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An overview of the November 2013 jobs report

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The Bureau of Labor Statistics reported on Dec. 6, 2013 that the official seasonally adjusted unemployment rate for November 2013 was 7.0 percent, down from 7.3 percent in October, 7.2 in September, and 7.8 percent in November 2012.

Total non-farm employment increased by 203,000 during the month of November with seasonal adjustment, but increased by 421,000 during the month of November without seasonal adjustment.

The seasonally adjusted total non-farm job creation figure for October 2013 was revised downward to 200,000 from 204,000, and the seasonally adjusted total non-farm job creation figure for September 2013 was revised upward to 175,000 from 163,000. The unadjusted total non-farm job creation figure for October 2013 was revised downward to 909,000 from 940,000, and the unadjusted total non-farm job creation figure for September 2013 was revised upward to 610,000 from 598,000.

Breaking these figures down further, with seasonal adjustment, private sector employment increased by 196,000 during the month of November while government employment increased by 7,000. Without seasonal adjustment, private sector employment increased by 309,000 during the month of November while government employment increased by 112,000.

The seasonally adjusted private sector job creation figure for October 2013 was revised upward to 214,000 from 212,000, and the seasonally adjusted private sector job creation figure for September 2013 was revised upward to 168,000 from 150,000. The unadjusted private sector job creation figure for October 2013 was revised downward to 442,000 from 453,000, and the unadjusted private sector job creation figure for September 2013 was revised upward to -368,000 from -384,000.

The seasonally adjusted government job creation figure for October 2013 was revised downward to -14,000 from -8,000, and the seasonally adjusted government job creation figure for September 2013 was revised downward to 7,000 from 13,000. The unadjusted government job creation figure for October 2013 was revised downward to 467,000 from 487,000, and the unadjusted government job creation figure for September 2013 was revised downward to 978,000 from 982,000.

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 November 2013, unchanged from October and September, and down from 4.2 percent in November 2012.
  • U2: Job losers and persons who completed temporary jobs, as a percent of the civilian labor force. This rate is 3.5 percent for November 2013, down from 3.6 percent in October, unchanged from September, and down from 3.9 percent in November 2012.
  • U3: Total unemployed, as a percent of the civilian labor force (official unemployment rate). This rate is 6.6 percent for November 2013, down from 7.0 percent in October and September, and 7.4 percent in November 2012.
  • 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 7.1 percent for November 2013, down from 7.4 percent in October, 7.5 percent in September, and 7.9 percent in November 2012.
  • 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 7.9 percent for November 2013, down from 8.3 percent in October, 8.4 percent in September, and 8.8 percent in November 2012.
  • 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 12.7 percent for November 2013, down from 13.2 percent in October, 13.1 percent in September, and 13.9 percent in November 2012.

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." The U5½ rate is 10.3 percent for November 2013, down from 10.75 percent in October and September, and 11.35 percent in November 2012.

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, as 455,000 people did in November 2013, 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. The labor force participation rate was 63.0 percent in November 2013, up from 62.8 percent in October, and down from 63.2 percent in September and 63.6 percent in November 2012.

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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