The Bureau of labor Statistics, (BLS), released labor market statistics for June 2018 today, Friday, July 6, 2018.
The bottom line:
Nothing much has changed.
Although the media is making a big deal about the unemployment rate and employers are shedding crocodile tears about a tight labor market, wages are stagnant, part time jobs are not converting to full time, and the average workweek is stalled at 34 hours.
There is not much encouragement, but neither are things getting any worse.
We’ve been hearing a lot about how tight the labor market is, and that employers are having a difficult time finding workers. The data does not support that contention.
When labor markets are tight, employment is very high and labor is hard to find. Demand for labor is so high that part time jobs turn into full time jobs, and part time jobs become hard to find. High quality employees are likely already working, so employers raise wages to attract them, lower barriers to employment like drug tests and credit checks, and the average workweek approaches 40 hours per week.
None of that is happening.
In June, there was no change in the number of involuntary part time workers. There just wasn’t enough work to offer these people full time employment.
The average workweek for all employees is only 34 hours. That is far from full capacity and implies there are far more idle potential workers than there are people drawing a steady full time paycheck.
Something else that happens in a tight labor market is wage increases. When employers compete for workers they offer higher wages to convince them to return to the labor market from whatever refuge has provided protection.
Wages are just about keeping pace with inflation at an annual rate of 2.7%. In other words, employers are not so in need of workers that they are offering higher wages.
There a number of things in The Employment Situation that you will not see the media crowing about because they don’t support the meme that everything is getting better.
One is the long-term unemployment rate. These people have been unemployed for six months or more. The six-month mark is significant because people have a much more difficult time finding a job after being unemployed for six months or more.
And guess what?
The long-term unemployment rate increased in June by 289,000 to 1.5 million, or 23% of the total unemployed. Remember, the BLS considers these people to still be attached to the labor force; they want a job, but may not have actively looked for one in the in the last 12 months. This group is getting bigger.
This brings up another statistical group, the Labor Force Participation Rate or the percentage of the population either working or desiring work.
The Labor Force Participation Rate has been at historically low levels since the Crash of 2008, but edged up by two tenths of a percent this month. Apparently, the good news about jobs convinced some people not in the labor force to try the job market again. Keep an eye on this number in future Situation reports. Continued increases might indicate an improving labor market.
People not in the labor force consist of those who have found ways other than a traditional job to survive. They might be doing things like making a career of going to school on student loans, blogging, grey market side work and outright illegal means of making a living. People in prison, the military the retired are also included in this group.
If you read many of my articles about statistics, you are familiar with my mantra “What are you measuring and how are you measuring it?” The BLS has a wonderful website explaining their methodology and definitions, How the Government Measures Unemployment
The definition of employed is straightforward – if you worked and were paid during the last week you are employed. There is no minimum wage or income requirement. This brings into question what a job really is.
Most people think that employment means being self-sufficient. With a job, you can rent an apartment and sign a note for a car. But this is not the way the BLS defines a job. If you make any amount of money in exchange for labor, you count as employed.
You raked your neighbor’s leaves for an hour last weekend and got $20 bucks? You’re employed.
In some cases, you don’t even have to make any money to count as employed. For instance, if you help your husband with the bookkeeping on his online business the BLS considers you employed even though you did not get a paycheck. Same with farms. Help Gramps out with the milking and the BLS considers you employed, even if you and your grandfather do not. (The rationale is that you benefit from your work, even though you don’t see a paycheck.)
More than ever, it is important to understand how the labor market is measured. At one time, it might have been enough to focus on the unemployment rate in order to understand the general health of the labor market, and larger economy.
The economy, and especially the labor market, has changed so much that we need to understand the nuances of the Employment Situation and look at measures we have ignored in the past.
For example, the unemployment rate means something very different when average hours worked are very low and part time jobs are either increasing or staying the same. The BLS is not lying or intentionally misleading, but in order to understand labor trends it is imperative to understand what the statistics mean.
I hope this article helps people understand the numbers the media pulls out of the Employment Situation.