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Yes, the unemployment rate is going down, but that’s not the whole story

A series of charts won’t give you the big picture but will tell you the story is incomplete

Photo by Denys Nevozhai on Unsplash

The United States Department of Labor’s Bureau of Labor Statistics has announced its latest round of employment figures, which show employment in the US rose by 222,000 jobs in June 2017.

This is higher than what analysts had expected. It should be a good sign.

As the BBC reported, “Economists have expected job growth to slow and wages to rise, as more people are employed and firms have a harder time hiring.”

The traditional view goes: as employees become more scarce because they already have jobs, then businesses have to start offering more pay and better benefits (which costs money) to attract the labor needed.

Therefore, wages and salaries should go up when unemployment rates fall.

But it hasn’t.

While the unemployment rate is at a low of 4.4%, the average hourly wage has only grown by 2.5% from last year.

The growth of wages and salaries for civilian workers year-on-year has been between 1.5% and 2.5% since the end of the recession in 2009, according to data from the Bureau of Labor Statistics.

Meanwhile, the Consumer Price Index, used most often to calculate inflation, has been fluctuating around 2% for much of the same period.

Wages and salaries, and benefits, have been higher every year compared to the previous year, but not at the rate before the recession. From the Bureau of Labor Statistics.
Wages and salaries, and benefits, have been higher every year compared to the previous year, but not at the rate before the recession. From the Bureau of Labor Statistics.
The Consumer Price Index has continued its steady climb at or around 2%, except for a few bumps and dips, since 2009.
The Consumer Price Index has continued its steady climb at or around 2%, except for a few bumps and dips, since 2009.

In real terms, wages, salaries, and benefits in the US haven’t budged much since the recession. The benefits of the economic recovery have not been felt by much of the workforce.


Job growth is not consistent among all industries

Jobs in professional and business services, education and health services, and government have risen since falling during the 2007–2009 recession.

But jobs in mining and logging, construction, manufacturing, and wholesale trade have not recovered to pre-recession periods.

For workers in such sectors, the post-recession job boom announced in the news media has not been reflected in their own industries. These industries usually employ workers with lower educational qualifications, particularly those without formal college degrees.

The civilian labor force participation rate is still low

The civilian labor force participation rate is a measure of the percentage of workers actually working or wanting to work (i.e. in the labor force) versus the pool of people eligible to join this group.

If the rate is 100%, everybody who can work either has a job or is looking for one; if it’s 0%, everybody has no job and has stopped looking.

In November 2007, before the start of the recession, it was 66%; in Jun 2017, it’s 62.8%.

Now, there are more people capable of work who are unemployed and have stopped looking for new jobs than there were before the Great Recession, although the ratio is still much higher than it was before the 1980s.

U.S. Bureau of Labor Statistics, Civilian Labor Force Participation Rate [CIVPART], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/CIVPART, July 7, 2017.
U.S. Bureau of Labor Statistics, Civilian Labor Force Participation Rate [CIVPART], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/CIVPART, July 7, 2017.

The median duration of unemployment is still high

The median duration of unemployment measures an average of how long a worker has no job but is still looking for employment.

It does not include people who have dropped out of the labor force because they’ve stopped looking for a job as they don’t think they can find one.

Before the recession, it hovered between 8 and 9 weeks, then began climbing during the recession; the duration continued to climb to a peak of 25.2 weeks in June 2010, before it started falling.

In June 2017, the number was 9.6 weeks — still higher than it was before the US entered the recession.

If you gathered all the people without a job and looking for employment, asked them how long they’d been unemployed, and arranged them in a line by the duration of unemployment, the person in the middle was unemployed for 9.6 weeks.

U.S. Bureau of Labor Statistics, Median Duration of Unemployment [UEMPMED], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/UEMPMED, July 7, 2017.
U.S. Bureau of Labor Statistics, Median Duration of Unemployment [UEMPMED], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/UEMPMED, July 7, 2017.

Young people aged 16 to 19 are still employed less than before

The employment-population ratio measures the ratio of people employed versus the population. The age 16–19 segment covers most teenagers in high school, who tend to be more unemployed; for example, in January 1985, the ratio was 44.7%.

It was declining since 2001 when the US entered into a mini-recession; the ratio continued to decline during the Great Recession, before flattening at 25.1% in June 2010.

The ratio has since begun a slower recovery and was at 31.2% in June 2017, which is lower than the 34.8% in November 2007 before the US entered the Great Recession.

In June 2017, if you found all the 16 to 19-year-olds in the US, about a third of them would have a job. If you had done the same in January 1985, about half would have had a job.

It’s worth pointing out that the people who were aged 16 to 19 in 1985 would not have been measured in this population segment in 2017, and the narrow age range means about a quarter of the individuals behind this data will move out every year.

U.S. Bureau of Labor Statistics, Employment-Population Ratio: 16 to 19 years [LNS12300012], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/LNS12300012, July 7, 2017.
U.S. Bureau of Labor Statistics, Employment-Population Ratio: 16 to 19 years [LNS12300012], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/LNS12300012, July 7, 2017.

White men aged 20 or over are also employed less than before

In November 2007, the employment-population ratio for white men aged 20 or over was 73.5%.

It fell during the Great Recession, hitting a low of 67.5% in December 2009, climbing a bit, then falling again to 67.3% in November 2010.

The ratio has climbed slowly but remains significantly lower than its pre-recession level at 69.2% in June 2017.

U.S. Bureau of Labor Statistics, Employment-Population Ratio: 20 years and over, White Men [LNS12300028], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/LNS12300028, July 7, 2017.
U.S. Bureau of Labor Statistics, Employment-Population Ratio: 20 years and over, White Men [LNS12300028], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/LNS12300028, July 7, 2017.

African-American men aged 20 or over are also employed less than before, but closer to pre-recession levels

A similar pattern exists for African-American men aged 20 or over. In November 2007, the employment-participation ratio for African-American men aged 20 or over was 65.1%.

The ratio fell during the Great Recession, then began climbing after 2010. In June 2017, the ratio was 63.3%.

This is still lower than pre-recession levels, but the gap is significantly narrower for African-American men than for white men.

U.S. Bureau of Labor Statistics, Employment-Population Ratio: 20 years and over, Black or African American Men [LNS12300031], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/LNS12300031, July 7, 2017.
U.S. Bureau of Labor Statistics, Employment-Population Ratio: 20 years and over, Black or African American Men [LNS12300031], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/LNS12300031, July 7, 2017.

The Bureau of Labor Statistics did not collect data about the Hispanic and Latino community long enough for me to draw meaningful conclusions

U.S. Bureau of Labor Statistics, Employment Population Ratio: 20 years and over, Hispanic or Latino Men [LNU02300034], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/LNU02300034, July 7, 2017.
U.S. Bureau of Labor Statistics, Employment Population Ratio: 20 years and over, Hispanic or Latino Men [LNU02300034], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/LNU02300034, July 7, 2017.

The Bureau has only identified data for Hispanic and Latino men since 2000.

A different story for women: still employed less than men, less than pre-recession levels, and much better than history

The employment-population ratio for women in the US has been climbing steadily since 1950 until the late 1990s, when it peaked at 58.0% in April 2000.

In November 2007, the ratio was 56.6%. It fell during the Great Recession and kept dropping until March 2013 at 52.9%, before climbing out to 54.6% in June 2017.

This is still lower than men in the US.

U.S. Bureau of Labor Statistics, Employment-Population Ratio: Women [LNS12300002], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/LNS12300002, July 7, 2017.
U.S. Bureau of Labor Statistics, Employment-Population Ratio: Women [LNS12300002], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/LNS12300002, July 7, 2017.

Conclusions

The post-recession economic recovery is not being felt by all Americans. It certainly isn’t being felt across all industry sectors.

Industries with plenty of workers with higher educational attainment, including bachelor’s degrees and higher, have recovered and are doing better than ever; industries that typically employ people with lower formal qualifications have not recovered since the recession.

The age and racial factors also cannot be discounted. The gap to pre-recession employment for white men over 20 is larger than for African-American men over 20.

However, these charts don’t account for changing demographics in the US population over time.

I find it frustrating to read news articles that don’t dig further into the data, and instead focus on the headline numbers.

Certainly, the general unemployment rate was a good proxy for the state of the economy over the last few decades, but the reality is nuanced, and the headline numbers just aren’t good enough anymore.

I feel I know less about how the economy is affecting people than I did before I found these charts.

We need to find the faces behind this wall of data to reflect the true narratives of the people of the United States.

Data doesn’t tell you the story, but it can tell you if your story is missing pieces and isn’t complete.

The story, as it’s being told now, isn’t complete.

By Leo Ji

software engineer and news nerd