The Unemployment Rate and the Labor Force Participation Rate tell Two Different Stories

Posted by PITHOCRATES - July 7th, 2013

Week in Review

The June jobs report is out.  And already they’re putting a positive spin on it.  Because of the new jobs reported in June.  But that’s about as far as anyone wants to dig into the report.  For the rest of it is rather dismal (see Employment Situation Summary posted 7/5/2013 on Bureau of Labor Statistics).

Total nonfarm payroll employment increased by 195,000 in June, and the unemployment rate was unchanged at 7.6 percent, the U.S. Bureau of Labor Statistics reported today. Employment rose in leisure and hospitality, professional and business services, retail trade, healthcare, and financial activities.

Yeah.  195,000 new jobs.  This was better than expected.  And the markets rallied.  While the Obama administration made the perfunctory statement that their economic policies are working.  Eternal optimists.  Never willing to admit that it is their economic policies that have given us the worst economic recovery since that following the Great Depression.  What with things like Obamacare causing a nationwide freeze on new hiring.  And their war on fossil fuels raising energy costs.  Further strangling business growth.  It’s all there in the Employment Situation Summary.  If you read further down the report.

Among the major worker groups, the unemployment rate for adult women (6.8 percent) edged up in June, while the rates for adult men (7.0 percent), teenagers (24.0 percent), whites (6.6 percent), blacks (13.7 percent), and Hispanics (9.1 percent) showed little or no change. The jobless rate for Asians was 5.0 percent (not seasonally adjusted), down  from 6.3 percent a year earlier. (See tables A-1, A-2, and A-3.)

Interestingly, strong supporters of President Obama in the last election (women, teenagers, blacks and Hispanics) either have rising unemployment rates (women) or unchanged unemployment rates that are well above the national average (teenagers, Hispanics and blacks).  The president may talk about being the guy for them.  But his actions sure would suggest otherwise

In June, the number of long-term unemployed (those jobless for 27 weeks  or more) was essentially unchanged at 4.3 million. These individuals  accounted for 36.7 percent of the unemployed. Over the past 12 months,  the number of long-term unemployed has declined by 1.0 million. (See table A-12.)

The civilian labor force participation rate, at 63.5 percent, and the employment-population ratio, at 58.7 percent, changed little in June. Over the year, the labor force participation rate is down by 0.3 percentage point. (See table A-1.)

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) increased by 322,000 to 8.2 million in June. These individuals were working part time because their  hours had been cut back or because they were unable to find a full-time job. (See table A-8.)

In June, 2.6 million persons were marginally attached to the labor force, essentially unchanged from a year earlier. (The data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. (See table A-16.)

Among the marginally attached, there were 1.0 million discouraged workers in June, an increase of 206,000 from a year earlier. (The data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.6 million persons marginally attached to the labor force in June had not searched for work for reasons such as school attendance or family responsibilities. (See table A-16.)

So there were 195,000 new jobs in June.  But there is still a net loss of jobs over the year as the labor force participation rate fell by 0.3 percentage points.  Meaning that there were fewer people in the labor force in June than there were in January.  Because the job market is so bad people are discouraged and give up trying to find a full-time job.  Work a couple of part-time jobs instead.  Live on their spouse’s income.  Or on their retirement nest egg.  The Obama administration and their economists and the mainstream media talk about positive signs with every jobs report.  That we’re turning the corner.  That the president’s economic policies are working.  But they’re not.  As you can see if you look at the official (U-3) unemployment rate and the labor force participation rate since he’s been president (the following numbers were pulled from the Bureau of Labor Statistics).

U-3 Unemployment Rate and Labor Force participation Rate 2009-2013 R1

The economic numbers show a decline in the official (U-3) unemployment rate starting sometime in 2010.  But it wasn’t because of an improving economy.  It was because people were just disappearing from the labor force.  For the fall in the labor force participation rate is GREATER than the fall in the unemployment rate.  That is, even though the official unemployment rate showed more people were entering the labor force (i.e., fewer people unemployed) the labor force participation rate showed an even greater number of people leaving the labor force.  (Note: If both graphs were plotted on the same vertical axis the graphs would have nearly the same slop.  Perhaps with the unemployment rate falling at a slightly greater rate.  However, because the actual number of people working far exceeds the number of people unemployed each percentage point move in the labor force participation rate represents a far greater number of people than each percentage point move in the unemployment rate.  So the above graph shows the trend in the number of people more accurately than it does in the percentage of the totals of each data set.  That is, there are more people who have lost a full-time job than have found a full-time job.)  Throughout the Obama presidency the economy has been getting worse.  Not better.  So there is nothing to cheer about in this jobs report.  Or in the many to come.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , ,