Politicians and economists now join investors in a ritual that typically takes place on the first Friday of each month and has important consequences for global markets: anticipating, internalising, and reacting to the monthly employment report released by the United States Bureau of Labor Statistics (BLS). Over the last few years, the report has evolved in a significant way—not only providing an assessment of the economy’s past and current state, but, increasingly, containing insights into its future as well.
Think of the BLS’s employment report as a comprehensive monthly check-up for the American labor market. Among its many interesting statistics, it tells you how many jobs are created and where; how earnings and hours worked are evolving; and the number, age, and education of those seeking employment.
Despite the data’s richness, only two indicators consistently attract widespread attention: net monthly job creation (which amounted to 169,000 in August) and the unemployment rate (7.3% in August, the lowest since December 2008). Together they point to a gradual and steady improvement in overall labour-market conditions.
This is certainly good news. It is not long ago that job creation was negative and the unemployment rate stood at 10%. The problem is that the headline numbers shed only partial light on what may lie ahead.
The figure for monthly job creation, for example, is distorted by the growing importance of part-time employment, and it fails to convey the reality of stagnant earnings. Meanwhile, the headline unemployment rate does not reflect the growing number of Americans who have left the work force—a phenomenon vividly reflected by the decline in the labour participation rate to just 63.2%, a 35-year low.
To get a real sense of the labour market’s health, we need to look elsewhere in the BLS’s report. What these other numbers have to tell us—about both the present and the future—is far from reassuring.
Consider the statistics on the duration of unemployment. After all, the longer one is unemployed, the harder it is to find a full-time job at a decent wage.
In August, the BLS classified 4.3 million Americans as long-term unemployed, or 37.9% of the total unemployed—a worrisome figure, given that the global financial crisis was five years ago. And, remember, this number excludes all the discouraged Americans who are no longer looking for a job. In fact, the more comprehensive employment/population ratio stands at only 58.6%.
The teenage-unemployment rate is another under-appreciated indicator that is at an alarming level.