Debunking US unemployment numbers

Source: www.globalresearch.ca

Do not mistake a rosy Bureau of Labor Statistics report for something that it is not. The unemployment rate did decrease in April, but only because 800,000 people exited the labour force.

When unemployment numbers were released on May 2nd, spring seemed a little sweeter for US policy makers. The unemployment rate declined by 0.4 percent to 6.3 percent, caused by a rise of 288,000 persons employed according to the payroll survey. Similarly, the household survey data provided cause for optimism by reporting a decrease in the number of unemployed persons by 733,000.

This makes for a piece of very good news at a time when job creation is one of the key components of political success. As published by the Bureau of Labor Statistics (BLS): “Employment gains were widespread, led by job growth in professional and business services, retail trade, food services and drinking places, and construction.”

What tantalising headlines like these fail to convey is the fact that there are details lost in translation from the tedious data collected by the Current Population Survey and the Current Employment Statistics to the brief news reaching consumer, employees and citizens hoping for an end to the recession.

The fact that the number of unemployed persons decreased does not in itself imply an improvement. This is due to the way in which that number, and as a corollary the unemployment rate, is calculated. More specifically, the total workforce, which is the denominator determining the rate of unemployment, excludes discouraged workers who have given up looking for a job, people retiring early for want of jobs, people returning to education for want of jobs, and people staying in education for want of jobs.

Curiously, several other figures in the BLS jobs statistics for April are much less encouraging. The number of people in employment for instance fell by 73,000, and the number of people in involuntary part-time jobs rose by 54,000. The total civilian labour force declined by 806,000, complemented by a rise of 988,000 in the number of people not in the labour force. In 2013, the population rose by 2.26m and the labour force increased by 62,000. However, those not in the labour force rose by 2.2 million.

The message behind these numbers is that while the population continues to increase, the labour force is stagnant. People are dropping out of the labour force in hordes, and that is what accounts for the low, single-digit unemployment rate.

As shown in table 1 below, the annual growth of the segment not in the labour force has steadily been above 2 percent, and mostly closer to 3 percent. Consequently, the participation rate, which is the ratio of the labour force to the total civilian, non-institutional population, has declined by 3.4 percentage points since 2002. But the labour force grew by just over 1 percent. Furthermore, growth was negative in the three years prior to 2013, despite increases in the civilian population of 0.86 percent in 2010, 0.86 in 2011 and 2.29 in 2012.

The official US unemployment rate in April 2014 was 6.3 percent. If, however, we add up the people who want a job, but do not believe they can find one, the people stuck in a part-time job, who would rather work full-time and those who dropped off the unemployment rolls because their benefits ran out, the rate is almost twice as high, as shown in table 2.

The rate would be even higher if it was not for the vast numbers simply dropping out of the labour force. To sum up: the unemployment rate did decrease in April. But only because 800,000 people exited the labour force.

Table 1. Annual averages of US labour statistics

Labour force (1,000 persons) Change in labour force (pct.) Total not in the labour force (1,000 persons) Change in total not in the labour force (pct.) Not in the labour force, but want a job (1,000 persons) Participation Rate (pct.)

2006

149,320

1.30%

77,387

0.81%

4,786

66.2%

2007

151,428

1.41%

78,743

1.75%

4,703

66.0%

2008

153,124

1.12%

79,501

0.96%

4,983

66.0%

2009

154,287

0.76%

81,659

2.71%

5,894

65.4%

2010

154,142

-0.09%

83,941

2.79%

6,059

64.7%

2011

153,889

-0.16%

86,001

2.45%

6,437

64.1%

2012

153,617

-0.18%

88,310

2.68%

6,558

63.7%

2013

155,389

1.15%

90,290

2.24%

6,390

63.2%

Source: Bureau of Labor Statistics, Current Population Survey

Table 2. BLS’s table A-15: Alternative measures of labour underutilization

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Source: US Bureau of Labor Statistics

 

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Categories: Economics, North America

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