Posts Tagged ‘u-6 unemployment’

7.4%: Good news you can’t use

4 August 2013

Another first Friday, another BLS employment report, and the headline news is pretty good: In July the official unemployment rate fell to its lowest level, 7.4%, since 2008. If you were a White House publicist that morning, you could have noted that fact and also that the comprehensive U-6 unemployment rate (which includes discouraged job-seekers and involuntary part-timers) also fell, from 14.3% to 14.0%. And then you could have taken the rest of the day off.

The improvement in the U-6 unemployment rate was not enough to cancel out the previous month’s 0.5% point jump. The U-6 rate was below 14% in March, April, and May. The improvement in the official (U-3) rate was exactly counterbalanced by an 0.1% point drop in the labor force participation rate (to 63.4%). The employment/population ratio was unchanged (at 58.7% for all adults, and 75.9% for prime-age (25-54) year-old adults). The decline in participation defies easy explanation, as it involves three distinct subgroups — adult white males, white teenagers, and adult black females — but not others. (A notable recent trend, by the way, is for fewer people, especially young women, to not enter the work force.)

The unemployment rates come from the BLS’s survey of households. The BLS’s other survey, of employers (the “payroll survey”), is disappointing relative to the previous month’s. June’s report showed the economy with net job growth of 195,000, plus upward revisions of 70,000 jobs to the previous two months. July’s report has net job growth of 162,000, and downward revisions of 26,000 to the previous two months. At this month’s pace, it would take us a year longer to get back to 6% unemployment than at last month’s pace (using the handy Jobs Calculator of the Atlanta Fed).

The stock and bond markets seem to have gotten this report about right. The stock market barely budged, and the 10-year Treasury bond rate actually fell somewhat, from 2.72% to 2.60%, despite the improvement in the official unemployment rate. Both markets watch the employment reports with an eye toward the Fed’s next move on interest rates and “quantitative easing” (“QE”; special purchases of long-term bonds and mortgage-backed securities), all the more so after the Fed recently announced that it would start “tapering” off QE when unemployment falls to about 7.0% and start raising its key interest rate when unemployment falls to about 6.5%. While we’re a notch closer to those rates now, the trend does not look good. Treading water is about all this labor market is doing, and the markets seem to get that.

Employment report: Black and white is always gray

13 July 2013

Has the dust settled yet on last Friday’s BLS employment report? The big news was that the economy generated 195,000 new jobs in June, better than expected, and revised data show 70,000 more new jobs in April and May than previously reported. The basic unemployment rate was unchanged at 7.6%, but the new 265,000 jobs were enough to set the media and markets aflutter. Most articles I saw hailed the jobs news as fabulous. The S&P 500 had a good day, up 1.6%. Ten-year Treasury bond rates shot up 21 basis points (from 2.501% to 2.715%), in anticipation of higher interest rates to come, either from the natural forces of higher demand for credit in a stronger economy or from the Fed’s “tapering” its expansionary Little Depression-era policies.

The higher jobs numbers are welcome news, to be sure. Using the Atlanta Federal Reserve’s wonderful jobs calculator, at a rate of 195,000 new jobs per month, the US economy would be back to 6% unemployment by September 2015 and 5% unemployment by February 2017. Not great, but at least a visible end of the tunnel. For a long time the math was much more dismal — e.g., not until 2020. With the new revisions, the average job growth for 2012 is actually a bit better than June’s, 202,000. (Which, by the way, is better than in 2010 or 2011.) Plug that into the jobs calculator and we hit those targets three months sooner.

But that’s only half the story. The BLS employment report gives the results of two surveys: the “payrolls survey” of companies, above, and the “household survey” of individuals. Because these are two different survey populations, often the results are very different. The total number of jobs in the household survey rose by 189,000, but the number of new part-time jobs was more than twice that amount, 432,000. The difference is a whopping 243,000 drop in the number of full-time jobs. Ouch. The number of people working part-time because of “slack work or business conditions” rose by 352,000; the only good news here is that the number of people working part-time because they could not find full-time worked dropped a bit, by 69,000. (Hat tip: Paul Solman. The payrolls survey, by the way, does not distinguish between full- and part-time work, though it shows no change in average weekly hours, which implies no big change.)

This shift from full-time to part-time work may reflect a trend of employers’ increased preferences for part-time over full-time workers; for example, in the wholesale and retail trade sector, since 2006 full-time employment is down 500,000 while part-time jobs are up 1,000,000. Avoiding the “Obamacare” employer mandate for firms with 50+ workers would be another logical reason, and I wonder if this trend is a reason for the administration’s recently announced one-year delay of the mandate. But neither of these trends is new, so I don’t know why June would have seen such a particularly huge shift to part-time.

We see the same pattern in my favorite alternative unemployment rate, the U-6 unemployment rate, which includes part-time workers who would prefer full-time work and “discouraged workers” who want a job but have given up looking. Unlike the standard unemployment rate, which stayed at 7.6%, this comprehensive jobless shot up from 13.8% to 14.3%. Part of the rise was due to more discouraged workers, but most of it was from an increase in involuntary part-timers.

Overall, not a great employment report. It’s possible the household survey, which economists tend to regard as less reliable than the payrolls survey (even though it’s the one we use to derive the all-important unemployment rate), was just weird this month. For the past 12 months as a whole, we do not observe a shift from full-time to part-time work. The net increase in jobs was 2.4 million, and slightly under 10% of that was part-time jobs, about the same as for the labor force as a whole (i.e., including old and new jobs).

The bond market may have taken a while to digest the ambiguous nature of this report, as long-term Treasury yields, after rising sharply on the Friday of the report, lost half of that increase in the next week. The stock market continued to boom, perhaps because they see the rise in part-time employment as promising greater flexibility and profitability on the part of corporations. But of course these prices change for a lot of reasons.

 

Something to sneeze at (the new employment report)

4 May 2013

Friday’s big economic headline was that the unemployment rate fell to 7.5%, the lowest since 2008. And payroll employment rose by 165,000, somewhat better than expected.  The news was good enough to push the Dow Jones average over 15,000 for the first time, and it obviously could have been worse, but what an age of diminished expectations we are in. Almost four years since the 2007-2009 recession officially ended, and we’re at 7.5% unemployment. The comprehensive “U-6” unemployment rate, which includes all discouraged job-seekers and part-timers who want to work full time, actually edged up slightly to 13.9%. And the employment-to-population ratio was essentially unchanged at 58.5%. All not good.

As for the why and what do we do now, Jared Bernstein nails it a lot better than I could.

Glad tidings?

8 December 2012

The US unemployment rate fell to a four-year low of 7.7% in November, it was reported yesterday. The BLS (Bureau of Labor Statistics) report also noted that the economy added 146,000* jobs in November, a better figure than expected, considering Hurricane Sandy. Yet the report did not get a particularly warm reception. Analysts and cynics instantly threw cold water on these seemingly good numbers by stating that the unemployment rate fell only (or largely) because masses of unemployed people stopped looking for work in November and therefore were no longer counted as unemployed. Were they right? Off to the report’s detailed tables!

First, the non-detailed tables. Table A suggests that more than 100% of the drop in the unemployment rate came from people leaving the labor force, which could mean unemployed people giving up looking and no longer being counted as unemployed or in the labor force. The unemployment rate and labor force participation rates both fell by two-tenths of a percentage point, unemployment from 7.9 to 7.7% and labor force participation from 63.8 to 63.6%. The number of employed fell by 122,000*; the number of unemployed fell almost twice as much (229,000); and “not in labor force” rose by 542,000. So it would seem that a lot of people stopped looking.

(*That’s right — the same report that says the net change in jobs in November was +146,000 also says it was -122,000. The reason is that the BLS conducts two different surveys, one of employers (the “establishment survey” of payrolls), which had the positive figure, and one of households, which had the negative one. Barry Ritholtz had a nice cranky comparison of the two a few years back that’s still worth a look. Unfortunately, even though many economists regard the employer survey as more reliable, it tells us only about things like employment, hours, and wages, not about the people in or out of the labor force. For that we still need the household survey. Back to it.)

(more…)

Idle times

2 December 2011

Today’s new Bureau of Labor Statistics report reveals the instant cure for unemployment: Stop looking for work. I say that not as advice or to be callous, just to explain how it is that November’s meager job growth could coexist with a pretty sizable drop in the unemployment rate, from 9.0% to 8.6%.

Technically, the precise reason is that the low number of jobs added, 120,000 (which is well under the 210,000 needed to restore 5% unemployment in eight years) comes from the BLS’s survey of companies (the “establishment survey”), whereas the 8.6% number comes from its separate survey of households. But even in the household survey, the basic story is the same. The longstanding economic definition of unemployed is not merely “not employed” but “not employed yet actively looking for work.” And it looks like the bulk of the reduction in unemployment was from people who stopped looking.

In the household sample, total unemployment fell by 594,000, which looks great, except that employment grew by less than half that (278,000). “Not in the labor force” (i.e., not working and not looking) grew by much more (487,000). The labor force itself (employed plus unemployed) shrank by 315,000. It’s hard to blame people for giving up looking for work when there are currently 4.2 times as many unemployed as there are job vacancies. (The number was 1.8 when the recession began three years ago.)

Rather than focus on the official unemployment rate or broader measures like the U-6 unemployment rate (now 15.6%; includes discouraged job-seekers and involuntary part-timers), I prefer to focus on the employment-to-population ratio, which is a simpler measure that avoids messy distinctions (e.g., actively vs. passively looking for work vs. not looking at all but might take a job if offered). The employment-to-population ratio has hardly changed at all since September 2009, fluctuating narrowly around its current value of 58.5%. (By comparison, it was 62.0% at the worst of the 2001 recession hangover.)

One could wax metaphysical about work as a bourgeois construct and argue that people are finding spiritually rewarding alternatives to work, but that doesn’t seem to be the case for all that many people here. The BLS report shows that 6,595,000 adult Americans are currently not working and not looking but want to work now. That number (seasonally adjusted) has never been larger — not even at the trough of the recession in mid-2009 and not even when the unemployment rate was over 10%.

If the labor force keeps on shrinking, the official unemployment rate could fall fast, but that’s probably not how we want to get there.

UPDATE 3 DEC. 2011: Brad DeLong does the number crunching I was too lazy to do and produces a specific breakdown of how much of the unemployment rate decline came from labor force shrinkage (25 basis points, or 0.25 percentage points) and how much came from employment growth (15 basis points). So if nobody had left the labor force, the unemployment rate would have fallen to 8.85%.

As good as it gets, and still lousy

7 October 2011

The best that can be said about today’s BLS employment report is that it revealed 202,000 new jobs, which is in the right ballpark for how many jobs the economy needs to generate each month for the next eight years in order to get back to a normal unemployment rate. The bad news is that only 103,000 of those jobs are from last month. The other 99,000 are from revisions to July and August, which push those months’ net-new-jobs totals up to 127,000 and 57,000. So the average employment gain for the last three months is less than half of what we need to be on that eight-year recovery track.

It gets worse. Quoth the BLS: “Since April, payroll employment has increased by an average of 72,000 per month, compared with an average of 161,000 for the prior 7 months.” So now we’re down to about one-third of the needed monthly job creation to be on that eight-year recovery track.

NPR’s Planet Money reports that the job market is bad across all demographic groups, even the college educated. While college-educated people age 25 and over are the only group with an unemployment rate below 5%, the BLS historical tables show that the current rate (4.2%) is more than double what it was four years ago (2.0%). And the employment-to-population ratio of this group has fallen almost 3 percentage points (to 73.0%) over the same span.

The employment-to-population ratio is really where the worst news is. Even the expanded unemployment rates, which include discouraged job-seekers and/or involuntary part-timers, have shown some improvement over the past two years. But the improved unemployment rates seem to be entirely an artifact of people dropping out of the labor force. The labor force is actually slightly smaller today (154 million) than it was in mid-2009, at the trough of the recession. The economy has added about 1.6 million jobs since the employment trough of October 2009, but that hasn’t been been enough to keep pace with population. The current employment-to-population ratio (58.3%) is actually slightly lower than that of October 2009 (58.5%), even as the main unemployment rate has fallen from 10.1% to 9.1%.

Along those lines, the BLS’s “Alternate Measures of Labor Underutilization” are instructive. The official (U-3) unemployment rate counts only the jobless who say they are actually looking for a job. The U-4 unemployment rate includes “discouraged workers,” i.e., jobless people who are not looking but would take a job if one came along. The U-5 unemployment rate adds in “marginally attached workers,” who are a similar state of joblessness. Yet the U-5 unemployment rate (10.5%) is only 1.4 percentage points higher than the official rate, which suggests that most of the unemployed are either (1) still looking for work or (2) really not even thinking about it, i.e., have found life, or despair, or something,  outside the labor force.

The oft-cited U-6 unemployment rate, which is by far the highest, includes part-time workers who cannot get full-time work. This one is 16.5%, so most of the addition comes from the involuntary part-timers. So 6.0% of the labor force is involuntarily working part time. How does 6% compare with other times? The BLS data here go back only to 1994, so it’s hard to be definitive, but about 3% seems to be the norm. That’s what it was for most of 1994-2007, including even the recession and slow recovery of 2001-2003. That’s right — the involuntary-part-time employment rate is double what it was in the last recession and “jobless recovery.” It edged up to 4% in 2008, above 5% in 2009, reached 6% in September 2010 and has hovered around there ever since. That’s a lot of involuntary part-time jobs, and it adds another dimension of lousiness to the current depression. Also, if those are the kind of jobs this economy is creating, it’s no wonder that many people would rather hold onto their unemployment benefits, which, depending on their previous jobs, might pay more. But that’s a subject for another post.

Pouring water on a drowning man

10 July 2011

Today’s New York Times editorial, “The Worst Time to Slow the Economy,” says it all. Voting against raising the debt ceiling is foolish even in the best of times, and it’s insanity right now. Congress already voted to raise the debt ceiling, or to do the equivalent, when it passed a budget with a deficit. It makes no sense for Congress to vote on the budget again.

Is the economy already in a double-dip recession? The rising unemployment rate (up to 9.2% for June, as announced on Friday, or 16.2% using the more inclusive U-6 unemployment rate) suggests it might be. See John Nichols’s column in The Nation for a good account of the unemployment crisis. Nichols says this is President Obama’s biggest problem, pointing out that no president since FDR has won reelection when unemployment was over 8%. (Nichols said over 7%, but he may have meant “over 7% and change,” as Reagan won reelection in 1984 when unemployment was about 7.5%. But at least it was falling, as it was for FDR in 1936 and 1940.)

While Nichols is correct that high unemployment is Obama’s biggest problem, it’s still true that the debt-ceiling impasse is Obama’s biggest worry. An act of supreme self-sabotage like not raising the debt ceiling could put the economy into free fall. As far as I can tell, Republicans who say it’s no big deal, like most of their presidential candidates, either (1) cynically are hoping it brings about an economic avalanche that sweeps Obama out of power or (2) cluelessly believe the Tea Party rhetoric about how “spending” has caused our current woes and think any shock that compels spending cuts will actually be good for the economy. It’s as if they were taught government purchases were a negative entry into GDP instead of a positive, i.e., GDP = Consumption + Investment + Net eXports – Government purchases, instead of GDP = C + I + G + NX.

If we’re lucky, the Constitution — in particular, the line in the 14th Amendment that says “The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned” — will save the day. The whole concept of a debt ceiling as something that Congress can refuse to raise, even to pay off previously issued debt, looks unconstitutional to me. (Former Reagan adviser Bruce Bartlett has forcefully raised this option.) But then again, it’s up to the Supreme Court to make that determination, and, as far as I know, nobody has asked them to yet. Harvard Law School Professor Laurence Tribe, in a New York Times op-ed that I otherwise tended to find unconvincing, points out that someone with standing would have to sue the government and that “increased interest rates would have already inflicted terrible damage by the time the Supreme Court ruled on the matter.”

So maybe the Constitution won’t ride to the rescue. Is there hope for a long-term bipartisan budget deal that could convince Congressional Republicans to raise the debt ceiling? And could such a deal be amenable to those of us who don’t want to shred the social safety net? I guess we’ll find out in a couple weeks.

If we make it through December

3 December 2010

The BLS unemployment report for November is out, and it ain’t pretty.  Less than a third as much job creation (+39,000) as expected, not nearly enough to absorb new entrants into the labor force, so the official unemployment rate edged up to 9.8%.  (The comprehensive U-6 unemployment rate was unchanged at 17.0%.)

The private sector added 50,000 more jobs, and the government shed 11,000 jobs.  It is a bit hard to disentangle private sector jobs from the government, in view of the fact that the $787 billion stimulus went mostly to the private sector as opposed to new government jobs, but it is rather remarkable how little the government is doing in terms of direct job creation.  At the federal level this comes down to politics — in this conservative age, creating 3.5 million temporary government jobs, as the New Deal did each year, is considered a bad thing.  Indirectly creating or saving 3.5 million jobs, as the Obama Administration credits the stimulus with having done, is politically viable (or was in early 2009) but hard to prove, which is probably why the stimulus is unpopular with most of the public.  At the state and local level, of course, it comes down to balanced-budget requirements — with tax revenues down for the count, everyone’s cutting government payrolls to try to close the budget gap.  (Without emergency federal aid to make up the difference, the recession gets magnified at the state and local government level.)   If I eyeballed the numbers correctly, employment is down for the year at all three levels of government.

The only good news I noticed in the report was that the number of temp workers, a leading economic indicator of employment, increased for the fourth straight month.  (And even then, the increase is smaller than in several months earlier this year.)  Another leading indicator, weekly hours worked, did not improve, instead holding steady at 34.3 hours.

Now, the unemployment rate is a lagging indicator, and there are positive signs of recovery elsewhere, but that’s cold comfort to the nation’s 15 million unemployed. Seems like we’re back to where Merle Haggard  was in 1973, especially with Republicans in Congress so far refusing to extend unemployment benefits for the long-term jobless:

Automatic destabilizers

4 July 2010

Going into this fourth of July weekend, we learned that the U.S. economy shed 125,000 jobs from May to June and that 16.5% of Americans are either unemployed, involuntary working part-time, or have given up looking.  (That’s the “U-6 unemployment rate.”)  We also learned that median duration of unemployment is now almost six months; it rose to 25.5 weeks, up from 18.2 weeks a year ago.

Last week the House of Representatives voted to extend unemployment benefits for the long-term unemployed, as is customary in times of very high unemployment, but the Senate failed to do the same.  The 58-38 vote in favor was not enough to overcome that repugnant, anti-democratic obstacle known as the filibuster. Senate Minority Leader Mitch McConnell said he and the Republicans could not support the extension of benefits unless they were paid for with equivalent spending cuts elsewhere, like in the stimulus bill.  In other words, prudence dictates that we rob Peter to pay Paul.

It’s one thing to be against a stimulus package because the country’s debt level is too high.  It’s not my position, but it is the position of reasonable, otherwise Keynesian-minded economists like Willem Buiter and Jeffrey Sachs.  But traditionally a big thing that mitigates recessions is the “automatic stabilizers” of which occur even without Congress passing new tax cuts or spending programs.   Taxes go down because incomes are down, and spending on unemployment and welfare benefits goes up because more people qualify for them.  For Congress to cut off one of the most important automatic stabilizers is not only callous but sheer idiocy.  Yes, the national debt is a problem, but there are fates worse than debt.  Obsessing about debt during an economic depression is like worrying about cellulite while you’re starving to death.  (Krugman piles on here and here.)

Here’s hoping that the ranks of the unemployed soon include McConnell and the other senators who opposed extending unemployment benefits.  (The would be every Republican except the two from Maine, and Democrat Ben Nelson.)

Unemployment

8 January 2010

And 2009 ends with a third straight month of double-digit unemployment, the Bureau of Labor Statistics announced today.  The official unemployment rate is 10.0%, same as November; the more comprehensive “U-6” rate of unemployment, underemployment, and discouraged job-seeking is 17.3%.

Will add more later.  Meanwhile, The Replacements pretty much said it all about the job market back in 1981: