Economic & Workforce Briefing

Normal.dotm0018094616Penn State389566812.0 0false 18 pt 18 pt 0 0 false false false Pennsylvania's unemployment rate during November 2009 was 8.5%, down 0.4% from October.

The number of Pennsylvanians unemployed during November fell 22,000 from October to 540,000, which still is higher than the 393,000 unemployed in November 2008 when the unemployment rate was 6.1%.

Perhaps Pennsylvanians should feel lucky. The national unemployment rate in November 2009 was 10%.

The release of monthly unemployment numbers captures the attention of policy-makers and the public. The unemployment rate often is tracked as an indicator of macroeconomic health. It is written into formulas solved to distribute government funds for social and educational programs to states and counties with the greatest needs. In the public mind, though, unemployment generally is associated with dislocation and hardship.

Who is counted among the unemployed? Sounds like a simple question, doesn't it? However, the unemployed are not merely people without jobs.

The unemployed are counted in a monthly household sample survey, called the Current Population Survey (CPS), conducted by the Census Bureau for the Bureau of Labor Statistics in the U.S. Department of Labor. The CPS focuses on the civilian noninstitutional population more than 15 years old. Excluded are people confined to institutions such as nursing homes and prisons and people on active duty in the Armed Forces.

CPS survey respondents are not asked whether they are unemployed. Rather, they are asked a series of questions that allow classification of whether they are employed, unemployed, or out of the labor force.

People with jobs are employed if they worked at least an hour for pay or profit during the CPS survey week. Workers are counted, not jobs. This means that a person with multiple jobs is counted only once.

The count of the employed includes part-time or temporary workers. Also included among the employed are unpaid family members who worked more than 14 hours during the survey week in family-owned enterprises operated by someone in their households.

The unemployed do not have jobs and have actively looked for work (not just read about job openings) in the four weeks prior to the CPS survey. To be counted among the unemployed, jobless people actively seeking work also must be available for work (e.g., they must not be too ill to work).

The labor force is defined by the CPS to include the employed plus the unemployed. Therefore, people who are out of the labor force do not have a job and are not looking for one. Many are going to school or are retired. Family responsibilities keep others out of the labor force.

The unemployment rate is defined as the percentage of people in the labor force, not the population, who are unemployed. Consider a region containing 100,000 people in which 70,000 people are in the labor force because they are employed or unemployed. If 10,000 of the 70,000 labor force participants are unemployed, then the unemployment rate is 14.3% (10,000 unemployed divided by 70,000 labor force participants, expressed as a percentage).

Month-to-month changes in the unemployment rate are difficult to interpret. For instance, if the unemployment rate increases, is it because more people lost jobs? Or, is it because more people, previously out of the labor force, decided to enter the labor force, increasing competition for available jobs? We heard one politician attribute a rising unemployment rate to the expansion of job opportunities that drew hopeful job seekers into the labor force.

Many observers of the economy are unhappy with the way the unemployment rate is measured. To some, it fails to capture the hardship that being without a job and pay creates. To some, the unemployment rate understates the number of people who would like to work because it fails to include "discouraged workers" who have surrendered their hopes of finding jobs. In addition, the official unemployment rate does not include "marginally attached" people who recently sought work, but are not currently looking, for reasons such as child care or transportation problems. Nor does it include underemployed people working part time who desire full-time work.

In response to these criticisms, the Bureau of Labor Statistics actually publishes six different unemployment rates (U-1 through U-6) monthly based on varying definitions of unemployment and the labor force. Between the fourth quarter of 2008 and the third quarter of 2009, these rates were:

• U-1: People unemployed 15 weeks or longer as a percentage of the civilian labor force. U-1 was 3.1% in Pennsylvania.
• U-2: Job losers and people who completed temporary jobs as a percentage of the civilian labor force. In Pennsylvania, U-2 was 4.4%.
• U-3: All unemployed people as a percentage of the civilian labor force. This is the official unemployment rate, which was 7.3%.
• U-4:  All unemployed people plus discouraged workers as a percentage of the civilian labor force plus discouraged workers. U-4 was 7.6% for Pennsylvania.
• U-5: All unemployed people plus discouraged workers and marginally attached people as a percentage of the civilian labor force plus discouraged workers and marginally attached people. U-5 for Pennsylvania was 8.5%.
• U-6: All unemployed people plus discouraged workers, marginally attached people, and all people employed part time who desire full-time work as a percentage of the civilian labor force plus discouraged workers, marginally attached people, and all people employed part time who desire full-time work. U-6 for Pennsylvania was 13.0%.

But, any way you count it, unemployment is up.