The U.S. Bureau of Labor Statistics (BLS) released the newest unemployment data for June 2016 on Friday July 8th. According to the BLS, the current “Seasonally Adjusted” Unemployment Rate is 4.9% up from 4.7% for May. The current “Unadjusted” rate is 5.1% up from 4.5% in May. See: Current Unemployment Rate Chart below.
According to the BLS Commissioner’s report for this month:
“Total nonfarm payroll employment increased by 287,000 in June, and the unemployment rate rose to 4.9 percent, the U.S. Bureau of Labor Statistics reported today. Job growth occurred in leisure and hospitality, health care and social assistance, and financial activities. Employment also increased in information, mostly reflecting the return of workers from a strike.”
Even though employment increased the BLS also said, “The unemployment rate increased by 0.2 percentage point to 4.9 percent in June, and the number of unemployed persons increased by 347,000 to 7.8 million.”
At first glance this doesn’t make sense. How could there be more jobs and more people unemployed? The key most certainly lies with the Labor Force Participation Rate [LFPR] (which doesn’t mean what you think it does). You would think that the LFPR would mean the percentage of the population that is working. And a quick read of the definition presented by the BLS would reinforce that misconception as a matter of fact the BLS Glossary says this: Labor force participation rate- The labor force as a percent of the civilian noninstitutional population.
But further research on the BLS site leads you to this explanation:
- The labor force participation rate is the percentage of the [civilian non-institutional] population that is either employed or unemployed (that is, either working or actively seeking work)
- People with jobs are employed.
- People who are jobless, looking for a job, and available for work are unemployed.
- The labor force is made up of the employed and the unemployed.
- People who are neither employed nor unemployed are not in the labor force.
How can you be neither employed or unemployed? A rational person would think that you had to be one or the other. But according to the BLS definition… long term unemployed people are defined out of existence and therefore are neither employed nor unemployed. They are the roughly 40% of the population that are not participating in the labor force.
So, if you are long term unemployed (and therefore not in the labor force) and you start looking for a job two things happen to the statistics:
- The Unemployment Rate goes up because a new unemployed person is added.
- The Labor Force Participation rate goes up because a new person was added to the labor force.
Current US Unemployment Rate Chart
(Click for Larger Image)
The Gallup survey people conduct their own survey to determine the unemployment rate and publish an unadjusted version. According to Gallup the Unadjusted Unemployment for June was 5.4%, down from 5.5% in May or 0.3% higher compared to the Unadjusted 5.1% reported by the BLS.
Gallup says Underemployment (U-6) is 13.4% down from last month’s 13.7% and down from 14.0% in January. On the other hand according to the BLS calculations, the U6 is “only” 9.9% up from 9.4% last month.
Unemployment Numbers BLS vs. Gallup
|Unadjusted U-3||Unadjusted U-6
Based on the long-term comparison between the BLS numbers and the Gallup numbers; the BLS consistently presents a rosier picture than the Gallup numbers do with an average difference of 0.6424%.
Theoretically the numbers are calculated slightly differently with Gallup measuring unemployment for those 18 and older while the BLS measures from 16 and older. But with the high unemployment rate of 16-18 year-olds, this should actually make the BLS numbers higher than the Gallup numbers not lower, so it makes the understatement by the BLS even worse.
See Is the Government Fudging Unemployment Numbers? for the comparison of Gallup numbers vs. Bureau of Labor Statistics numbers.
The Percentage of the Population that is Working
The U.S. Payroll to Population employment rate (P2P) is the percentage of the total adult population that is working full-time for an employer (higher means more people are working). The (P2P) for June according to Gallup is 46.1% up slightly from last month.
Note: Gallup has started calling the P2P the “Good Jobs Metric” meaning that 46.1% of the population aged 18 and older work for an employer for at least 30 hours per week. Gallup does not count adults who are self-employed, those who work fewer than 30 hours per week, or those who are unemployed or are out of the workforce. “Good Jobs” does not mean that they are employed at their full potential… it simply means that they have “full-time” jobs. For instance it is still difficult to live on 30 hours a week even if you are making 50% above minimum wage or roughly $10.87. That would be $326.25 per week gross and since you only work 30 hours, you would not qualify for benefits such as paid vacation, healthcare etc. So even if you worked 52 weeks a year you would only make $16,965/ year or roughly $1000 more than the federal poverty level for a family of two which is $15,930.
Generally, the higher the percentage of the population that is working the better- meaning fewer people are unemployed. According to Gallup the P2P had been getting worse from mid-2013 but began recovering in 2014. A falling P2P could indicate rising unemployment although it could also indicate more people going to school, retiring, working part-time or self-employed or as has happened since 2010 more people defined out of the labor force due to long term unemployment.
Instead of P2P, the BLS chooses to use the “Labor Force Participation Rate (LFPR)” which as mentioned above is the percentage of the civilian non-institutional population that is either working or actively seeking work. So an LFPR of 60% means that 60% of the civilian non-institutional population is either working or looking for work and 40% are not working or even looking for work.
In June the Labor Force Participation Rate was 62.7% up from 62.6% in May and very close to the 62.9% in January 2015. The LFPR has fallen significantly since January 2008 when it was 66.2%. Which some have suggested is the result of baby-boomers retiring but data suggests that Seniors are actually taking lower paying jobs (think Walmart greeter) and pushing younger workers out of the workforce.
David Stockman a two-term Congressman from Michigan and Director of the Office of Management and Budget under President Ronald Reagan says:
In fact, at the February 2008 peak prior to the crisis, the BLS reported 138.5 million nonfarm payroll jobs compared to 143.9 million in April 2016. The net gain is thus only 5.6 million, and it means nearly 9 million or 61% of the 14 million new jobs our President has been crowing about are not “new” at all; they were born-again jobs, and even then they consist of lower paying and lesser quality jobs than the ones obliterated during the crash and so-called Great Recession.
For instance, there has been a loss of 2.3 million goods-producing jobs in manufacturing, mining/energy and construction, paying an average of$58,000 per year; and these have been swapped for 1.9 million jobs in leisure and hospitality paying less than $20,000 per year.
Background Information- Gallup Good Jobs Metric
Back in November 2013 the Good Jobs Metric (formerly P2P) was 42.9% (meaning that less than 43% of the people in the county were working full-time) down from 45.7% just a month earlier.
In January 2014 the P2P (Good Jobs Metric) bottomed at 42%, from there it rose steadily to peak at 45.1% in July but began falling to 44.9% in August. Then it began falling steadily, reaching 44.8 in September, 44.4% in October and 44.2% in November. In December 2014 it rose slightly to 44.3%, meaning a slightly greater percentage of the population was working.
The decline continued into 2015 with the Good Jobs Metric in January 2015 at 44.1% and in February 2015 it fell further to 43.9%. In March 2015 it rose a bit to 44.2% but fell back to 43.9% in April. In May 2015 it rebounded to exactly the same level as May of 2014 at 44.5%.
The average for 2012 was 44.4% and for 2013 was 43.8% so we are currently above the average of 2012 and 2013. According to the U.S. Census bureau over just the last 12 months the U.S. population has increased by roughly 2.8 million people with one birth every 8 seconds, one death every 13 seconds and one new immigrant every 33 seconds (faster than every 38 seconds last year) that results in a net gain in the U.S. population of one person every 13 seconds or more than 4.6 people per minute.
Employment and Unemployment Numbers:
|January 2014||13.5%||7.0%||6.6%||135.488 Million||246.915 Million|
|February 2014||13.1%||7.0%||6.7%||136.230 Million||247.085 Million|
|March 2014||12.8%||6.8%||6.7%||137.187 Million||247.258 Million|
|April 2014||11.8%||5.9%||6.3%||138.325 Million||247.439 Million|
|May 2014||11.7%||6.1%||6.3%||139.237 Million||247.622 Million|
|June 2014||12.4%||6.3%||6.1%||139.824 Million||247.814 Million|
|July 2014||12.6%||6.5%||6.2%||138.841 Million||248.023 Million|
|August 2014||12.0%||6.3%||6.1%||139.125 Million||248.229 Million|
|September 2014||11.3%||5.7%||5.9%||139.812 Million||248.446 Million|
|October 2014||11.1%||5.5%||5.8%||140.866 Million||248.657 Million|
|November 2014||11.0%||5.5%||5.8%||141.331 Million||248.884 Million|
|December 2014||11.1%||5.4%||5.6%||141.327 Million||249.027 Million|
|January 2015||12.0%||6.1%||5.7%||138.511 Million||249.723 Million|
|February 2015||11.4%||5.8%||5.5%||139.343 Million||249.899 Million|
|March 2015||11.0%||5.6%||5.5%||140.099 Million||250.080 Million|
|April 2015||10.4%||5.1%||5.4%||141.286 Million||250.266 Million|
|May 2015||10.4%||5.3%||5.5%||142.233 Million||250.455 Million|
|June 2015||10.8%||5.5%||5.3%||142.717 Million||250.663 Million|
|July 2015||10.7%||5.6%||5.3%||141.774 Million||250.876 Million|
|August 2015||10.3%||5.2%||5.1%||141.793 Million||251.096 Million|
|September 2015||9.6%||4.9%||5.1%||142.520 Million||251.325 Million|
|October 2015||9.5%||4.8%||5.0%||143.689 Million||251.541 Million|
|November 2015||9.6%||4.8%||5.0%||144.122 Million||251.747 Million|
|December 2015||9.8%||4.8%||5.0%||144.116 Million||251.936 Million|
|January 2016||10.5%||5.3%||4.9%||141.150 Million||252.397 Million|
|February 2016||10.1%||5.2%||4.9%||141.992 Million||252.577 Million|
|March 2016||9.9%||5.1%||5.0%||142.895 Million||252.768 Million|
|April 2016||9.3%||4.7%||5.0%||143.934 Million||252.768 Million|
|May 2016||9.4%||4.5%||4.7%||144.557 Million||253.174 Million|
|June 2016||9.9%||5.1%||4.9%||145.239 Million|
|2 mo. Change||0.6%||0.4%||-0.1%||1.305 Million||0.428 Million|
|12 mo. Change||-0.9%||-0.4%||-0.4%||+ 2.522 Million||+2.734 Million|
So over the last two months the actual number of people working has increased by 1.3 Million and the civilian non-institutional population (a fairly narrow measurement of population) has increased by 428,000. Over the last 12 months the civilian non-institutional population grew faster than the number of jobs but if only 62% of the population is looking for work the unemployment rate could still fall.
Currently the US (unadjusted) unemployment rate is 5.1% according to the “BLS Current Population Survey” (CPS; household survey) and according to the newest release of Current Employment Statistics (CES) survey (the Employment Survey) in June there were 145.239 million people employed up from 140.099 in March 2015 although the population is also up.
Back at the peak of the unemployment, there was some discussion in the media about “discouraged workers” U-6 is the broadest measurement of unemployment which includes “discouraged workers” and part-time workers who would rather be working full-time but can’t find full-time employment. Back in November 2011 the unadjusted U-6 unemployment rate was 15.0% and in November 2012 just in time for the election it was down to 13.9% but in December 2012 it jumped up to 14.4% and in January 2013 it jumped again to 15.4% (worse than November 2011) in February 2013 it was 14.9%. In both April and May 2013 it was 13.4%, while in June it jumped back up to 14.6%. Gallop calls this the “Underemployment Rate” and says it is was actually 17.3% in July 2013, 17.4% in August and 17.1% in September exactly the same as July 2012 but down from 18% in July of 2011.
According to the BLS U-6 in June 2016 was 9.9% while Gallup says it was 13.4%. There was a 3.5 percentage point difference between Gallup’s numbers and the BLS numbers.
According to Shadowstats the government is really underestimating unemployment by even more than our numbers suggest since “long-term discouraged workers were defined out of official existence in 1994.” The new U-6 numbers only include short-term discouraged workers. Once we understand that the Labor Force Participation Rate does not include “Long Term Unemployed” we can see that the a big part of the decline in the BLS numbers is accounted for simply by redefining long term unemployed individuals as out of the labor force and so as if by magic the unemployment rate falls. But the ShadowStats number which refuses to ignore these people remains steady.
See U-6 Unemployment Rate for more information on the broader U-6 unemployment calculation that includes these “discouraged” unemployed and gives a truer picture of the total unemployment situation. Also see the Misery index ( which includes Unemployment Rate+ Inflation Rate). The adjusted unemployment rate in January of 2009 when Obama was sworn in was 7.8%. Subsequently the rate reached a peak of 10.1%. The average unemployment rate during the Bush presidency was 5.3% and during the Clinton presidency it was 5.2%. In addition to looking at the unemployment rate, I prefer to look at the actual employment rate, which often shows a different picture, in that we can see how many people are actually employed and it is less easily manipulated, since the number of people who have opted for retirement or just stopped looking for work is not a factor. See the Current Employment Data.
How the US Government Comes Up with the Current Unemployment Rate
According to the U.S. Bureau of Labor Statistics they don’t actually track the unemployment numbers but instead they base the all important “Unemployment Rate” on a survey. You would think they would collect the numbers from the 50 states who would get them from their unemployment offices. But that is not how it is done. Unemployment rates are calculated based on a random survey called the Current Population Survey (CPS). No one can accuse the government of being efficient, rather than calling the main office of 50 state offices (or having the 50 state numbers automatically reported), instead the government calls up 60,000 households every month and then estimates the unemployment rate based on that sample. According to the BLS,
Every month, one-fourth of the households in the sample are changed, so that no household is interviewed more than 4 consecutive months. This practice avoids placing too heavy a burden on the households selected for the sample. After a household is interviewed for 4 consecutive months, it leaves the sample for 8 months, and then is again interviewed for the same 4 calendar months a year later, before leaving the sample for good. This procedure results in approximately 75 percent of the sample remaining the same from month to month and 50 percent from year to year.
For more information on how the BLS performs the survey see BLS: How the Government Measures Unemployment Unemployment data is interesting but my question is always… yeah, but how many real people actually have jobs? In addition to calling 60,000 households, the government also performs a Current Employment Statistics (CES) survey where they collect data from employers. The CES survey sample is larger and so the employment data is considered more reliable than the unemployment data. For more information See: Current Employment Data Historical Employment Data Chart The Misery index measures inflation plus unemployment and is a good measure of the discomfort of the country’s population. Current Employment vs Unemployment Chart Are they just two sides of the same coin or is there more? Sometimes the best thing to do during times of economic decline is to go back to school and wait out the decline while improving your skills at the same time. See The Difference a Degree Makes in Unemployment Levels for more information on how a degree might help.
- Unemployment, Part-time Workers and Obamacare
- 7 Tips for the Newly Unemployed
- Job Hunting Success: How to Make Yourself More Employable
- Highly Skilled Worker Shortage in a Recession?
Source: US-BLS Current Unemployment Rate Data