The employment report published by the Bureau of Labor Statistics (BLS) each month is one of the most highly anticipated economic indicators. In it we get the headline stealing unemployment rate but dozens of more useful statistics come out of it as well. Most people understand the basics of the unemployment rate and even the number of jobs added in each month, but there’s a lot about these reports that people don’t know. Let’s look at some.
Revisions: When the report first comes out it’s considered an initial estimate. It’s really just a best guess by the BLS based on the results of surveys they conduct each month. The results are not fully compiled by the time the report comes out so what is available runs through a model and spits out a number. It’s a statistically valid number, but it can change. It usually does too, but only if the revised number is significant does it ever creep into the news cycle. The good news is that lately the revisions have been positive. So in the first estimate maybe the economy added 200k jobs, but in a revision it might be 225k jobs. That’s 25,000 more jobs than previously thought! The revisions give a much more accurate view of what is going on in the economy, but they rarely make headlines.
Employment across the pond: While the employment situation in the US has been anemically improving, in other parts of the world it’s getting worse. Take a look at the chart below.
As you can see when the recession hit things went bad for the US pretty quickly. The UK fared slightly better but had a higher rate leading up to the recession. As the US employment situation has steadily improved since then, it’s gotten worse in the UK. What’s going on? The two countries have different economies. The UK is more reliant on its European neighbors. They also enacted spending cuts that the US has not had the political will to pass. This has led to stagnation in the country and an increasing level of unemployment. It remains to be seen if the rate will level off soon. But just because developed countries are all intertwined, doesn’t mean our economies move in the same direction.
Natural unemployment: Did you know that it’s impossible to have a 0% unemployment rate? There is a natural level of unemployment which accounts for movement in the economy. People quit jobs, get fired, enter the workforce for the first time, etc. In the US that natural level is around 4-5%. But it is different in other countries. In Europe it can be much higher. This is in part to a wider safety net for the unemployed. Jobless benefits are more substantial and so workers have less incentive to get back into the labor force as quickly. In the US, shorter terms of benefits gets people back to work and less picky about their options. Labor laws in Europe also make it more of a pain for a company to hire a new employee so they want to be really sure they need the job before setting up interviews. This leads to a natural unemployment level that is higher than the US.
There’s a lot more to employment than the simple numbers of jobs added and whatever the unemployment rate is that month. Hopefully we’re all a little smarter, but don’t stop watching those headlines because it’s still one of the best indicators for the economy we’ve got.This post was brought to you by Gumtree.com, the largest online provider of local classifieds in the United Kingdom with pages dedicated to 60 cities across Europe, Australia, New Zealand, and South Africa.