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Broad and Long-Term Unemployment Fall to New Lows Despite Slowdown in Payroll Job Growth

The Bureau of Labor Statistics reported Friday that the broad unemployment rate and long-term unemployment have fallen to new lows for the recovery, despite a slowdown in the growth of payroll jobs. Payroll employment increased by 142,000 in August, significantly less than the 212,000 average for the previous three months. The standard unemployment rate fell fractionally, returning to the low of 6.1 percent first reached in June. The percentage of the labor force working part-time for economic reasons also decreased.

The standard unemployment rate, U-3, is the ratio of unemployed persons to the civilian labor force. Both the numerator and denominator of the ratio fell in August. The broad unemployment rate, U-6, also takes into account discouraged workers (people who would like to work but have stopped looking because they think no jobs are available) and involuntary part-time workers. As the following chart shows, that rate fell to 12.0 percent in August, a new low for the recovery.

Long-term unemployment has been a particularly painful feature of the Great Recession. By early 2010, the percentage of all unemployed workers who were out of work for 27 weeks or more rose to nearly three times its normal level. As the next chart shows, long-term unemployment still remains elevated by historical standards, but after a sharp decline in August, it has fallen halfway back to its prerecession level.

Overall, the August employment situation indicates that the recovery is continuing in the third quarter of 2014, although possibly at a slower pace than earlier in the summer. The trajectory of the economy will become clearer next month when government statisticians release September job numbers and the advance estimate of Q3 GDP.

4 Responses to “Broad and Long-Term Unemployment Fall to New Lows Despite Slowdown in Payroll Job Growth”

rjsigmundSeptember 6th, 2014 at 11:34 am

no doubt that long term employment is trending down, but the trajectory of the downturn has been been skewed by the end of the emergency unemployment rations…as you can see on your chart, those numbers have been falling more rapidly since their end, as the termination of that program disincentivized the long term unemployed to continue looking for work every month; and hence less are counted as unemployed….

Ed Dolan EdDolanSeptember 6th, 2014 at 1:13 pm

You are right. The long-term unemployment number was inflated by long-term benefits and has been falling as they have been terminated. According to research by the Boston Fed, most of the long-term unemployment exit to "out of the labor force" rather than "employed." That suggests to some observers that many of them were never really "unemployed" in the sense of truly looking for a job, but rather, went through the motions of job search in order to qualify for benefits. Any way you look at it, the drop in the long-term unemployment number is a welcome development.

Bud_MeyersSeptember 10th, 2014 at 11:03 am

There are many more that are unemployed — such as those who have been laid off since 2008 and have never found work again (and are not counted in the U-3 or U-6 rates). They were already "long-term" unemployed long before the recession ended.

Currently there are 6.3 million unemployed working-aged Americans who are not counted as "unemployed" (but also want a job) that are no longer considered in the labor force, and so therefore, are not counted in the unemployed rate.
* Source: St. Louis Fed – http://research.stlouisfed.org/fred2/series/NILFW
* Source: The Bureau of Labor Statistics – http://data.bls.gov/timeseries/LNS15026639

That's one reason why the unemployment rate has dropped. There were also forced early retirements, because they couldn't find work either. And some people went on disability, but would have also preferred to work if they had been offered a job.

SOME OTHER BASIC FACTS TO CONSIDER (Stats for June 2009 to August 2014):

1) From June 2009 to August 2014, the U.S. has had an additional 11.2 million people "not in the labor force", but not counted as "unemployed".
* Source: Bureau of Labor Statistics – http://www.bls.gov/webapps/legacy/cpsatab16.htm

2) As of August 2014, we currently have 9.6 million counted as "unemployed", but are also still counted as part of the labor force.
* Source: Bureau of Labor Statistics – http://www.bls.gov/news.release/empsit.nr0.htm

3) The U.S. had 9.7 million net new jobs created from June 2009 to August 2014.
* Source: Bureau of Labor Statistics – http://data.bls.gov/timeseries/CES0000000001?outp

4) From the end of June 2009 to the end of August 2014 (62 months) the U.S. had a monthly average of 12.8 million workers unemployed.
* Source: Bureau of Labor Statistics – http://www.bls.gov/webapps/legacy/cpsatab1.htm

5) From June 2009 to August 2014 the U.S. has had an additional 7 million workers in payment status for Social Security retirement and disability. (They are counted as "not in the labor force" and not counted in the unemployment rate.)
* Source: Social Security Administration – http://www.ssa.gov/oact/ProgData/icp.html

6) Since the Great Recession "officially" ended, from June 2009 to August 2014 (during six school years), we had a total of 15.7 million new high school graduates (not counting dropouts.)

* Source: The National Center for Education Statistics – http://nces.ed.gov/programs/projections/projectio

College students, who choose not to work, are also counted as "not in the labor force". NOTE: We assume for every high school grad who goes on to college, we also have another college grad (or a college dropout) exiting school to enter the job market, canceling out one high school statistic.

Now consider this: From 2008 to the end of 2013, almost 24 million long-term unemployed Americans were out of work at least 6 months and received federal extended unemployment benefits during that time. Were did they all go?
* Source: The White House – http://www.whitehouse.gov/sites/default/files/doc

Further reading: http://bud-meyers.blogspot.com/2014/09/63-million

Ed Dolan EdDolanSeptember 10th, 2014 at 12:25 pm

Thank you, Bud, for all of these links. You are completely correct that neither the standard unemployment rate nor the broader U-6 provides a comprehensive measure of labor market distress. A weak labor market has cascading effects that impact all kinds of people who do not fall neatly into the categories of "employed" and "unemployed." I have tried to explore some of these categories in earlier posts on voluntary vs. involuntary part-time employment ( http://www.economonitor.com/dolanecon/2014/01/15/… ) and on multiple jobholders ( http://www.economonitor.com/dolanecon/2014/03/13/… ), but those are only two categories out of many. Perhaps I should try to write something on the broader topic of "measuring labor market distress". Your links will help.