June 7, 2013

Employment vs. unemployment: Different stories from the jobs numbers

Every month, the Bureau of Labor Statistics releases a flood of data about employment and unemployment in the previous month. And every month, the lion’s share of the attention goes to one figure — the unemployment rate — as an indicator of where the U.S. economy stands.

But the unemployment rate is hardly the only, or even necessarily the best, indicator to come out of the monthly jobs report. Simply being out of work isn’t enough for a person to be counted as unemployed; he or she has to have been available to work and actively looking for work, or on temporary layoff. (As the BLS itself noted once upon a time, “Being employed is an observable experience, while being unemployed often lacks that same concreteness.”) Accordingly, if jobless people give up looking for work, enroll in graduate school, or otherwise leave the civilian labor force, the unemployment rate can fall even if employment itself stays level.

Which is why many economists like to look at the employment-population ratio, a measurement of employed people as a percentage of the entire civilian non-institutional population. Though the ratio has some quirks, which we’ll look at in a moment, it’s less affected by seasonal variations or short-term fluctuations in labor-market behavior.

According to the jobs report released Friday, the seasonally adjusted employment-population ratio was 58.6% in May, essentially the same level it’s been at since September 2009 . Over that same period, the “official” unemployment rate (designated U-3 by the BLS) has fallen from a seasonally adjusted 9.8% to 7.6%.

One reason for the difference is that the share of Americans saying they’re not looking for work has been trending up since the Great Recession: from 31.7% of the working-age population in May 2008 to 33.6% last month (on a non-seasonally adjusted basis). Some of that increase, though, may be due to Baby Boomers reaching retirement age; as they leave the workforce, labor economists expect the employment-population ratio to trend lower. Young adults staying in or returning to school also may be a factor.

Looking at just the 25-to-54 age group, which strips out most students and retirees, the employment-population ratio has been edging higher, though ever so slowly: At a seasonally adjusted 74.8% as recently as October 2011, it stood at 76% as of May. That’s still well below the indicator’s pre-recession high, though: In January 2007, 80.3% of the 25-to-54-year-olds were employed.

Topics: National Economy, Work and Employment

  1. Photo of Drew DeSilver

    is a Senior Writer at the Pew Research Center.

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1 Comment

  1. American11 months ago

    Many of the employed Americans are low paid self-employed professionals with college degrees that used to make much more money before the Great Recession. The disparity in income is imply ignored in this data.

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