Tag: employment

By Paul Gomme and Peter Rupert

The BLS announced that payroll employment climbed 339,000 in May. The private sector added 283,000. The bulk of the gain was in the service sector, adding 257,000. The goods sector increased 26,000 but almost all of it, 25,000, in construction.

Although employment climbed 339,000, average weekly hours fell from 34.4 to 34.3 (a decline of 0.1%), throwing a little cold water on the overall report. As shown in the chart below, average weekly hours have trended down since late 2020. Hourly pay, however, climbed 0.3%, from $34.33 to $34.44, and the year over year increase was 4.30%; unfortunately, that growth is still a bit below the year-over-year CPI inflation rate for April, 4.96% (the May CPI has not yet been released).

The household data showed almost exactly the opposite from the establishment survey with an employment decline of 310,000. The employment to population ratio fell slightly from 60.4 to 60.3, and still falls below the pre-pandemic level of 61.1.

The unemployment rate is based on data from the household survey. As mentioned above, employment fell by 310,000 according to the household survey. Combined with a 440,000 increase in the number of unemployed persons, the unemployment rate rose from 3.39% to 3.65%. The changes in the number of employed and unemployed left the labor force participation rate unchanged at 62.6%.

To be “officially” classified as unemployed, an individual must have “actively” looked for a job and available to begin employment. This definition excludes those who are deemed “marginally attached” to the labor force who would like a job, but have not taken sufficiently active measures to find one. The chart below plots the headline unemployment rate along with a measure that includes marginally attached individuals as well as those employed part time for economic reasons (the “U-6” definition). Whereas the headline unemployment rate is 3.7%, the broader measure of unemployment stands at 6.7%. The gap between the two, 3.0%, is about as low as it has been since 1994 when the U-6 measure of the unemployment rate starts.

Until the early 1980s, female unemployment tended to exceed that of men; since then, the pattern has reversed. Since 2021, the male unemployment rate has exceeded that of women by 0.17 percentage points.

Historically, Black and African American unemployment rates have exceeded that of other racial groups. Since 1973 (when the data becomes available), the Black and African American unemployment rate has averaged 6.1 percentage points higher than that of whites. Over time, this gap has narrowed; since 2021, it has averaged 3.1 percentage points. Hispanic and Latino unemployment rates lie between that of Blacks/African Americans and whites. (Note that we have seasonally adjusted the Hispanic and Latino unemployment rates using Python’s ARIMA X11 package with default settings; officially seasonally adjusted series are not available.) Over the available data, the Hispanic/Latino unemployment rate exceeded that of whites by 3.15 percentage points; since 2021, by 1.5 points. The Asian unemployment rate is only available since 2003. On average, their unemployment rate is 0.55 percentage points lower than that of whites; since 2021, the gap is only 0.09 points.

We can further look at unemployment rates by sex and race, albeit for those 20 years of age and older. As mentioned earlier, since the early 1980s, for the population as a whole the male unemployment rate has exceeded that of women. While the same is generally true for Blacks/African Americans and whites, the average unemployment rate for Hispanic/Latino women is 0.95 percentage points higher than that of Hispanic/Latino men. Data for Asians is not broken down by sex.

People enter unemployment through various channels. The largest component is for people who lose their job, that represents about half of all of the unemployed. The next largest category is from those who reenter the labor force after a spell of being absent; these are labeled reentrants. Then there are those that voluntarily leave their jobs and those who are just entering the labor force.

Looking across those unemployed, average weeks of unemployment has been trending up somewhat over time. Between 1950 to 1980 average weeks of unemployment hovered between 10 and 15 weeks. Indeed, average weeks never hit 20 weeks until after 1980. Since that time average weeks have hit 20 or more numerous times and today stands at just over 21. The Great Recession and the pandemic had massive effects on weeks of unemployment.

Overall, the labor market continues its strong performance. While the unemployment rate increased it still remains as low as the economy has seen for decades.

We are not seeing a lot in this employment report to warrant any large changes in beliefs about the current stance of the labor market. The headline number in the Establishment Survey showed a gain of 311,000, solid, but not remarkable. There were gains in: (1) leisure and hospitality (105,000), (2) retail trade (50,000), (3) government (46,000, of which 37,000 is local government) and (4) health care (44,000). It also mentions losses in: (1) information (25,000), and (2) transportation and warehousing (22,000). It also notes that the information sector has shed 54,000 jobs since November of 2022. There were 25,000 jobs lost in the information sector in February, 9,000 of which were in the Motion Picture and Sound Recording Industry, and 3,000 were in Telecommunications.

Throwing a little cold water on the report were sizable downward revisions to the Establishment Survey employment gains for December (down 21,000 to 239,000) and January (down 13,000 to 504,000). The figure below gives a historical perspective on the first (initial) release, the second (revised) release, and the third (final) release.

In addition to the downward revisions, average weekly hours (private non-farm payroll) are down 0.1 hours, to 34.5. However, average weekly hours are still “high” by (recent) historical standards. Having said that, the combination of the rise in employment with the decline in average hours led to an overall decline in total hours of work by about 4 million, or 1%.

Average hourly earnings were up $0.08 and up about 4.6% year over year. However, CPI inflation continues to erode real average earnings.

The Household Survey showed that the number of people unemployed (up 242,000) and the unemployment rate (from 3.43% to 3.57%) rose. The labor force expanded by 419,000, moving the labor force participation rate to 62.5%. All groups except for teens have been trending up slightly since the end of the pandemic.

Overall, the labor market remains one of the strongest in recent memory. Not only is employment growing at a solid pace, the number of job vacancies has stayed substantially higher than the number of people unemployed and is unprecedented since these data began at the end of 2000. The relationship between vacancies and unemployment, known as the Beveridge Curve, has had a strange journey due to the pandemic. During the Great Recession the unemployment rate increased substantially as vacancies continued to decline. The “counterclockwise” pattern, standard in the search and matching framework, saw a reduction in the unemployment rate as vacancies began to increase. The unprecedented closures to business at the onset of the pandemic drove the unemployment rate to 15% even though vacancies did not decline substantially. Today, vacancies are near an all time high and unemployment near an all time low.