like a full time job, but either only works part time, or have dropped out of the labor force entirely for lack of work.
With the decline in the workforce participation rate noted above, U-6 and less frequently U-5 unemployment figures have been cited as more accurate representation of the job market precisely because they capture those who have dropped out of the workforce entirely due to a lack of work, where as the Official Unemployment Rate does not count these people.
3) Long Term Unemployment Continues to be a Problem
Of those considered unemployed by the official unemployment rate, a staggering number have been so for a long time. Those who have been unemployed for more than 27 weeks, increased from 41.3% to 42.8% of the total. While it is still lower than it was a year ago, it appears that April’s drop was only temporary.
While the raw numbers show a drop of those who have been unemployed for more than 27 weeks, the continual slide in the workforce participation rate mentioned above means these individuals have left the work force rather than have found jobs.
As shown by these three data points, while the increase in the unemployment rate to 8.2% is bad enough, finer data points of the monthly jobs report show a much weaker jobs market than that 8.2% indicates. The general rule of thumb is that for a recovery to be fully underway, the US should be adding about 400,000 jobs a month. May saw less than 1/4 of that. Our friends over at AEI have pointed out that at the rate we’re going, the job market might not return to normalcy until as late as 2019.