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 214,000 in October, following an increase of 256,000 in the prior month. Overall this year, employment growth has been averaging about 222,000 jobs per month, slightly outpacing growth in the labor force of 138,000 per month. While this is positive, it is not enough to be bringing down the unemployment rate in any meaningful way. In fact, a net increase of just 84,000 jobs a month should bring down unemployment by only 0.65 points over the course of the year. In fact, the reported unemployment rate so far this year has fallen by 1.4 percentage points, from 7.2 to 5.8 percent, more than twice as fast as job growth suggests. This is an interesting phenomenon, and reflects the fact that two different surveys are used in the Employment Situation Summary release. While the survey of firms suggests that just 222,000 new jobs are being created per month, the household survey finds that the average number of people who report that they are employed is growing at a monthly rate of 316,500, or double the rate of growth in the labor force.
The differences in the surveys are well known, and economists have numerous ways of adjusting the data to try and figure out what is happening, but basically the establishment survey reflects traditional jobs in incorporated firms and the government, while the household survey contains family workers, the self employed, and marginal, or occasional workers. While the unemployment rate for those most directly attached to the labor force and entering traditional jobs, is falling by .12 percentage points per month, the rate for those who are marginally attached to the labor force, or working part time for economic reasons is down by just .067 percentage points – about half. This suggests that many people who are reporting that they are employed are working very few hours per month.
Even so, the recent jobs data have been good. The labor force participation rate, after having fallen for years, is beginning to stabilize at around 68 or 69 percent, and unemployment rates are falling across categories of age, sex and educational attainment. The only groups to see employment stagnating are younger African-Americans and black women, possibly reflecting the predominance of these groups in government occupations where there has been little net growth over the past year.
So while there are still large problems with unemployment for certain groups, and particularly for those most marginally attached to the labor force, many of these individuals are at least finding temporary work, or some sort of paid activity outside of traditional economic sectors. And while the drop in headline rates of unemployment may not completely reflect labor markets, the overall pace of job growth and employment is at least fast enough to absorb new entrants into the labor market at current levels.
From a business standpoint, outside of the most highly educated persons, where unemployment is consistently below 4 percent, there appears to be a sizable underutilized labor force, which will keep wages down for most unskilled and semi-skilled occupational titles.
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