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An overview of the June 2014 jobs report

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The Bureau of Labor Statistics reported on July 3, 2014 that the official seasonally adjusted unemployment rate for June 2014 was 6.1 percent, down from 6.3 percent in May and April, and 7.6 percent for June 2013.

Total non-farm employment increased by 288,000 during the month of June with seasonal adjustment, but increased by 582,000 during the month of June without seasonal adjustment.

The seasonally adjusted total non-farm job creation figure for May 2014 was revised upward to 224,000 from 217,000, and the seasonally adjusted total non-farm job creation figure for April 2014 was revised upward to 304,000 from 282,000. The unadjusted total non-farm job creation figure for April 2014 was revised downward to 914,000 from 920,000, and the unadjusted total non-farm job creation figure for April 2014 was revised downward to 1,118,000 from 1,125,000.

Breaking these figures down further, with seasonal adjustment, private sector employment increased by 262,000 during the month of June while government employment increased by 26,000. Without seasonal adjustment, private sector employment increased by 978,000 during the month of June while government employment decreased by 396,000.

The seasonally adjusted private sector job creation figure for May 2014 was revised upward to 224,000 from 216,000, and the seasonally adjusted private sector job creation figure for April 2014 was revised upward to 278,000 from 270,000. The unadjusted private sector job creation figure for May 2014 was revised upward to 960,000 from 959,000, and the unadjusted private sector job creation figure for April 2014 was revised downward to 1,074,000 from 1,086,000.

The seasonally adjusted government job creation figure for May 2014 was revised downward to 0 from 1,000, and the seasonally adjusted government job creation figure for April 2014 was revised upward to 26,000 from 12,000. The unadjusted government job creation figure for May 2014 was revised downward to -46,000 from -39,000, and the unadjusted government job creation figure for April 2014 was revised upward to 44,000 from 39,000.

The BLS keeps track of six unemployment rates, which are defined as follows and given without seasonal adjustments:

  • U1: Persons unemployed 15 weeks or longer, as a percent of the civilian labor force. This rate is 2.8 percent for June 2014, down from 3.1 percent for May, 3.3 percent for April, and 3.9 percent for June 2013.
  • U2: Job losers and persons who completed temporary jobs, as a percent of the civilian labor force. This rate is 3.0 percent for June 2014, unchanged from May, and down from 3.2 percent for April and 3.8 percent for June 2013.
  • U3: Total unemployed, as a percent of the civilian labor force (official unemployment rate). This rate is 6.3 percent for June 2014, up from 6.1 percent for May and 5.9 percent for April, and down from 7.8 percent for June 2013.
  • U4: U3 plus discouraged workers, as a percent of the civilian labor force plus discouraged workers. “Discouraged workers” are those who have stopped looking for work because current economic conditions make them believe that no jobs are available. This rate is 6.7 percent for June 2014, up from 6.5 percent for May and 6.3 percent for April, and down from 8.4 percent for June 2013.
  • U5: U4 plus all other persons marginally attached to the labor force, as a percent of the civilian labor force plus all persons marginally attached to the labor force. “Marginally attached” workers are those who would like and are able to work, but have not looked for a job recently. This rate is 7.5 percent for June 2014, up from 7.3 percent for May and 7.2 percent for April, and down from 9.3 percent for June 2013.
  • U6: U5 plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force. This rate is 12.4 percent for June 2014, up from 11.7 percent for May and 11.8 percent for April, and down from 14.6 percent for June 2013.

As people who are employed part-time typically work about half as much as people who work full-time, it is useful to consider a "U5½," defined as the arithmetic mean of the U5 and U6 numbers. This measure would thus count people who work part-time but wish to work full-time as "half-employed." This rate is 9.95 percent for June 2014, up from 9.5 percent for May and April, and down from 11.95 percent for June 2013.

The BLS revised the Current Population Survey, which gathers the data needed to determine these rates, in 1994. Among the changes made, the U3 rate was named the new "official" unemployment rate, instead of the U5 rate. This revision also defined "long-term discouraged workers" out of official existence. With the inclusion of long-term discouraged workers, the SGS Alternate Unemployment Rate, which might be considered a "U7" rate, exceeds 23 percent.

The use of the U3 as the official definition exposes some holes in the BLS's thinking, because according to them, the following are true:

  • A person who loses a full-time job but spends one hour each week mowing a lawn for pay is considered employed.
  • A person who simply expresses interest in having a job is classified as unemployed.
  • "Discouraged workers" are not classified as unemployed or even as part of the labor force.
  • A sharp decrease in a worker's wages when forced to change jobs is not accounted for.

What this means is that the official unemployment rate can fluctuate because discouraged workers (who are not considered to be part of the labor force in the U3 measurement) who re-enter the labor force will cause the U3 rate to spike. The U3 rate can also dip temporarily when such people find temporary jobs and then lose them a month or two later. It also means that the U3 rate will go down when people give up looking for jobs, as 303,000 people did in June 2014. The labor force participation rate was 62.8 percent for June 2014, unchanged from May and April, and down from 63.5 percent for June 2013.

Given the problems with the BLS unemployment rates, are they a useful measurement of how well the economy is performing, a wild guess that cannot be accurate despite the BLS's best efforts, or a deliberate fraud by the government? I report, you decide.

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