Don't get too excited about unemployment numbers. They are very slippery when you look at the details. To know the unemployment rate that is reported by the Bureau of Labour Statistics there are several numbers to keep in mind.
Start off with the drop down from 9.3% to 8.3% unemployment in the past year, that is a change of 1,300,000 people. The definition of unemployed is simple. Did you look for a job in the previous four weeks if you were 16 years of age or older. If yes, did you have a job in the week that is considered the key week of the month. Most months, that is the second week.
All of this data is seasonally adjusted. That means that for December most people are seasonally adjusted to not be looking for a job and those who have jobs are assumed to include many Christmas only workers. Slippery data.
Did these 1.3 million people get jobs? That answer depends on several other numbers.
At present, there are roughly 141.6 million workers. Of these, 8 million work part time jobs and and another 9 million were government employees. That excludes the military.
In the past year the number of workers has gone up by slightly more than 2 million. So how did we get two million more workers when only 1.3 million were formerly unemployed?
There is a group of people called the labor force. In January of this year there were 154.4 million of these. A year ago there were only 153.3 million. So that is 1.1 million new people who entered the labor force. The definition of the labor force is people who have a job or who are looking for a job.
The number of employed people increased by 2.3 million in the past year, of which 1.3 million were formerly unemployed and 1 million were formerly out of the labor force. Note that these numbers are for a gigantic data set. It only left out 0.1 million people in the final data.
So where do those 1.1 million new entrants to the labor force come from?
They come from the pool of possible workers which constitutes all Americans over age 16. It excludes a few million in jail or prison, in the Army, or in senior living and hospital environments. It therefore includes my friend Herman who is 84 and was capable, maybe, of working last year. In January of this year it excluded Herman because senility put him in a senior care home.
During the past year the possible worker pool increased from 238.7 million to 242.3 million. That is 4.4 million people. That includes people who just turned 16 during the year or became citizens.
All of this data is seasonally adjusted. That means that for December most people are seasonally adjusted to not be looking for a job and those who have jobs are assumed to include many Christmas only workers. Slippery data.
Did these 1.3 million people get jobs? That answer depends on several other numbers.
At present, there are roughly 141.6 million workers. Of these, 8 million work part time jobs and and another 9 million were government employees. That excludes the military.
In the past year the number of workers has gone up by slightly more than 2 million. So how did we get two million more workers when only 1.3 million were formerly unemployed?
There is a group of people called the labor force. In January of this year there were 154.4 million of these. A year ago there were only 153.3 million. So that is 1.1 million new people who entered the labor force. The definition of the labor force is people who have a job or who are looking for a job.
So where do those 1.1 million new entrants to the labor force come from?
They come from the pool of possible workers which constitutes all Americans over age 16. It excludes a few million in jail or prison, in the Army, or in senior living and hospital environments. It therefore includes my friend Herman who is 84 and was capable, maybe, of working last year. In January of this year it excluded Herman because senility put him in a senior care home.
During the past year the possible worker pool increased from 238.7 million to 242.3 million. That is 4.4 million people. That includes people who just turned 16 during the year or became citizens.
Which means, 3.3 million have defined themselves as potential workers but who are not working and who are not unemployed by existing definitions.
That 3.3 million people has the potential to mess up our figures. They could look for a job and increase unemployment data. They could get jobs without being ever unemployed and make the unemployment data look better.
There is room for slippery numbers in this structure. We should always allow unemployment data a few months to stabilize in order to understand what is happening in the labor market.