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An overview of the March 2014 jobs report

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The Bureau of Labor Statistics reported on April 4, 2014 that the official seasonally adjusted unemployment rate for March 2014 was 6.7 percent, unchanged from February, up from 6.6 percent in January, and down from 7.6 percent in March 2013.

Total non-farm employment increased by 192,000 during the month of March with seasonal adjustment, but increased by 941,000 during the month of March without seasonal adjustment.

The seasonally adjusted total non-farm job creation figure for February 2014 was revised upward to 197,000 from 175,000, and the seasonally adjusted total non-farm job creation figure for January 2014 was revised upward to 144,000 from 129,000. The unadjusted total non-farm job creation figure for February 2014 was revised downward to 743,000 from 750,000, and the unadjusted total non-farm job creation figure for January 2014 was revised upward to -2,818,000 from -2,836,000.

Breaking these figures down further, with seasonal adjustment, private sector employment increased by 192,000 during the month of March while government employment did not change. Without seasonal adjustment, private sector employment increased by 831,000 during the month of March while government employment increased by 110,000.

The seasonally adjusted private sector job creation figure for February 2014 was revised upward to 188,000 from 162,000, and the seasonally adjusted private sector job creation figure for January 2014 was revised upward to 166,000 from 145,000. The unadjusted private sector job creation figure for February 2014 was revised upward to 315,000 from 300,000, and the unadjusted private sector job creation figure for January 2014 was revised upward to -2,321,000 from -2,340,000.

The seasonally adjusted government job creation figure for February 2014 was revised downward to 9,000 from 13,000, and the seasonally adjusted government job creation figure for January 2014 was revised downward to -22,000 from -16,000. The unadjusted government job creation figure for February 2014 was revised downward to 428,000 from 450,000, and the unadjusted government job creation figure for January 2014 was revised downward to -497,000 from -496,000.

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 3.7 percent for March 2014, up from 3.6 percent for February, 3.5 percent for January, and down from 4.3 percent for March 2013.
  • U2: Job losers and persons who completed temporary jobs, as a percent of the civilian labor force. This rate is 3.7 percent for March 2014, down from 3.9 percent for February, 4.0 percent for January, and 4.3 percent for March 2013.
  • U3: Total unemployed, as a percent of the civilian labor force (official unemployment rate). This rate is 6.8 percent for March 2014, down from 7.0 percent for February and January, and 7.6 percent for March 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 7.2 percent for March 2014, down from 7.5 percent for February and January, and 8.1 percent for March 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 8.1 percent for March 2014, down from 8.4 percent for February, 8.6 percent for January, and 9.0 percent for March 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 12.8 percent for March 2014, down from 13.1 percent for February, down from 13.5 percent for January, and 13.9 percent for March 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 10.45 percent for March 2014, down from 10.75 percent for February, 11.05 percent for January, and 11.45 percent for March 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, as 504,000 people did in March 2014. 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. The labor force participation rate was 63.2 percent for March 2014, up from 63.0 percent for February and January, and down from 63.3 percent in March 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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