Alternative Data Sources Shrinking
For years the Gallup survey people conducted their own survey to determine the unemployment rate and published an unadjusted version. Unfortunately, as of July 31, 2017, they discontinued surveying unemployment-related numbers including U-3, U-6 and Payroll to Population . This puts us back to relying strictly on government sources and unfortunately in the past, we found significant differences between what the government was telling us and what independently collected numbers told us.
For instance, according to Gallup the Unadjusted Unemployment for June 2017 was 5.1% while the BLS said it was 4.5%. Gallup said Underemployment was 13.4% while the BLS said it was 8.9%.
Income And Other Inequalities
Studies from CDC and others have shown a correlation3 between obesity and poverty. In this Colab notebook , we explore the relation between poverty, unemployment and obesity. Unfortunately, many other medical conditions are inversely correlated with economic well being.
Explore the relation between these variables for counties across the US:
Life expectancy across Europe Life is getting better in Europe, with high life expectancy in addition to decreasing crime. People are living healthier as well and smoking less. However, some economies just have more ups and downs than others. Additionally,fertility rates have come down quite a bit, though not as much as inthese places.
1. RCP 2.6 , represents a stringent mitigation scenario, while RCP 8.5 represents a scenario with very high Greenhouse Gas emissions. Source: IPCC
Environmental health : a global access science source vol. 16,1 32. 4 Apr. 2017, doi:10.1186/s12940-017-0238-0
3. Correlation does not imply causation. See this guide for more on correlation.
President’s Council On Jobs And Competitiveness
President Obama established the President’s Council on Jobs and Competitiveness in 2009. The Council released an interim report with a series of recommendations in October 2011. The report included five major initiatives to increase employment while improving competitiveness:
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Given The Measurement Problems During The Pandemic Are There Alternatives To The Bls Indicators Of Slack To Gauge The Health Of The Labor Market
Some economists have offered their own estimates of labor market slack trying to account for the misclassification and unusual movements in labor force participation during the pandemic. For example, Jason Furman and Wilson Powell III at the Peterson Institute for International Economics calculate what they call the realistic unemployment rate. Their realistic unemployment rate was 8.3 percent in January, two percentage points higher than the official unemployment rate. Furman and Powells realistic unemployment rate differs from the official in two ways. First, they estimate the number of workers misclassified as being not at work for other reasons and count them as unemployed. Second, they try to estimate the excess decline in labor force participation beyond what would be expected given the rise in unemployment, and add those people to the unemployment rate as well. While this estimate is dependent on the specific modeling assumptions, it is nonetheless a useful attempt to reveal the extent to which we underestimate the true disruption to peoples livelihoods if we fail to account for the unusually large drop in labor force participation.
How Is Unemployment Rate Calculated
An unemployment rate is how many people in a country are unemployed divided by the number of people available for civilian work. In the United States, the U.S. Bureau of Labor Statistics determines this rate. Understanding the unemployment rate in certain areas of the country can give you a better idea of job opportunities available in that area, as higher unemployment is often linked to fewer available jobs. In this article, we explore what the unemployment rate is, how it works, the formula used to calculate this rate and the factors that influence the unemployment rate in the United States.
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How To Use The Unemployment Rate
Keep in mind that the unemployment rate is a lagging indicator. It tells you what has already happened, since employers only lay off workers after business slows down.
The unemployment rate isn’t lagging as much as usual because the pandemic is still creating sudden changes.
Companies resist hiring new workers when a recession is over until they can be sure that the economy will stay strong. The economy could improve for months, and the recession could be over before the unemployment rate drops. It’s not suitable for predicting trends, but it’s useful for confirming them.
Comparison Of Employment Recovery Across Recessions And Financial Crises
One method of analyzing the impact of recessions on employment is to measure the period of time it takes to return to the pre-recession employment peak. By this measure, the 20082009 recession was considerably worse than the five other U.S. recessions from 1970 to present. By May 2013, U.S. employment had reached 98% of its pre-recession peak after approximately 60 months. Employment recovery following a combined recession and financial crisis tends to be much longer than a typical recession. For example, it took Norway 8.5 years to return to its pre-recession peak employment after its 1987 financial crisis and it took Sweden 17.8 years after its 1991 financial crisis. The U.S. is recovering considerably faster than either of these countries.
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Jobs Created By Presidential Term
Job creation is reported monthly and receives significant media attention, as a proxy for the overall health of the economy. Comparing job creation by President involves determining which starting and ending month to use, as recent Presidents typically begin in January, the fourth month into the last fiscal year budgeted by their predecessor. Journalist Glenn Kessler of The Washington Post explained in 2020 that economists debate which month to use as the base for counting job creation, between either January of the first term or February. The Washington Post uses the February jobs level as the starting point. For example, for President Obama, the computation takes the 145.815 million jobs of February 2017 and subtracts the 133.312 million jobs of February 2009 to arrive at a 12.503 million job creation figure. Using this method, the five Presidents with the most job gains were: Bill Clinton 22.745 Ronald Reagan 16.322 Barack Obama 12.503 Lyndon B. Johnson 12.338 and Jimmy Carter 10.117. Four of the top five were Democrats.
Writing in The New York Times, Steven Rattner compared job creation in the last 35 months under President Obama with the first 35 months of President Trump . President Obama added 227,000 jobs/month on average versus 191,000 jobs/month for Trump, nearly 20% more. The unemployment rate fell by 2 percentage points under Obama versus 1.2 points under Trump.
What Job Creation Rate Is Required To Lower The Unemployment Rate
Estimates vary for the number of jobs that must be created to absorb the inflow of persons into the labor force, to maintain a given rate of unemployment. This number is significantly affected by demographics and population growth. For example, economist Laura D’Andrea Tyson estimated this figure at 125,000 jobs per month during 2011.
Economist Paul Krugman estimated it around 90,000 during 2012, mentioning also it used to be higher. One method of calculating this figure follows, using data as of September 2012: U.S. population 314,484,000 x 0.90% annual population growth x 63% of population is working age x 63% work force participation rate / 12 months per year = 93,614 jobs/month. This approximates the Krugman figure.
Federal Reserve analysts estimated this figure around 80,000 in June 2013: “According to our analysis, job growth of more than about 80,000 jobs per month would put downward pressure on the unemployment rate, down significantly from 150,000 to 200,000 during the 1980s and 1990s. We expect this trend to fall to around 35,000 jobs per month from 2016 through theremainder of the decade.”
During the 41 months from January 2010 to May 2013, there were 19 months where the unemployment rate declined. On average, 179,000 jobs were created in those months. The median job creation during those months was 166,000.
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Inflation Is Shifting Will Be Here For A While: Jason Furman
Former Obama chairman of economic advisers discusses the risk of recession on ‘WSJ at Large.’
For months, the labor market has been one of the few bright spots in an economy plagued by high inflation, rising interest rates and a plunging stock market.
The Labor Department reported at the beginning of May that the economy saw solid job growth in April despite growing headwinds and the unemployment rate held steady at 3.6%, the lowest level since February 2020. Employers, meanwhile, posted a record number of 11.5 million open jobs in March.
But the job market outlook is more complicated than that, because the headline unemployment figure is artificially depressed by excluding people who might only be earning a few dollars a week, but who want to find full-time work. It also does not encompass any workers who have stopped searching for a job because they are discouraged or caring for a child.
New data released on Tuesday by the Ludwig Institute for Shared Economic Prosperity shows the “true rate of unemployment” is much higher than those government figures suggest.
That is still in line with pre-pandemic levels: According to the Institute, which was founded by former U.S. Comptroller of the Currency Gene Ludwig, the true level of unemployment in February 2020 was about 24.5%.
Papa John’s Pizza and Anglez Hair Design on N. Wickham Rd. have multiple signs around the businesses looking for employees.
How Has The Us Unemployment Rate Been Under Biden
Under Bidens presidency, the U.S. unemployment rate has continued to come down and was 4.2 percent in November. The economic stimulus announced by Trump, and then the Biden administration’s continued aid helped propel a recovery in the U.S. job market.
One concerning aspect of the U.S. labor market has been the low labor force participation rate. Simply put, the labor force participation rate tells us how many adults above the age of 16 are either working or actively looking for a job.
Today, we have incredible news that our unemployment rate has fallen to 4.2% a level experts didnt expect us to achieve until 2024. Weve created 588,000 jobs per month on average this year a record. America is back to work, and our jobs recovery is going strong.
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The Unemployment Figures In Detail
The total number of unemployed is 6.9 million, down 542,000 from October. The number of long-term unemployed dropped to 2.19 million. A smaller number, 1.9 million, lost jobs within the last five weeks. This number declined from October’s 2.1 million.
The real unemployment rate was 7.8% in November, 0.5 percentage points lower than in October. This alternate measure of unemployment, known as U-6, gives a broader definition of unemployment. It includes people who would like a job but haven’t looked for one in the past month. It also includes those who are underemployed and marginally attached.
The real unemployment rate includes 450,000 discouraged workers, down from 455,000 in October and down from 657,000 back in Nov. 2020. Discouraged workers are people who have given up looking for work but would take a job if offered. They are not counted in the unemployment rate because they haven’t looked for a job in the past four weeks.
The labor force participation rate in November was 61.8%, up 0.2 percentage points from October. The labor force doesn’t include those who haven’t looked for a job in the past month. Some would like a job, but others dropped out of the labor force for different reasons. They may have retired, gone back to school, or had a baby.
Us Unemployment Rates By Year
The U.S. Bureau of Labor Statistics has measured unemployment since the stock market crash of 1929.
Gross domestic product is the measure of economic output by a country. When the unemployment rate is high, there are fewer workers. That could lead to less economic output and a lower rate of GDP.
When inflation rises, the prices of goods and services go up, making them more expensive. If there is a high rate of unemployment at the same time, this could cause issues for those without an income since they may be struggling to afford basic necessities.
The following table shows how unemployment, GDP, and inflation have changed by year since 1929. Unless otherwise stated, the unemployment rate is for December of that year. Unemployment rates for the years 1929 through 1927 were calculated from a different BLS source due to current BLS data only going back to 1948. GDP is the annual rate and inflation is for December of that year and is the year-over-year rate.
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Breakdown Of Participation Rate By Race And Gender
These charts give a glimpse into those whose labor participation was most affected by the pandemic. For Black and Hispanic people, the drops in labor participation were more dramatic than that of their white counterparts with notable gaps between their rates of participation during the pandemic and their pre-pandemic norms. Each drop not only represents those without a job, but more specifically, those who have had to drop out of the labor force entirely.
Structural barriers, such as the location of jobs, alignment of the skillsets of workers to available work, lack of childcare or even discriminatory practices, have influence on who participates in the labor force.
I call it the spigot effect, said Rodgers. For certain groups, you have to take into account how much the faucet is turned on.
When workers face enough barriers to drop out of the labor force entirely, they no longer appear in the headline unemployment rate at all.
Although 4.8% may sound like a job market in healthy recovery, the truth is that the pandemic is still being felt across the labor market and it is hurting those who can least afford it.
Why Might The Historical Link Between Unemployment And Poverty Be A Misleading Way To Look At Todays Numbers
When people become unemployed, they lose an important source of income and are at risk of falling into poverty. Of course, the more generous unemployment insurance is, the less likely it is for someone who loses a job to become poor. But unemployment insurance has typically replaced only about 40 percent of lost wages, on average, over the past 20 years, with a lot of variation in generosity across the states.
The federal response to the pandemic changed that. The CARES Act, for instance, added $600 a week to weekly unemployment insurance benefits through the end of July 2020, preventing many families from falling into poverty, and the December extension provided for an additional $300. And, of course, Congress provided two rounds of one-time payments for most families$1,200 per adult and $500 per dependent child in the spring of 2020 and another $600 per individual in December, with payments phasing out for higher earners. Estimates suggest that about 13 million people were prevented from falling into poverty by these efforts.
The author thanks Francisca Alba for research assistance and Becca Portman for graphic design.
- Copyright 2022 The Brookings Institution
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Labor Force Participation Rate
The LFPR can have a major impact on the actual level of unemployment.
Tom Thomas, one of our readers reminds us that if you want to compare U-3 numbers you have to do it in light of the Labor Force Participation Rate . He said, since U-3 only measures those who are actively looking for a job if the labor force declines the U-3 rate will appear better than it actually is. So, in order to compare two time periods, you have to adjust for the LFPR.
For more information see Labor Force Participation Rate.
How Is The Us Unemployment Rate Calculated
In general, the unemployment rate in the United States is obtained by dividing the number of unemployed persons by the number of persons in the labor force and multiplying that figure by 100. There are, however, various ways of defining unemployed, each yielding a distinct unemployment rate. The standard unemployment rate, referred to as U-3, is the one most often cited. By that measure, a person is counted as unemployed if he or she does not have a full-time, part-time, or temporary job, is actively looking for a job, and is currently available to be hired. The category of unemployed persons also includes those who have been temporarily laid off. A person is understood to be actively looking for a job if he or she has tried to obtain one within the preceding four weeks. Persons who are only marginally attached to the labor marketthose who want and are available for a job and have actively looked for a job within the preceding 12 months but not within the preceding four weeksare considered neither employed nor unemployed and thus not part of the labor force. Also excluded are discouraged workers, a subset of the marginally attached who are not looking for a job specifically because they believe there are none for which they are qualified or because they have been victims of employment discrimination.
Find out more about the U.S. unemployment rate at:
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