How to Analyze Today's Unemployment Report
September 5, 2014
The Bureau of Labor Statistics will release its August employment report this morning, and all eyes will be on the unemployment rate. But there are a few other pieces of important data that should be looked at, explains Diana Furchtgott-Roth, Director of Economics21 at the Manhattan Institute.
What should the public pay attention to in the BLS report? Furchtgott-Roth points to seven different measures, including:
- The labor force participation rate: A decline in the unemployment rate can take place when Americans leave the labor force, as those who have given up on work are not included in unemployment numbers. Similarly, the unemployment rate can rise if more Americans resume their job searches. One must look at the participation rate in order to understand what a drop in the unemployment rate really indicates.
- The U-6 unemployment rate: There are six different measures of unemployment, the most common being the U-3 rate. The U-3 rate does not count discouraged workers or part-timers who wish to be full-time as unemployed, but the U-6 rate does. In July, the U-6 rate was 12.2 percent, far above the official unemployment rate of 6.2 percent.
- Revised jobs numbers from previous months: The BLS will revise its previous job creation numbers for June and July when it issues its report. Notably, the jobs numbers issued for August will also be revised in subsequent months.
- Total hours worked: Are Americans working more or less hours each week? Last month, the number of hours worked rose. This number can be affected by policies like Obamacare, which incentivizes employers to move workers to part-time jobs.
- The teenage unemployment rate: Teenagers are employed in low-skilled positions, so when the teenage unemployment rate rises, it can have a lasting impact on low-skilled workers, whose lack of experience can leave them locked out of the job market.
- Long-term unemployment: Long-term unemployment means unemployment for at least 27 weeks. That number was at 32.9 percent in July, meaning one-third of the unemployed had been out of work for almost seven months. The longer a person is out of the job market, the more difficult it is for him to re-enter it.
Furchtgott-Roth cautions that most headlines will only focus on the standard unemployment rate, which is expected to fall. She urges readers to look beyond that measure in order to have a better grasp of the health of the labor market.
Source: Diana Furchtgott-Roth, "What to Look For In Friday's Unemployment Report," Economics21, September 2, 2014.
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