UNEMPLOYMENT | Rising Long-Term Unemployed in July

The official unemployment number (U-3) of 10.2 percent in July is down 0.9 of a percentage point from June.

But the  number of long-term unemployed (U-1) is growing as Covid-19 extends into another month, from 2.1 percent in June to 5.0 percent in July. These are likely to be people with fewer skills or opportunities, who are less able to adapt to a new economic situation. This damage to the labor market is hard to repair. 

The broadest published measure of unemployment (U-6) in July is still 16.5 percent, nearly double what it was in March.

Table A-15. Alternative measures of labor utilization
HOUSEHOLD DATA (https://www.bls.gov/news.release/empsit.t15.htm)
Measure	Seasonally adjusted, percent
	July 2019	Mar. 2020	Apr. 2020	May 2020	June 2020	July 2020
U-1 Persons unemployed 15 weeks or longer, as a percent of the civilian labor force	1.3	1.2	1.1	1.4	2.1	5.0
U-2 Job losers and persons who completed temporary jobs, as a percent of the civilian labor force	1.7	2.4	13.2	11.6	8.9	8.1
U-3 Total unemployed, as a percent of the civilian labor force (official unemployment rate)	3.7	4.4	14.7	13.3	11.1	10.2
U-4 Total unemployed plus discouraged workers, as a percent of the civilian labor force plus discouraged workers	3.9	4.7	15.1	13.6	11.5	10.6
U-5 Total unemployed, plus discouraged workers, 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	4.5	5.2	16.0	14.6	12.5	11.3
U-6 Total unemployed, plus all persons marginally attached to the labor force, 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	6.9	8.7	22.8	21.2	18.0	16.5

JOBS | Trump Compared with Obama, GW Bush, Clinton

May 8, 2020, 8:45 am—Three and a half years ago, in December 2016, this blogpost reviewed two numbers important for working-age Americans, the unemployment rate and the employment-population ratio, for the prior three administrations. These are seasonally adjusted monthly numbers. This post updates the records of the last four presidents.

1. UNEMPLOYMENT RATE

	Bill Clinton 1993-2001	G. W. Bush 2001-2009	Barack Obama 2009-2017	Donald Trump 2017-April 2020
Unemployment Rate, last prior full month, percent, s.a.	7.4	3.9	7.3	4.7
Unemployment Rate, last full month, percent, s.a.	3.9	7.3	4.7	14.7
Change, percentage points (– = rise)	3.5	-3.4	2.6	-10.0

In December 2016, the last full month of President Obama's administration, the unemployment rate was 4.7 percent. The unemployment rate is the number of unemployed, 7.5 million, divided by the labor force (employed + unemployed), i.e., 159.6 million—4.7 percent.

The unemployment rate rose under President Trump to 14.7 percent in April 2020, an increase of 10 percentage points. The New York City Comptroller earlier this week projected an unemployment rate for NY City of 22 percent in June.

President Obama's last full-month 4.7 percent unemployment rate compares with 7.3 percent in December 2009, the last month of President George W. Bush's administration. That is a reduction of 2.6 percentage points.

This is turn compares with an increase in the unemployment rate of 3.4 percentage points during President G.W. Bush's administration and a decrease of 3.5 percentage points during President Clinton's administration. 

2. THE EMPLOYMENT-POPULATION RATIO

	Bill Clinton 1993-2001	G. W. Bush 2001-2009	Barack Obama 2009-2017	Donald Trump 2017-April 2020
Employment-Population Ratio, last prior full month, percent, s.a.	61.4	64.4	61.0	59.8
Employment-Population Ratio, last full month, percent, s.a.	64.4	61.0	59.8	51.3
Change during administration, percentage points (– = decline)	3.0	-3.4	-1.2	-8.5

The December 2016 Employment-Population Ratio was 59.8 percent. It fell to 51.3 percent in April, a decline of 8.5 percentage points from March. This is the lowest rate and largest over-the-month decline in the history of the series, which dates back to 1948. The employment-population ratio is defined by the BLS as the number of employed people, 152.1 million, divided by the civilian noninstitutional population, 254.5 million.

Trump visits Obama, 2016  

The Employment-Population Ratio has certain advantages as a labor market measure over the unemployment rate. It is a more reliable indicator over time because it is unaffected by variations in interviews, sampling, telecommunications preferences or definitions of the unemployed. 

In December 1992 when President Clinton came to office, the employment-population rate had been falling and was at 61.4 percent. It rose during his administration to 64.3 percent, an increase of 2.9 percentage points. Under President G. W. Bush, the rate fell by 3.3 percentage points to 61.0 percent. Under President Obama the rate fell further to 59.7 percent, a drop of 1.3 percentage points. 

On both measures, as of April 2020 the last two Democratic administrations outperformed both the Bush 43 and Trump administrations. 

FOMC | Job Numbers Mean EZ Decision (Comment)

The Effective Fed Funds Rate. Source: FRED, St. Louis Fed. Since Dec. 2008
 the target rate has been between 0 percent and 0.25 percent, i.e., at the
"zero bound"; rate will likely be raised at the next FOMC meeting.

The job numbers from the BLS this morning show total nonfarm payroll employment increased by 211,000 in November.

The unemployment rate was unchanged at 5.0 percent.

Job gains occurred in construction, professional and technical services, and health care. Mining and information lost jobs.

The numbers have been widely anticipated because they are the last before the Ides of December FOMC meeting.

Fed Chair Janet Yellen made clear yesterday in her testimony before the Joint Economic Committee of the Congress that the Fed is ready to raise the zero-bound Federal Funds rate that has been at the zero-bound level since December 2008. The only major concern is lackluster economies in the rest of the world.

Comment

The Fed has a dual mandate (besides the basic one of ensuring stability in financial markets) – its traditional 1913 mandate to preserve the value of the dollar by reining in lending during periods of speculation and therefore inflation, plus its 1946 mandate to ensure full employment.

Interest-rate doves like Paul Krugman and Brad DeLong argue that since the United States has no inflationary pressure, interest rates should not be raised. If inflation is below the 2 percent Fed inflation target, leave rates alone. While unemployment is low, the employment/population ratio is also low and economic growth has been slow.  Why is anyone is thinking of raising interest rates? They are afraid raising rates will kill the economy.

One answer is that the zero-bound rate is an unnatural one, giving no flexibility on the stimulus side. The Fed wants to be able to respond to economic developments in either direction. So long as it is at the zero bound, it is powerless to do much to stimulate demand, notwithstanding the QE initiatives.

BLS | Boy Cries "Wolf" Again on Unemployment Data

Funny... but unfair. (Washington Post cartoon, 2011)

Onto her 23, 2014–A New York Post columnist yesterday wrote that Los Angeles, "the city known as America’s story factory", is "making up Census data".

This is a reprise of a challenged report last year  emanating from Census worker Julius Buckmon that the BLS had been "faking" the unemployment numbers in Philadelphia in 2012 to make President Obama look good for his reelection.

The columnist, John Crudele, says the new whistleblower reports that Census workers in the Los Angeles region have been manipulating economic data and that she is now coming forward because she “applauds” whistleblowers in Denver and Philadelphia.

Crudele's report last year was in support of former GE CEO Jack Welch, a self-identified Republican who publicly criticized the BLS in September 2012 when the U.S. unemployment rate dropped to 7.8 percent from 8.1 percent. Welch tweeted:

Unbelievable jobs numbers..these Chicago guys will do anything..can't debate so change numbers.

His tweet was widely critiqued by people who noted GE's own reputation for earnings manipulation. Sample conclusions:

• In the Atlantic, Jordan Weissman argues that poor survey data wouldn't make much difference. He says the unemployment data historically mirror the payroll-jobs data, which are more broadly based. 

• The Census Bureau’s Office of Inspector General looked into Buckmon's report and concluded:

Our investigation did not find any evidence to support allegations that supervisors in the Philadelphia Regional Office manipulated, or attempted to manipulate, the unemployment rate prior to the 2012 presidential election.

• Commerce Inspector General Todd Zinser found wrongdoing on the part of Buckmon, but not his supervisors.

The reason for public concern is that the Census Bureau conducts a survey of about 60,000 households each month to find out who is working and who is unemployed. These surveys are turned over to the Bureau of Labor Statistics, to compute and estimate the monthly unemployment rates, which are usually reported on the first Friday of every month and are closely watched by Wall Street and politicians contemplating reelection.

The LA whistleblower brings to four the number of regions where survey problems are alleged by Crudele - Philadelphia, Chicago, Denver and now LA. (No problems have recently surfaced in the other two regions, New York and Atlanta.)  Each region is divided into Field Service Areas (FSAs) with 10-15 field reps reporting to one supervisor. The BLS requires a 90 percent success rate for interviews to be included in the Current Population Survey. The LA whistleblower told The New York Post:

There are some FSAs that month after month had a 100 percent response rate. That alone should raise flags! I can understand an occasional 100 percent response rate but you have to raise an eyebrow when some FSAs have 100 percent every month.

At any rate, the unemployment rate was just reported as having fallen in September to 5.9 percent, below the benchmark 6 percent rate - historically considered the rate below which inflationary pressures are supposed to start. So the decline in 2012 was certainly not off the trend line.