Going beyond the unemployment rate

Each month, the federal Bureau of Labor Statistics releases a flood of knowledge about employment and unemployment within the U.S. And each month, the lion’s share of the eye goes to 1 determine – the unemployment price, which was a seasonally adjusted four.eight% in January. (The February report comes out on Friday.)

However the unemployment price is only one indicator of how the U.S. financial system is doing, and it’s not all the time the perfect one. Merely being out of labor isn’t sufficient for an individual to be counted as unemployed; she or he additionally must be available to work and actively looking for work (or on non permanent layoff). In any given month, the unemployment price can rise or fall primarily based not simply on how many individuals discover or lose jobs, however on what number of be a part of or go away the lively labor drive.

There are, in actual fact, 5 different month-to-month measures of what the BLS calls “labor underutilization” in addition to the official unemployment price, in addition to scores of different measurements – labor drive participation charges, employment-population ratios, common weekly wages, common hours labored and extra. Figuring out what these different knowledge factors are, the place they arrive from and the way they’re calculated is crucial in understanding what they do – and don’t – inform us concerning the nation’s employees.

Take the idea of unemployment. Since U.S. economists first started making an attempt to systematically measure unemployment in the 1870s, one of many fundamental points has been defining exactly what “being unemployed” means – since many individuals who don’t have jobs, akin to retirees and college students, might not really need paying work. (Because the BLS itself famous once upon a time, “Being employed is an observable expertise, whereas being unemployed typically lacks that very same concreteness.”)

Since 1945, the official definition has been that to be thought-about unemployed, you need to not solely not have a job however be obtainable for work (i.e., not too sick to work) and have actively appeared for a job prior to now 4 weeks. In the event you’re neither employed nor, in accordance with the official definition, unemployed, you’re not thought-about a part of the labor drive.

The BLS derives its unemployment knowledge from the Census Bureau’s Current Population Survey, which interviews about 60,000 folks every month (and never, as is typically supposed, by counting how many individuals drew unemployment advantages). The CPS covers all the civilian non-institutional population ages 16 and older, together with self-employed folks; jail inmates, residents of psychological services and houses for the aged, and active-duty army personnel are excluded. (A separate survey of 146,000 private- and public-sector employers produces the month-to-month nonfarm-payroll numbers.)

Since 1994, no main adjustments have been made in how unemployment is measured, although there have been some modest updates to the CPS over time. For instance, a 2010 change raised the higher restrict on reporting how lengthy somebody has been jobless from “99 weeks and over” to “260 weeks and over” with a view to higher monitor long-term unemployment.

As many observers have identified, the official unemployment definition leaves out some vital teams. The underemployed – part-time employees who would like to work full-time – are counted among the many employed. And discouraged employees – individuals who’d like a job however have stopped trying as a result of they don’t imagine any work is out there – aren’t counted as a part of the labor drive in any respect.

However the CPS asks folks much more than whether or not they're working or looking for work. Questions embrace how lengthy jobless folks have been out of labor, how not too long ago they appeared for work, why part-timers aren’t working full time, why folks select to not search for work, and even why folks with jobs might not have been working throughout the survey interval (for instance, in the event that they have been sick, on trip, quickly laid off or snowed in).

All that additional knowledge allows the BLS to calculate six totally different measures of labor underutilization, labeled U-1 by means of U-6, with broader or narrower parameters than the official unemployment price (which is called U-Three). The broadest, U-6, consists of all “marginally connected” employees (together with discouraged employees) and involuntary part-time employees. The seasonally adjusted U-6 price stood at 9.four% in January; since 1994 it has ranged from 6.eight% (in October 2000) to 17.1% (most not too long ago in April 2010). Whereas the U-6 sometimes runs anyplace from Three to 7 proportion factors increased than the common unemployment price, with the hole wider throughout recessions and narrower in good financial occasions, it tends to comply with the identical sample because the official unemployment price.

Past the unemployment price, a key metric within the month-to-month jobs report is the labor drive participation price – the share of the 16-and-over civilian non-institutional inhabitants both working or on the lookout for work. The participation price rose for a number of many years, peaked in early 2000 at 67.Three%, then started falling; in January it was 62.9%, about the place it was within the late 1970s. Labor economists typically agree that waves of retiring Baby Boomers clarify half (however not all) of the decline, which has been particularly steep for men in their prime working years.

There’s additionally the employment-population ratio, which measures employed folks as a proportion of the 16-and-over civilian non-institutional inhabitants. Although the ratio has some quirks, it’s much less affected by seasonal differences or short-term fluctuations in labor-market conduct than the unemployment price. In accordance with the January jobs report, the seasonally adjusted employment-population ratio was 59.9%, three-tenths of a proportion level increased than it was a 12 months earlier.

Just like the labor drive participation price, the employment-population ratio will be affected by extra folks retiring or deciding to return to high school. That’s why many labor-market economists deal with the 25-to-54 age group, which strips out most college students and retirees. In January, the employment-population ratio for that subgroup was a seasonally adjusted 78.2%, a determine that’s been fixed for the previous 4 months. Whereas that’s higher than it was throughout the lengthy hangover from the Nice Recession (solely 75.2% of 25- to 54-year-olds have been employed in January 2011), it’s nonetheless beneath the indicator’s pre-recession excessive (80.Three% in January 2007).

It’s additionally essential to do not forget that not all employment is created equal. Earlier than the Nice Recession, fewer than 20% of all part-time employees stated they have been working lower than 35 hours every week for financial causes, akin to slack demand or incapacity to search out full-time work. Through the stoop, that share jumped to a 3rd of all part-timers; the “involuntary part-time” share has fallen since, to 22.2% of all part-timers in January, however nonetheless is above typical pre-recession ranges.

Notice: This publish has been up to date with January 2017 unemployment knowledge. It was initially printed in June 2013.

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