A Question for the Economists Here

[Some Friggin Guy]

This is a serious question, because I can't seem to wrap my brain around the logic of this.

Today, they announced that last month there were upwards of 300,000 new jobs created. At the same time, last month, unemployment went up .1%.

I am wondering how it is possible to have both more employment and more unemployment at the same time.

[Lord Emsworth]

Originally posted by Some Friggin Guy

This is a serious question, because I can't seem to wrap my brain around the logic of this.

Today, they announced that last month there were upwards of 300,000 new jobs created. At the same time, last month, unemployment went up .1%.

I am wondering how it is possible to have both more employment and more unemployment at the same time.


That's simple.

The work force increased by more than 300,000 (say 600,000), while merely 300,000 new jobs were created. Hence the percentage of unemployment is higher.

[UserGoogol]

Or maybe they created the jobs, but didn't actually fill them. You know, just to mess with statisticians' heads.

But yes, Emsworth's explanation seems to make a little more sense. The work force is growing faster than the job supply.

[Some Friggin Guy]

That makes sense. Thanks. I suppose the answer was so simple I didn't recognize it.

[corplinx]

Unemployment is a fake figure too. Its basically the number of people filing unemployment claims. So the number of people filing claims went up .1 percent.

[peptoabysmal]

Yup. It's not just unemployment, it's the unemployment rate.

Here's a Shanek<SUP><FONT SIZE="-1">TM</FONT></SUP> type of question:

If the number of new jobs increases, but the new jobs are "offshore outsourced" will that cause the unemployment rate to climb or decrease or stay the same?

[RandFan]

According to an economist on the radio.

Individuals can only apply for benefits for a certain amount of time. After that the fall of the charts. If those people get jobs they do not effect the unemployment rate.

[Bjorn]

And what happens to unemployment rates if you suddenly declare 3 million illegal (working) immigrants legal?
:(

[Drooper]

A few points here.

Firstly, definitional issues.

Unemployment, for an economist, is not the same thing as those people who claim for unemployment benefits. There may be people who are claimants who would not be defined as unemployed in the strict sense and there are those who are not claimants who would be. The most commonly accepted standard measure for unemployment is that calculated under ILO (the International Labour Organisation) methodology.


Secondly, methods of estimation.

Labour market measures (such as unemployment and employment) are traditionally calculated in two distinct ways: an employer based survey and a household based survey.

As it would imply, the former ask companies about the number of people they employ, while the latter calls door to door and asks people.

From the Bureau of Labor Statistics (http://www.bls.gov/news.release/empsit.tn.htm)

This news release presents statistics from two major surveys, the Current Population Survey (household survey) and the Current Employment Statistics survey (establishment survey). The household survey provides the information on the labor force, employment, and unemployment that appears in the A tables, marked HOUSEHOLD DATA. It is a sample survey of about 60,000 households conducted by the U.S. Census Bureau for the Bureau of Labor Statistics (BLS).

The establishment survey provides the information on the employment, hours, and earnings of workers on nonfarm payrolls that appears in the B tables, marked ESTABLISHMENT DATA. This information is collected from payroll records by BLS in cooperation with State agencies. The sample includes about 160,000 businesses and government agencies covering approximately 400,000 individual worksites. The active sample includes about one-third of all nonfarm payroll workers. The sample is drawn from a sampling frame of unemployment insurance tax accounts.

The +300,000 jobs you quoted is the increase in "non-farm payrolls". This is the commonly accepted standard for employment trends in the US economy and it is an "Establishment" or employer based statistics.

If you look at the Household based statistic for those those people over 16 years of age employed, then there was a FALL of 3,000 in March. So you can see how difficult it can be to interpret statistics (or; lies, damn lies etc.). Browse the copious alternative measures for employment and unemployment on the BLS site to see how many different measures of employment and unemployment exist.


Thirdly, factors affecting unemployment.

The employment figures are supposed to be an estimate of those people in payed employment. Unemployment measures are supposed to capture those people willing and able to work, but had not found employment at the time of the survey.
From this definition, unemployment can vary as people pass into and out of employment AND it can vary as people enter and leave the "labour force". The former is simple to understand, the latter effect represents those people might become unavailable for work (through illness or going into studies, going into retirement etc.).

So you can have falling employment (fewer people working) at the same time as falling unemployment if the labour force is shrinking and vice versa.


I hope this sheds some light.

[Drooper]

Originally posted by Bjorn
And what happens to unemployment rates if you suddenly declare 3 million illegal (working) immigrants legal?
:(


Illegal aliens would be less likely to show up in "Household Survey" data (see my post above for explanation).

However, they would tend to show up to some extent on "Establishment" or employer based data.

Since unemployment figures are usually taken from household suveys, the might be some effect on unemployment measures. However, it depends on the relative proportions of illegal immigrant unemployed versus the rest of the population and relative magnitude of the illegal population etc. Conceivably, the unemployment rate might go up or down.

I am sure there is loads of research on this. Try searching the BLS web site.

[Cain]

So you can have falling employment (fewer people working) at the same time as falling unemployment if the labour force is shrinking and vice versa.

Expanding on this..

In order to be counted as "unemployed" one must be actively seeking work. So, for example, if the labor market becomes so bad that people are discouraged from seeking jobs -- which is to say they remove themselves from the workforce -- then unemployment could decline (this happened several months ago).

In this case the creation of jobs could have encouraged people to begin searching for work, hence unemployment increases.

Also remember that these figures might look quite different after they're revised.

[epepke]

Originally posted by Cain
In order to be counted as "unemployed" one must be actively seeking work. So, for example, if the labor market becomes so bad that people are discouraged from seeking jobs -- which is to say they remove themselves from the workforce -- then unemployment could decline (this happened several months ago).

(raises hand)

I'm one of them. I've been unemployed for almost two years now. I make some meagre small change from consulting, but I gave up on looking for proper work a while ago.