One of the most important economic releases to come out each month is the Employment Situation Summary report issued by the Bureau of Labor Statistics. This report presents a range of data series related to the nation’s employment and unemployment. The report is compiled by the BLS and the Bureau of the Census, and contains data from two separate surveys: The Establishment survey, which collects data from a sampling of more than 400,000 businesses across the country, and the Household survey, which is based on a sampling of about 60,000 households. It is the most comprehensive look at the labor market until the annual GDP numbers are released – generally 3 months after the end of a given year.
The January report, which provides data for December 2013, has been controversial. We have posted a blog entry (The Good, The Bad and the Ugly) which provides some detailed opinions about the data (http://guerrillaeconomics.com/2014/01/the-good-the-bad-the-ugly/).
According to the December report, the number of employed persons rose by about 140,000 over the prior month, while the number of registered unemployed people fell by close to 500,000, to just 10.351 million. This brought the unemployment rate down to 6.7 percent (from 7.0 in November). While it is good to see the number of unemployed falling, rather than getting jobs, many of these people simply left the labor force, which fell by 347,000 people, bringing the labor force participation rate to its lowest level for the year, and lowest since Jimmy Carter was President (62.8 percent).
It is the change in the labor force participation rate that has been most interesting during the recent period of economic stagnation. Since peaking in 1997 at about 67.2 percent of working age people, the labor force participation rate has declined steadily, and it has literally fallen off of the cliff since the height of the recession in 2008. There are a number of reasons for this. First, there are more retired people in the overall labor force (which is considered to be people between the ages of 16 and 64). In addition, a larger percentage of younger people are attending college. Finally, there has been a “baby boomlet” that has led some working age women to leave the labor force. Even so, the declining labor force participation rate is cause for worry, and simple demographics do not explain it.
Unemployment among certain demographics is still at stunningly high levels. Among those under 20 more than one in five is unemployed. Almost half of those without a college degree are not in the labor force at all. Among African American men, unemployment stands at 11.5 percent and over a third of young black people are unemployed.
Among these demographics it is easy to understand why issues such as stagnant wages, rising income inequalities and the criminalization of drug use are important. As was mentioned before in these Economic Indicators, it is also unlikely that these Depression level unemployment rates mean that people are not actually working. Rather, it is likely that the underground economy has been growing more rapidly over the past few years. This will impact income tax revenues over time, as more people leave the traditional labor force and move into occupations like cigarette smuggling, drug sales, or even legitimate occupations like house cleaning while staying “off the books.”
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