The media might be celebrating, but let’s untangle the May jobs report before joining in

The Bureau of Labor Statistics (BLS) released its monthly Employment Situation today and the media predictably has seized on only one number — the U-3 measure of unemployment — and is throwing a party over it.

Unemployment is down to 3.8%, representing 6.1 million people and that is a good thing, but it is only one number of many. If you want to understand what is happening to the economy you have look a little deeper.

The BLS includes a section called the Household Survey Data in the Employment Situation. This section summarizes the data most of us find interesting.

Looking here, we can see that while unemployment dropped for men, Blacks and Asians nothing much changed for women, teens Whites and Hispanics. This means that positive changes benefit male Blacks and Asians, but not for males of other races, teens or women.

The 1.2 million long term unemployed, (jobless for six months or more), hasn’t changed, accounting for about 20% of the total unemployed. The good news is that long-term unemployment is down by about half a million over the preceding 12 months.

But don’t throw a party just yet.

That decrease may not mean that long-term unemployed (LTU) are finding jobs. A 2010 analysis in the Monthly Labor Review finds that the composition of long term unemployed changed dramatically since 1980. Increases in LTU came disproportionately from people over the age of 45, accounting for about 15% of the LTU, an increase of 185% since 1980. (See Allegretto and Lynch, 2010)

There are many reports from older workers of age discrimination and rejections based on “over qualification,” a term once considered a euphemism for “too old.” This might represent a decrease in the value employers place on work experience.

That sounds like a very strange thing, but as new technologies come and go ever more rapidly, it may that current experience is the only kind that has value. Experience older than maybe five years could be irrelevant.

At some point, older workers exit the LTU category for the Out of the Labor Force category when they begin drawing Social Security retirement benefits.

We don’t know how many people “retire” out of long-term unemployment and into Out of the Labor Force. We also don’t know how many people cannot find a good job and exit the labor force to go to school.

One BLS researcher has some interesting comments on these two related issues:

“The aging of the population would be expected to increase labor force exits, but the increase in the education level of the labor force would be expected to decrease it. For workers ages 25–54, increases in education would similarly be predicted to lead to a decrease in exits (with little effect caused by aging within this group) instead of resulting in the substantial increase we observe.” (Frazis, 2017)

The implication is that although people are returning to school they do not return to the labor market afterwards.

Next, we come to the category of “part time for economic reasons” totaling 4.9 million, unchanged from the previous year. These people can only find part time work even though they are looking for full time employment. The classic definition of contingent workers.

But contingent workers also work at full time jobs that may not last very long. These people are probably part of the “marginally attached” category — not in the labor force, wanting a job, looking for work in the last year, but not in the last month. There are about 1.5 million people in this situation.

Adding the 1.5 million in this category the 4.9 million considered “part time for economic reasons”, we get 5.4 million contingent workers.

Let that sink in for a minute.

The number of unemployed is 6.1 million, but the number of people hovering around financial catastrophe in contingent jobs or flitting in and out of part time/limited duration employment is about 5.4 million.

Put those two groups together and we can say that over ten million Americans who are in the labor force do not have full time jobs. They are either looking for work when they can, working at part time or short duration jobs, and sometimes retiring or going back to school, but not coming back into the labor market.

And let’s not forget that the average workweek in May was about 33 hours, and that wages increased less than 2%over the previous 12 months.

Let’s celebrate that 3.8% unemployment rate, and keep in mind it is about the only thing to celebrate.

References

Allegretto, S., & Lynch, D. (2010). The composition of the unemployed and long-term unemployed in tough labor markets. Monthly Labor Review, Bureau of Labor Statistics, 133(10), 16.

Frazis, H. (2017). Employed workers leaving the labor force: an analysis of recent trends. Monthly Labor Review, Bureau of Labor Statistics (May 2017). Retrieved from https://doi.org/10.21916/mlr.2017.16.

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