November 7, 2014

Employment, unemployment and underemployment: Different stories from the jobs numbers

FT_14.11.7_unemployment

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. Today, for instance, the BLS said unemployment last month fell to 5.8%, as 683,000 more people reported finding work, which sounds like good news.

But the unemployment rate isn’t 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.”) In any given month, the unemployment rate can rise or fall depending on the interplay between how many people find or lose jobs and how many join or leave the active labor force.

For much of the current recovery, the unemployment rate fell even when relatively few people were finding jobs, because even more people were retiring, going back to school, or simply giving up the job hunt. In the past six years, more than 12.6 million Americans 16 and over (seasonally adjusted) have joined the ranks of those not counted as part of the labor force.

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

According to the October jobs report, the seasonally adjusted employment-to-population ratio was 59.2% last month, one percentage point higher than it was a year earlier. Over that same period, the “official” unemployment rate fell from a seasonally adjusted 7.2% to 5.8%.

One reason for the difference is that the share of Americans saying they don’t want a job has trended up since the Great Recession: from 31.9% of the working-age population in October 2008 to 34.6% 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 over the next several years, labor economists expect the employment-to-population ratio to trend lower. Young adults staying in or returning to school also may be a factor.

So if we look at just the 25-to-54 age group, which strips out most students and retirees, the employment-to-population ratio has been slowly improving since it bottomed out at 74.6% (not seasonally adjusted) in February 2011. Last month, 77.3% of all 25-to-54-year-olds were employed, which is well below the indicator’s pre-recession high in October 2006, when 80.7% of people in this age group were employed.

Then again, not all employment is created equal, either. During the Great Recession, the ranks of people working part-time either because they couldn’t find full-time work or because their hours were cut back because of slack demand soared from around 3% of all employed people pre-recession to 6.6% in March 2010. There are fewer such involuntary part-timers now, but last month they still accounted for 4.8% of all employed people (and 2.7% of the entire adult civilian non-institutional population).

Note: This post has been updated with October 2014 unemployment data.

Topics: National Economy, Work and Employment

  1. Photo of Drew DeSilver

    is a Senior Writer at the Pew Research Center.

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5 Comments

  1. Collaborator2 weeks ago

    I’m so upset about the BLS stats. I just created a new group in NYC for this purpose. It’s time we need to come together as a whole, train each other, represent each other all as whole. This unemployed and underemployment must stop!
    We are struggling to survive.

    goo.gl/VCmfzS

    Reply
  2. Dayne Clark2 weeks ago

    Hi Drew,
    Economics is the study of how we satisfy our needs and wants.
    Most of my colleagues do not get out of the office to find out what
    is happening in the real world.
    For example the BLS in the mid 1990’s released a report saying that
    furniture manufacturing was increasing in the U.S.
    A couple of months later there was, I believe, the annual National Association
    of Furniture manufacturers and they started discussing the report that had been
    issued by the BLS and concluded it was wrong because there data showed that,
    they were contracting to have more manufactured abroad.
    It came out that the BLS was using a percentage of reported furniture sales dollars
    to estimate the percentage of foreign manufactured furniture that had been
    been establish 15 or more years earlier.
    Thus, I feel that many of the numbers they put out are misleading because they
    have not gone out and check to see if the procedures they use for estimating are
    still providing relevant numbers.
    Correlation does not always mean there is a cause and effect relationship, just
    because it fits your hypothesis.
    You have to be more diligent in your work and not assume correlation means there
    is a cause and effect relationship.
    Which means you have to get out of the office and see what factors are affecting
    the consumers decision and those can change, they do not stay constant.
    May you have a Great Week!

    Reply
  3. Dayne Clark2 weeks ago

    The tiles of the chart and the percentages are “Extremely Misleading.”
    For example the tile refers to “Workforce” but the percentage given is
    for the entire U.S. population which includes babies, disabled individuals,
    retired individuals, prisoners in jail and old people, plus many other categories.
    Thus, the percentages for unemployed are about half of what
    they would be if the % calculation had been based on those who are actually
    considered employable.
    I find the presentation confusing to the general public and misleading.
    It will confuse the general public as to what Economists consider the Real
    Numbers that should be used in evaluating the number of jobs that need
    to be created.
    Some might think the presentation as cute, but misleading information
    like this only leads to mistrust in the real numbers that are used to try to
    manage the economy.

    Reply
  4. JD3 weeks ago

    Hi Drew, Do you have an update on this chart, since the mid-terms 2014? I am anxious to see if voter turn-out actually decreased, stayed the same, or increased. :) pewresearch.org/fact-tank/2014/0…

    Reply
  5. American1 year 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.

    Reply