Jobenomics tracks both employment (see: Employment Scoreboard: January 2013) and unemployment (this posting).
Executive Summary. According to the US Department of Labor’s Bureau of Labor Statistics (BLS) January 2013 report, the US added 155,000 jobs but the official unemployment rate increased slightly from 7.7% to 7.8%. The number of people that quit looking for a job increased by 224,000, thereby increasing the official BLS “Not-in-labor-force” category to 89,445,000 (unadjusted)—an all-time high for those who can work and choose not to work. Last month, 1,017,000 joined the ranks of “Not-in-labor-force” that is rapidly outpacing those employed in private sector labor force. Jobenomics calculates that those can work but don’t will exceed the total number of private sector workers by year 2020.
Understanding Employment and Unemployment Numbers. The BLS the basic concepts involved in identifying the employed and unemployed are quite simple:
- People with jobs are Employed.
- People who are jobless, looking for jobs, and available for work are Unemployed. Those who are marginally employed, and looking for jobs, are deemed Underemployed.
- People who are neither employed nor unemployed are not in the labor force. Those who have no job and are not looking for one are counted in the B Not-in-Labor-Force (NiLF) category. When a discouraged worker stops looking for work, that person is no longer considered unemployed by the BLS, they moved into the NiLF category.
Therefore, as shown above:
- Working Population = Employed + Underemployed + Unemployed = 156.4 million.
- Non-Working Population = Not-in-Labor-Force + All Others = 159.6 million.
The Working Population includes 134.0 million employed and 22.4 million people who have a marginal job, no job, or are looking for work (U6 category). The BLS calls this group, the “Civilian Labor Force”, which is defined as citizens, who have jobs or are seeking a job, are at least 16 years old, are not serving in the military and are not institutionalized.
The Non-Working Population includes 88.8 million in the BLS’ Not-in-Labor-Force categorywho can work but are not looking. Not-in-Labor-Force includes people (over 16 years old) such as discouraged workers, citizens who choose not to work, welfare recipients, students, retired, stay-at-home caregivers, etc. The remaining All Others category that include 69.9 million children, elderly, disabled, serving in the military, incarcerated, etc.
Every month, the BLS publishes unemployment and employment statistics for economic, policy and public decision-making. Unfortunately, few policy-makers, opinion-leaders, media-pundits and citizens understand these statistics. More importantly, Americans tend to focus on only one statistic—the U3 rate or “official” unemployment rate—which is deleterious to good decision making. The above chart highlights the U3 rate against a backdrop of other BLS unemployment (can work and are looking) and not-in-labor-force (can work but are not looking) categories.
The BLS calculates six unemployment categories (U1 through U6) every month for those that can work and are looking for work. The three most often reported categories are the so called Long-Term U1 Rate, the Official Unemployment U3 Rate, and the Total Unemployment U6 Rate. These rates and numbers are calculated as a percentage of the US Civilian Labor Force, which currently stands at 155.5 million Americans, which is less than half of the total US population of 315.1 million.
As of 1 January 2013, the U1 category is currently 4.1% with 6.7 million unemployed longer than 15 weeks. The U3 category is 7.8% with 12.1 million “officially” unemployed. The U6 category is 14.4% with 22.4 million underemployed or unemployed. These high unemployment rates have been consistently high for almost four years and many believe that high unemployment has become a floor as opposed to ceiling.
The chart above shows the recent US employment history. US peak employment occurred in January 2008 with 138.0 million employed. The post-Great Recession low occurred in February 2010 with 129.2 million employed. Today, there are 134.0 million employed. Consequently, -8.8 million jobs were lost from peak to low. From the low to present, 4.8 million jobs were created. From the start of the Obama Administration, the US has produced 500,000 more jobs since the president took office. From the start of this decade, the Jobenomics starting point, 4.7 million jobs were created—all in the private sector, whereas each level of government (federal, state and local) lost jobs.
The “Not-in-Labor-Force” Category. The downward trends in the US working population and the upward trend in the US non-working population pose serious challenges to America’s economy and way-of-life. These trends are shown in the following charts.
Those in the Not-in-Labor-Force category (those that can work but don’t) has surged consistently since year 2000 by 20.6 million people. Since 2009, the start of the Obama Administration, it grew by 8.8 million. Since 2010, the beginning of the decade (Jobenomics starting point), it grew by 5.2 million people—a number of people approximately equal to the number of all new jobs created. In the last twelve months, it grew by 2.2 million—the highest average yearly rate in the last two decades.
From 1 January 2000 until today, the NiLF has grown 30% compared to 2% growth in the private sector work force. At the current rate of NiLF growth, those than can work but choose not to work will outnumber those working sometime in year 2020.
As shown above, in terms of age, the NiLF includes 48 million people 55 years or older (54%), 23 million 25 to 54 year olds (26%), and 18 million 16 to 24 year olds (20%). In terms of gender, NiLF includes 54 million women (60%) and 36 million men (40%).
Since year 2000, the US working population suffered a serious decline from a high of 67.1% to 63.6% (the lowest rate since 1981) of our citizens are in the labor force. The primary reason for the dramatic US drop is largely due to those that simply have quit looking for work and are now categorized as Not-in-Labor-Force. Alarmingly, the BLS reports that 93% of the people in the NiLF currently do not want a job.
In comparison, the United States, United Kingdom (Britain) and Canada’s labor force participation rates are shown above as reported by the US Federal Reserve. The US, UK and Canada share a common heritage and economic system. Comparatively, the percentage of citizens that are in participating in the US labor force is now shrinking significantly faster than those of our closest allies.
The “Functionally Unemployed”. When a discouraged worker quits looking for work, he/she is eventually moved into the BLS’ Not-in-labor-force category—which essentially means that this former worker is in an unemployment limbo and off-the-grid from a working population perspective.
Jobenomics defines “functionally” employed as the total number of people that have no job and are capable of working—111.2 million Americans. From a Jobenomics perspective, Not-in-Labor-Force citizens should be classified as long-term unemployed. If all underemployed, unemployed and Not-in-Labor-Force people were calculated as “functionally unemployed”, the US unemployment rate would be a whopping 35%.
The Jobenomics “functionally unemployed rate” equates to 35% of the US population or 111.2 million people. 111.2 million is calculated by adding the BLS’ U6 number (22.4 million) and the BLS’ Not-in-Labor-Force number (88.8 million). Dividing 111.2 million by the total US population of 315.1 million yields a functionally unemployed rate of 35%.
Understanding the functionally unemployed rate of 35% is a much better indicator of economic distress, than the much lower 7.8% “official” U3 unemployment rate that is most often watched and reported. Jobenomics asserts that overemphasis on the official unemployment rate is politically and economically dangerous. Sooner or later, the American people will figure out that the current way our government calculates unemployment is seriously flawed.
Under the current system, it is theoretically possible for the US to have a zero rate of unemployment while simultaneously having zero people employed in the labor force. Stated another way, since NiLF workers are not counted as unemployed, the official unemployment rate could theoretically be zero if all the current unemployed people simply quit looking for work and joined those in the NiLF.
32% of all Americans are financially supporting the rest of the country. 102 million workers in the private sector are supporting 32M that work for government (including contractors), 89M that can work but choose not to work, 70M that cannot work (children, retired, disabled, etc.) and 23M that are looking for work (officially unemployed and unemployed).
 Bureau of Labor Statistics, Economic News Release, Employment Situation Summary, 7 Dec 2012, http://www.bls.gov/news.release/empsit.nr0.htm
 Bureau of Labor Statistics, Table A-16. Persons not in the labor force and multiple jobholders by sex, not seasonally adjusted, http://www.bls.gov/webapps/legacy/cpsatab16.htm
 Bureau of Labor Statistics, Table A-1. Employment status of the civilian population by sex and age, http://www.bls.gov/news.release/empsit.t01.htm
 US Census Bureau, US & World Population Clocks, 7 Dec 12, http://www.census.gov/main/www/popclock.html
 Federal Reserve Bank of St. Louis, Economic Data, http://research.stlouisfed.org/fred2/graph/?id=CIVPART,CANLFPRNA,GBRLFPRNA,