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 (BLS). 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 latest BLS data shows that total nonfarm payroll employment increased by 248,000 in September, beating the consensus expectations of 215,000. Growth was seen in the areas of professional and business services, retail trade, and health care. However, in terms of the number of job gains that are expected at the peak of an expansionary cycle (over 250,000 per month), 248,000 is still a low number and reflects the slow pace that the US has exited the recent recession.
Reported unemployment fell by 329,000 to 9.3 million, which is a rate of 5.9 percent. This is down from a rate of 6.1 percent in August. With regard to demographics, improved unemployment rates were seen for adult men, whites and Hispanics, while those for adult women, teenagers and blacks saw little change over the month.
The BLS report also shows the civilian labor force participation rate (which is the labor force as a percentage of the population) continues to fall. After hitting a high of 67.1 percent between 1997 – 2000, the labor participation rate fell to its lowest point since 1977 in 2013, at 63.2 percent. This is one of the most concerning facets of the current recovery, and in fact, the actual number of people employed in the country only reached pre-recession levels 5 months ago.
While there are demographic reasons for the decline in work, there are also more incentives to stay out of the labor force. Demographically, the population is aging and living longer so there are more retired people in the overall labor force (which is considered to be all employed and officially unemployed people over the age of 16). Secondly, a larger percentage of younger people are attending college. While this is a benefit in the long term, it has pulled down the labor force participation rate. Finally, there has been a “baby boomlet” that has led many working age women to leave the labor force. In addition, easier access to long term unemployment benefits disguised as disability payments, and growth in the underground economy are likely leading to reductions in the official workforce.
Since one of the main avenues for future economic growth is a growing labor force, the precipitous decline in the labor force participation rate is something that needs to be watched as an indicator of future demand, price pressure and wage growth. Source: Bloomberg, Econoday Economic Calendar, “Employment Situation”, October 3 2014, [http://bloomberg.econoday.com/byshoweventfull.asp?fid=461123&cust=bloomberg-us&year=2014&lid=0&prev=/byweek.asp#top].
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