Unemployment Forecast Remains Bleak

Unemployment measures the percentage of workers in the current labor force (persons 16+) who want to work, but are unable to find jobs.  At the end of August, the Bureau of Labor Statistics (BLS) reported the unemployment rate in the United States was 9.1%, which has remained relatively unchanged since April 2011.  There are nearly 20 states with employment rates higher than the national average, however.  While Healthcare, Mining and other private sectors saw marginal increases in hiring, the Telecommunications and Manufacturing industries had declines.

The unemployment rate does not accurately reflect the number of workers who are marginally attached – a number that rose from 2.4 to 2.6 million over the previous 12 months.  These are people in the labor force, similar to those who are unemployed, who want to work and have looked for work in the past year, yet have not reported a work search within the four weeks prior to the most current BLS Study.  This number also does not take into account those who have been out of work as long as two years and have become so discouraged, they have stopped looking for work completely.  Workers who have been forced to into part-time employment, but want to work full-time (underemployed) are measured separately, and increased in August to 16.2%.

Economists were hopeful that August would bring enough job growth to lower the national unemployment rate down to 8.9%, demonstrating that the economy is indeed in recovery.  They were instead greeted with the news that the US is in what some are calling an “economic paralysis”.  The average workweek, as well as the average hourly wages for nonfarm workers, was both down a nominal amount in August.  This causes economists concern because fewer hours means a possible decrease in the disposable income people would have to spend.  The unemployment rate is affected by the overall business cycle – when the Gross Domestic Product (GDP) is growing, jobs are up and people have money to spend, but when the GDP falls, jobs are cut and people decrease their expenses.  This often propels the economy into an even deeper state of recession.

Source: Bureau of Labor Statistics

Since the two main concerns of macroeconomics policy are unemployment and inflation, it is important to look at the whole picture when it comes to our state of employment, rather than just the small view of our national unemployment rate.  A better indicator of the current state of employment may be to also look at the percent of the population with a job, which now sits at a mere 58.2%, a 28-year-low.  The government is not doing anything to boost consumer confidence out of the current recession, as they too continue to experience layoffs, despite the Minnesota workers returning after the partial government shutdown last month.

The theory behind many of the cutbacks was to “super-charge the private sector”.  The private sector has not hired many of the people who have been laid off by state and local governments, due to fears of an even weaker economy, which means there are even fewer consumers to boost spending and, in effect, cause our real GDP to grow.  Some economists advise the government to create policies that avoid public sector layoffs if they really want to lower the unemployment rate and help boost an economic recovery.

Works Cited

(1)   US Bureau of Labor Statistics, “The Employment Situation – August 2011”, September 2, 2011, Retrieved from: http://www.bls.gov/news.release/empsit.nr0.htm.

(2)   US Bureau of Labor Statistics, “Unemployment Rate State-By-State, July 2011”, August 19, 2011.

(3)   Censky, Annalyn, “August Jobs Report: Hiring Grinds to a Halt”, CNNMoney.com, September 2, 2011, Retrieved from: http://money.cnn.com/2011/09/02/news/economy/jobs_report_unemployment/index.htm.

(4)   “The Horrific August Jobs Report” Opinion Brief on TheWeek.com, September 2, 2011, Retrieved from: http://theweek.com/article/index/218898/the-horrific-august-jobs-report.