John Irons's Blog


Economic News, Data and Analysis

Unemployment Rate: Behind the Numbers

The rate of unemployment
for the month of April fell to a 30 year low of 3.9% – the lowest rate
since January 1970. The employment-to-population ratio was also at a high
of 64.9%.

Is the unemployment
rate really a good measure of the labor market? In a recent speech, Alan
Greenspan used the term “pool of available workers” repeatedly rather than
referring directly to unemployment. The “pool” is meant to represent a
broader measure of people who would like jobs rather than focusing only
on those who fit the exact definition in the Department of Labor’s monthly

This feature looks
a little more closely at the numbers behind the numbers.

Past unemployment

The graph below
looks at the unemployment rate and the employment ratio over time. It’s
pretty easy to spot the most recent major recessions – there are nice spikes
in 1958, the early and late 1970’s, early 1980’s, and early 1990’s.



Is “Unemployment”
a good measure?

Here’s how the
Bureau of Labor Statistics defines unemployment:

had no employment during the reference week; they were available for work
at that time; and they made specific efforts to find employment sometime
during the 4-week period ending with the reference week.  Persons
laid off from a job and expecting recall need not be looking for work to
be counted as unemployed.”

The official number
misses several categories of workers including discouraged workers, and
“under-employed” – people with part time jobs who would like to work full
time. It might be better to look a broader measure of the “pool of available
workers” – which includes both the unemployed as well as people who are
out of the labor force, but who would like jobs.

The BLS also defines
loosely attached, of “marginal” workers, about 1.2 million people, are
those who wanted work and had looked for a job in the prior 12 months (but
not the prior 4 weeks as required to be counted as unemployed). Discouraged
workers, people who are not looking for work because they don’t think there
are any jobs for them, represent 330,000 workers as was actually up from
245,000 a year earlier. Overall there are 4.3 million people who are not
in the labor force, but who would like a job.

If we were to
add this group to the unemployed, we would find closer to 7% of the current
workforce available for work.

of Unemployment

Unemployment is,
by necessity, only a single number. But underlying the 3.9% is a wider
range of unemployment experiences.


The following
table shows the employment rates for various groups. One of the more dramatic
changes in the unemployment rate for black teenage men: A fall from last
year’s rate of over 30% down to 22%.


Hispanics 5.4%
Whites 3.5%
Blacks  7.2%
Women 3.5%
Men 3.2%
Teenagers 12.7%
College Graduates 1.5%
< High School

Source: Department
of Labor


The Average duration
is 12.4 weeks while the median duration is only 6 weeks. This means that
half of unemployment spells are relatively short, yet there are still many
people who are unemployed for a long period of time. This would suggest
that there are different “kinds” of unemployment – for some unemployment
is simply a transition between jobs, while for others unemployment is a
persistent problem.


Total unemployed 100.0
Less than 5 weeks
5 to 14 weeks
15 to 26 weeks
27 weeks and over

Source: Department
of Labor


DOL, BLS: Employment
Data Release

BLS defines

with the “pool of available workers”

Graph constructed
by J. S. Irons. All data is from the US
Department of Labor, BLS


Filed under: Data



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