Firm Positive Employment View
The number of jobs added comes from a survey of establishment payrolls, or employer payroll survey. The unemployment rate comes from a separate survey of U.S. households. The household survey is much smaller than the establishment survey, and as a result it can swing around a lot — and move the unemployment rate up and down when it does. So the establishment report is more justified.
The unemployment rate is calculated based on people who are without jobs, who are available to work and who have actively sought work in the prior four weeks. The “actively looking for work” definition is fairly broad, including people who contacted an employer, employment agency, job center or friends; sent out resumes or filled out applications; or answered or placed ads, among other things. The rate is calculated by dividing that number by the total number of people in the labor force.
The labor force has been in the down trend since 2008, because of retirement, reduced immigration, and early retirement after many lost their jobs. The more troublesome indicator is declining participating rate among age 25-54. The participating rate is defined as the population force share in labor force. It has dropped from 66.5% in 2007 to 64.3% in 2011. As the denominator becomes smaller, the nominator has to drop faster to have a negative trend. That means the actual unemployment may be bigger than reported. In addition, positive GDP growth in the past quarters supports employment growth.
The trend has also been confirmed another measure. The U-6 figure from the Department of Labor dropped dropped 0.6% in November, including everyone in the official rate plus “marginally attached workers” — those who are neither working nor looking for work, but say they want a job and have looked for work recently; and people who are employed part-time for economic reasons, meaning they want full-time work but took a part-time schedule instead because that’s all they could find.
But we may have some variance down the road. If extending unemployment benefit fails in the Congress, people will be forced to go back to job markets. It is estimated 1.2 million will lose this benefit in January 2012 and total 5 million people in 2012 i
f the bill fails by year end. Another factor is that warming job market may attract more people back to look for jobs. Both these would make the denominator bigger again.
But the trend is convincing.
The unemployment rate is calculated based on people who are without jobs, who are available to work and who have actively sought work in the prior four weeks. The “actively looking for work” definition is fairly broad, including people who contacted an employer, employment agency, job center or friends; sent out resumes or filled out applications; or answered or placed ads, among other things. The rate is calculated by dividing that number by the total number of people in the labor force.
The labor force has been in the down trend since 2008, because of retirement, reduced immigration, and early retirement after many lost their jobs. The more troublesome indicator is declining participating rate among age 25-54. The participating rate is defined as the population force share in labor force. It has dropped from 66.5% in 2007 to 64.3% in 2011. As the denominator becomes smaller, the nominator has to drop faster to have a negative trend. That means the actual unemployment may be bigger than reported. In addition, positive GDP growth in the past quarters supports employment growth.
The trend has also been confirmed another measure. The U-6 figure from the Department of Labor dropped dropped 0.6% in November, including everyone in the official rate plus “marginally attached workers” — those who are neither working nor looking for work, but say they want a job and have looked for work recently; and people who are employed part-time for economic reasons, meaning they want full-time work but took a part-time schedule instead because that’s all they could find.
But we may have some variance down the road. If extending unemployment benefit fails in the Congress, people will be forced to go back to job markets. It is estimated 1.2 million will lose this benefit in January 2012 and total 5 million people in 2012 i
f the bill fails by year end. Another factor is that warming job market may attract more people back to look for jobs. Both these would make the denominator bigger again.
But the trend is convincing.
posted by Intl.investment.services at
5:01 PM
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