Friday, December 3, 2010

November unemployment rate

On the first Friday of every month at 8:30 AM labor economists, like me, get very excited.  The BLS's Employment Situation report is released.  Amongst other statistics, the unemployment rate for the previous month is reported. 

This morning it just so happened that I was in the middle of my Block 1 Principles of Microeconomics class teaching about labor markets and unemployment.  The students were kind enough to indulge me with an apparent interest as I pulled up the BLS web page ( to see the new number.  The headline read...

Unemployment rate (9.8%) edges up in November; payroll employment changes little (+39,000)

Not good news.

The unemployment rate was holding steady over the past few months at 9.6%.  Employment must increase by about 150,000  per month just to hold the unemployment rate steady.  Clearly the 39,000 increase was not enough and the unemployment rate increased.

Before major conclusions are drawn, we must dig a little deeper.  An individual is considered unemployed if they are not working for pay AND are actively seeking work.  If someone becomes "discouraged" and stops looking for a job, they move from the ranks of the unemployed to another category: not in the labor force.  As the economy improves and job opportunities appear, theses discouraged workers start looking again.  Once they start looking they move into the labor force and are considered unemployed.  This can cause a temporary uptick in the unemployment numbers.  The broader ranges of unemployment actually suggest that more people are becoming discouraged and not looking than less.  Yikes!

While it is expected that unemployment will rise as discouraged workers reenter the workforce, there were other concerning signs in the report.  Average weekly hours worked remained unchanged between October and November (34.3 hours).  Typically before firms start hiring more people, they work their current workers harder until the employers are comfortable that the downturn is over. Hours worked had been slowly rising until this month. 

How long will it take to recoup all of the lost jobs since the beginning of the 2007 recession?  One report estimated that would 2017 !  That was conditional on several factors, including GDP growing at an average of 2% per year.  If the actual growth rate is lower and/or employment continues add on low numbers like in November, we could be waiting even longer.

This blog hosted an non-scientific poll concerning projections for the November unemployment rate.  20% of participants felt that the unemployment rate would rise for November.  Most felt that it would remain at 9.6%, where it has been for several months (including this labor economist).  A lot of people were wrong, not just poll participants from this blog.  Many experts thought that unemployment would actually fall.

As we move into 2011 there are a lot of unanswered questions, uncertainty, and even fear.  Here's to a more stable and certain economy for the new year.  Hopefully on the first Friday of 2011 the Employment Situation Report is a little bit rosier. 

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