November 06, 2015
This morning the Bureau of Labor Statistics released its newest jobs figures for the month of October. In the household survey, the unemployment rate fell to 5.0 percent, the lowest rate in over seven years. Perhaps more importantly, the unemployment rate today is now the same as it was at the beginning of the recession in December 2007.
Undoubtedly, this will be cheered as a positive development for the economy, and other things equal, a low unemployment rate is preferable to a high unemployment rate. But, unemployment is only part of the story of a weak labor market. There are other categories of non-employed workers which can be described as follows:
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Discouraged Workers: Persons who have searched for a job within the past year but not the past four weeks and gave up their search because they were discouraged over their job prospects.
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Marginally Attached Workers: Persons who have searched for a job within the past year but not the past four weeks. (Discouraged workers are a subset of marginally attached workers.)
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Persons not in the labor force who would like a job: Persons who haven’t searched for a job within the past four weeks but report to the Bureau of Labor Statistics that they want to be employed.
If we compare the number of discouraged, marginally attached, and job-wanting workers to the number of “unemployed” workers, we see that the unemployment rate is failing to capture a much larger share of all non-employed workers than it did in December 2007. This is shown in the table below:
|
December 2007, Number of Given Non-Employed Workers, in thousands |
October 2015, Number of Given Non-Employed Workers, in thousands |
December 2007, Ratio of Given Non-Employed Workers to Unemployed |
October 2015, Ratio of Given Non-Employed Workers to Unemployed |
|
|
Discouraged Workers |
363 |
665 |
0.05 |
0.08 |
|
Marginally Attached Workers |
1344 |
1916 |
0.18 |
0.24 |
|
Not in the labor force, Want a Job Now |
4657 |
6052 |
0.61 |
0.77 |
This reveals that the job market is actually much weaker today than it was in December 2007, even though the two months had the same unemployment rate. In December 2007, there were just 0.61 workers not in the labor force who wanted a job for every one “unemployed” worker; in October 2015, there were 0.77 such prospective workers for every unemployed worker. If we incorporate such workers into our measure of “unemployment,” progress over the past 12 months shows that the labor market is nearly a year away from full recovery.
There are other reasons to suspect that the unemployment rate is failing to capture all the slack in today’s labor market. For instance, in December 2007 involuntary part-time employment — the condition of working a part-time job while looking for a full-time job — represented 3.2 percent of total employment. Last month, involuntary part-time employment was 3.9 percent of total employment.
Another factor worth considering is the duration of unemployment. Last month the average duration of unemployment was 28.0 weeks, up from 16.6 weeks in December 2007. This suggests that unemployed workers are having much more trouble finding jobs in today’s economy than they were eight years ago.
Finally, it should be noted that the prime-age employment rate — the percentage of persons aged 25 to 54 who are employed — was just 77.2 percent last month. In December 2007, it was 79.7 percent. This shows that while Americans today are just as likely to be classified as “unemployed” as they were in December 2007, they are less likely to actually have jobs.
