Thursday, May 3, 2012

The Data Behind America's Unemployment Rate

Along with the monthly unemployment data, the Bureau of Labor Statistics (BLS) releases a monthly review showing the number of jobs available to Americans.  The Job Openings and Labor Turnover Survey News Release (or JOLTS) reveals the number of job openings available to the American workforce along with the number of hires and the number of separations.  Without significant job openings, underemployed and unemployed Americans don't have a hope of removing themselves from their unfortunate unemployment situation.

Let's open by looking at a graph showing the number of job openings since 2000 according to FRED:


You'll notice that the number of job openings plummeted from a peak of 4.69 million in June of 2007 to a low of 2.186 million in July of 2009 during the depths of the Great Contraction, a drop of 53.3 percent.  Since then, the number of job openings has slowly but surely increased, however, it is still well below the levels experienced during the period between June of 2005 and March of 2008 when it was above 4 million every month.  In fact, the March 2012 level of 3.737 million jobs is reminiscent of the levels seen back in 2004 and is still between 20 and 25 percent lower than the average just prior to the Great Recession and well below the levels seen at the beginning of the new millennium.  As well, in recent months, the number of job openings seems to have stalled around the level of 3.5 million which was achieved back in September 2011.   

Here is a chart from the BLS comparing job openings, the number of hires and the number of separations (those who quit, are involuntarily laid off and retirements) in various industries to those seen historically:



The hiring rate was unchanged from the previous month at 3.3 percent and was the same as a year earlier.  The total number of hires in March 2012 was 4.356 million, still 13 percent below the pre-recession rate of 5 million and down by nearly 100,000 from a month earlier.  The hiring rate dropped the most on a year-over-year basis for construction, falling from 6.5 percent in February 2011 to 5.1 percent in March 2012, suggesting that this part of America's economy is a long way from improving.

Here is a chart showing the most recent quits rate data which measures how willing or able workers are to change jobs:



Here is a graph from FRED showing how the quits rate is still below the decade-long low from 2003 showing how difficult it is to change jobs even three years into the "recovery":



In March of 2012, 2.147 million workers quit their current jobs, up from a low of 1.8 million in June of 2009 at the end of the Great Recession but well below the pre-recession rate of 2.9 million recorded in December of 2007.  On a year-over-year basis, the number of quitting workers has remained relatively stagnant, increasing by only 0.1 percentage point from 1.5 to 1.6 percent.  In looking through the various industries, you will notice how few construction workers are quitting their current jobs, a not particularly surprising sign of weakness in the housing and general construction industry.  America's workers are certainly not a confident lot.  

It is always interesting to look at the statistics behind the headline unemployment rate data.  The JOLT data pretty much summarizes the current state of the economy; this has been a particularly modest recovery on the employment side of the ledger despite Mr. Bernanke's massive stimulus.  This data also suggests that it is unlikely that we will see improvement in the employment situation in the coming months since it would appear that the jobs simply are not being created.

6 comments:

  1. I agree with that analysis. The data seems to show that things are not going to improve anytime soon. I continue to question how accurate the numbers really are. Often they seem heavily massaged to me and I wonder how much they are tied to political agendas.

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  2. Data from Federal withholding corroborates your analysis. The employment situation is still an unmitigated disaster.

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  3. There really isn't much of a way to have it be anything BUT a disaster.

    We're combining an economy that has been built on debt for the past 30 years and a job market that, by 2005, was driven by housing.

    Not only do we not have very much to build on, but much of what we consider 'normal' was unsustainable to begin with.


    meanwhile, people keep saying 'job'. "we need more jobs." "this will help us get more jobs."

    This isn't Sim City. There's no generic 'job' we pick up. What sorts of jobs? I know, people want manufacturing, but not only is that hard to keep (even China is starting to lose them to Vietnam and India) but aren't we trying to get people to stop buying more than they can afford?

    There's also the big push to shrink government, which means the 700k jobs lost there stay gone with more going out.

    We can go medical, though we'll need to fix the Student Loan issue. Same goes for financial. Personally, I think we can make big gains in science fields.

    We have places we can go, job wise, but they will require time and major shifting if we want it to be Private driven (Government can try to speed it up, with mixed results).

    Personally, I think we'll have to stop looking for some quick, 1 year fix. Have you seen how a family lives during the years that they are paying off a massive credit card debt while trying to go back to school? it looks ugly. It looks pretty miserable compared to what they used to look.

    It looks...a lot like what this recovery looks like.

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  4. Plus, how many people capable of entering the labour market do not? Every year, the economy must somehow provide for simple population growth AND re-absorb the unemployed, as well as the under-employed. It will take a Grand Project like the incredible achievement of Eisenhower's Interstate highway system. This project both provided massive employment and raised the productivity the American economy by a huge amount. Is there anything similar that could be done?

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