No.

99 and
N d hi
his
driver became
unemployed a week
after I took this
photo. Sad.

Employment and Unemployment

Wh and
Who d why....?
h ?
All data in this presentation are from the U.S. Bureau of Labor Statistics, unless
otherwise
h i indicated.
i di d For current data
d go to http://www.bls.gov.
h // bl

(c) 2012-2014, Gary R. Evans. May be used only for non-profit educational purposes without permission of the author.
Sample from the reading:
Shows the job outlook, median pay, etc. of an aerospace engineer
Sample from the reading:
Shows the job outlook, median pay, etc. of an actuary.
 The highest paying occupations ...

Source:
Occupational
O tl k
Outlook
Handbook,
2014
 The dominance of health care in future growth ...

Source:
Occupational
O tl k
Outlook
Handbook,
2014
 Key Employment/Unemployment Stats
with values for February 2014
Year-ago
Year ago stats
• Unemployment rate: 8.7% (7.9%) shown in red.

• Civilian labor force participation rate: 63.0% (63.6%)

– slowly trending down
• Payroll report: +175,000 (+157,000)
– Stock market very sensitive to this statistical release
• Employment cost index (ECI): + 0.5% 4th Q 2013 (+0.5%)
– Rational expectations leading inflation indicator
• Productivity: +1.8% 4th Q 201 (-2.0%)
– Remember the importance in the AS/AD model; kept inflation at
bay.
y
Unemployment theory

• Frictional unemployment
– Information inefficiencies
– Imperfect
I f t searchh andd relocation
l ti activities
ti iti
• Structural unemployment
– Mismatch
Mi t h between
b t skill
kill levels
l l needed
d d andd those
th
available in a changing economy
• Cyclical unemployment
– Due to downturn in the business cycle
– Can add as much as 5% or more to UR
 Change in Nonfarm Payroll
thousands
Monthly 1999 - February 2014,
Monthly, 2014 SA
600

Dot-com
400 Now
recession
200

-200

-400
The stock market is very sensitive to
-600
600
these data,, as are ppolitics.
The last release was Friday, March
-800 7, at +175,000, an OK number.

-1000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Source: Bureau of Labor Statistics database, Series ID CES000000001, SA, one month change.
 "Official Unemployment" definition:
Who is counted as unemployed?
Persons are classified as unemployed if they do not have a job, have actively looked
for work in the prior 4 weeks, and are currently available for work.
Who is not in the labor force?
All members of the civilian noninstitutional population are eligible for inclusion in the
labor force,
force and those 16 and over who have a job or are actively looking for one are
so classified. All others--those who have no job and are not looking for one--are
counted as "not in the labor force." Many who do not participate in the labor force are
going to school or are retired. Family responsibilities keep others out of the labor
f
force. Still
ill others
h have
h a physical
h i l or mentall disability
di bili whichhi h prevents them
h from
f
participating in labor force activities.
Source: U.S. Government Bureau of Labor Statistics web site, www.bls.gov. Most of the data in
this presentation is from that site.
site The data are compiled from monthly surveys taken by the
Department of Census in a survey called the Current Population Survey (CPS).
 "Official" Unemployment Rate
1960--Feb 2014, monthly,
1960 y % of civilian workforce
12

10

Mean: 6.11
6.11%
8

Red represents the trough of business

2 cycles. In some cycles, unemployment
lags the cycle by a few months.

0
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Source: Bureau of Labor Statistics database, Series ID LNS14000000, SA, one month change.
 A hidden statistic: The "Special
Unemployment Rate"
The Department Labor determines the size of the civilian labor force and the
percentage of that labor force unemployed by doing a monthly survey (it is not
determined by the number of people collecting unemployment compensation as
is sometimes reported in the media). As stated in a previous slide, the
unemployed
l d are defined
d fi d as those
h who
h declare
d l theyh have
h "actively
i l looked
l k d for
f
work in the last 4 weeks." That count is the numerator and the civilian labor
force is the denominator.
But they ask another question in the survey. They determine whether the
respondent is "neither working nor looking for work but indicate that they want
and are available for a job and have looked for work sometime in the recent
past." Some of these are classified as "discouraged workers." When this number
is added to the numerator and published in obscure Table A-12 U6, it is
referred to as the "Special" Unemployment Rate.
It should be called the Real Unemployment Rate.
 Official and Special Unemployment Rate
Monthly, 1999 – Feb 2014, SA(O), NSA(S)
% of labor force
20.0

18.0 Jan 2014:

Average:
16.0 13.1%
11.0%
14.0 6.7%
8.2%
12.0

10.0

80
8.0

6.0

4.0

2.0

0.0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Special (real) Unemployment Rate Official Unemployment Rate

Source: Bureau of Labor Statistics database, Series ID , LNU03327709 NSA, original data.
 Average weeks unemployed
1999-- Jan 2014, monthly,
1999 y civilian workforce
45
Before the double millennium recessions, this
40 was typically
yp y less than 15 weeks. In Fall 2012
it finally started dropping below 40. Because of
35 the high cost of unemployment insurance, this
has huge cost implications for governments.
30

25

20

15

10

5
Source: Bureau of Labor Statistics database, Series ID , LNS13008275 SA, original data.
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
 Unemployment by Educational Level
F b
February 2014
2014, NSA
NSA, % off that
th t category
t off llabor
b fforce above
b age 25

3.4
College degree

6.3
College less than degree

7.1
High school only

No high school diploma 11.1

0.00 2.00 4.00 6.00 8.00 10.00 12.00

SouceL BLS News Release, The Employment Situation February 2014, March 7, 2014, Table A-4.
 Unemployment by Marital Status
by gender
gender,, above age 25, % of cohort, January 2013

8.6
Single Divorced Widowed
11.1

9
Single Never Married
11.4

Note: BLS no longer

seems to keep current
52
5.2 data on this
this. In Feb 2014,
2014
Married Married men: 3.8%
5.2 Married women: 4.2%
Single mothers: 9.1%

0 2 4 6 8 10 12
Women Men
 Unemployment by Race/Ethnicity
by gender
gender,, above age 16, % of cohort, February 2014

8.8
Hispanic
73
7.3

6.0
Asian
6.0

9.6
Black
13.5

5.2
White
6.2

0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0

Female Male
SouceL BLS News Release, The Employment Situation February 2014, March 7, 2014, Table2 A-2, A-3.
 Summary Implications
of thee p
o previous
ev ous sslides
des
• The aggregate unemployment rate tells you nothing about
the uneven effects of business cycles
• In terms of employment, the impact of an economic
downturn depends upon
– educational level,
level the higher the level; the lower the likelihood of
employment
– martial status; if married you are less likely to be unemployed
(there is a general correlation between marital status and economic
well-being, especially when broken down by race)
– race; huge gaps in unemployment levels by race, especially for
blacks and even more so for single black men - there is clear
correlation of this to educational level - what remains can probably
be explained by discrimination and by milieu (environment) in
which personal development takes place
– gender; fortunately, that is starting to even out in the modern era,
although not necessarily on compensation.
Labor Force Participation Rate (age 16+)
b gender,
by d 1948
1948--2008,
2008 10 years. plus
l Feb
F b 2014

100
90 86.6
84.2
80.1 77.9
80 76.2 74.9 73.0
68.7
70
59 8
59.8 59 5
59.5
60 56.6 57.2
50.0
50
41.6
40 37.1
32.7
30
20
10
0
1948 1958 1968 1978 1988 1998 2008 2014

Men Women
 Interpretation of the LFPR data
(previous
( i slide)
lid )
• The rise in the female labor participation rate in the 50
years between 1948 and 1998 is largely explained by
– The post-war breakdown in the structure of the "traditional" family
where the husband worked and the wife didn't, encouraged by the
active
ti and d essential
ti l participation
ti i ti off women in i manufacturing
f t i
during the war effort.
– At the family level, a desire for or the necessity of raising family
income.
– More opportunities for women in the workplace, especially in
professions like law, medicine, and college education.
• The decline in male participation is largely explained by an
aging male population (retirement)
• The decline on both in recent years has the same reason.
reason
 Current European Unemployment
Sweden

Spain

Portugal
What does this bode
politically for Europe?
Italy

Greece
Unemployment Rates
Select Eurozone Countries and the
Germany United States, 2013

UnR UnR
Country 25+ 16-25
France United States 6.1 15.5
Eurozone (17) 10.8 24.0
Finland 6.5 19.9
Finland France 9.3 25.5
Germany 5.0 7.9
Greece 22.0 55.0
Italy 10.3 40.0
Eurozone (17) Portugal 14.8 37.7
Spain 24.0 55.7
Sweden 5.7 23.4
United States
Source: EuroStat , March 10, 2014

00
0.0 10 0
10.0 20 0
20.0 30 0
30.0 40 0
40.0 50 0
50.0 60 0
60.0
Unemployment rate ages 16-25 Unemployment rate 25+

Source: Eurostat, Code tsdec460 date shown.

 http://www.bbc.co.uk/news/business-19762941
(Spanish unemployment video)

Source: Prepper Podcast Radio Network, “Spain and Greece Compete for Worst Youth
Unemployment in EU (Wait Until You See the Numbers).” January 25, 2013
 The
Th Philli
Phillips Curve
C Controversy
C t
The Phillips curve represents the relationship
between the rate of inflation and the
unemployment rate. Although several people
had made similar observations before him, A.
W. H. Phillips published a study in 1958 that
represented a milestone in the development
of macroeconomics. Phillips discovered that
there was a consistent inverse,
inverse or negative,
negative
relationship between the rate of wage
inflation and the rate of unemployment in the
United Kingdom from 1861 to 1957. When
unemployment was high, wages increased
slowly;
s o y; when e unemployment
u e p oy e t was as low,
o , wages
ages
rose rapidly. The only important exception
was during the period of volatile inflation
between the two world wars.
(From the article by Kevin Hoover cited below).

Does the PC define a valid policy

tradeoff option today? Controversial.
Data so flat and calm in recent years
An original Phillips Curve vintage 1960s. See Phillips
Curve by Kevin D. Hoover,
that it is hard to tell,
http://www.econlib.org/library/enc/PhillipsCurve.html
 Phillips
p Curve Modern Data

Unemployment Inflation Pairs Byy casual inspection

p on a
1960-2008
Inflation rate scatter diagram using
16 annual data over 48 years
14 there is no obvious
12 tradeoff Using qquarterly
tradeoff. arterl
10 or monthly data over
8 shorter periods of time
6 (allowing for a shift in the
4 tradeoff line) may show a
2 tradeoff, but probably not.
0
0 2 4 6 8 10 12

Unemployment rate
 Solutions

• Higher education levels and

“flexible
flexible” education
• Better information flows
– Monster.com
Monster com The Ladder etc.
etc may help
• Unemployment compensation
• Retraining opportunities
– [teacher’s thoughts on private education]
Source: National Public Radio Planet Money: “The
The Scariest Jobs Chart
Isn’t Scary Enough,” by Jacob Goldstein, March 7. 2013
Source: National
Public Radio Planet
Money: “The
Scariest Jobs Chart
Isn’t Scary Enough,”
by Jacob Goldstein,
March 7. 2013