Unemployment Report Reverts as Half a Million Drop Out of Labor Force...Again

The April 2016 unemployment report shows some disturbing developments behind the numbers.  While the official unemployment rate did not change and stayed at 5.0%, over half a million dropped out of the labor force during the month and over three hundred thousand are no longer employed.  The labor participation rate dropped by 0.2 percentage points as did the civilian participation rate.  That said, one month does not a pattern make, yet seeing over half a million drop out of the labor force is quite disconcerting.  Many other economic indicators show a stalled economy and employment might just be catching up.


unemployment rate


This article overviews and graphs the statistics from the Employment report Household Survey also known as CPS, or current population survey.  The CPS survey tells us about people employed, not employed, looking for work and not counted at all.  The household survey has large swings on a monthly basis as well as a large margin of sampling error.  This part of the employment report is not about actual jobs gained but people and their labor status.

Those employed now stands at 151,004,000, a monthly decline of -316 thousand.  From a year ago, the ranks of the employed has increased by 2.495 million.  That's almost half a million less annual gain than last month but still a very solid showing of annual growth.


employed levels


Those unemployed number 7,920,000, a monthly -46,000 decline.  From a year ago the unemployed has decreased by -603,000.  




Those not in the labor force is 94.044 million.  The monthly increase was an astounding 562,000.  The below graph are the not in the labor force ranks.  Those not in the labor force has increased by 810,000 in the past year, obviously the majority of that gain occurring this month.


not in labor force


The labor participation rate is 62.8%.  This is a -0.2 percentage point decrease from last month.  Pre-recession, the January 2008 labor participate rate was 66.2% a far cry from what we see today and a good explanation of why most feel the economy is still horrific for them.


labor participation rate


Below is a graph of the labor participation rate for those between the ages of 25 to 54, which decreased by -0.2 percentage points from last month.  The rate is 81.2%, a level not seen since May 1985, discounting events after 2008.  These are the prime working years where people are not in retirement or in school full time commonly, so one should not see record low participation rates.  In January 2008 the prime working years labor participate rate was 83.3%.


labor participation rate ages 25 to 54


The civilian labor force, which consists of the employed and the officially unemployed, declined by -362,000 to stand at 158,924,000.  The civilian labor force has grown by 1,892,000 over the past year.  That's a whopping change from last month so a word of caution that one month of statistics in this report can have wild swings which over time typically average out.


civilian labor force


Below is a graph of those not in the labor force, (maroon, scale on the left), against the noninstitutional civilian population (blue, scale on the right).   Notice how those not in the labor force crisscrosses the noninstitutional civilian population in growth.  The civilian noninstituitonal population is from where all other labor statistics have sprung, so to see strong acceleration in those not counted as participating in the labor force than the pool of population possible to be part of the labor force in the first place isn't a great sign.


not in labor force against population growth


Below is a graph of the civilian labor force, or the official employed plus unemployed, in maroon, scale on left, against those not in the labor force, in blue, scale on right.   See how those not in the labor force as a trend exceeded those considered employed and unemployed starting around mid 2009.  Starting in 2014 it has reverted back, yet look at how is it reverted once again in 2015 and now is back.  To have a solid employment situation those not in the labor force should be growing less than those obtaining jobs and being counted as looking for work.  Those not in the labor force does include retirees and students and there is a baby bump with both of these segments of the population.


civilian labor force again not in labor force


Those considered employed as a ratio to the total Civilian noninstitutional population now stands at 59.7%, a -0.2 percentage point drop and also levels not seen since 1985 (ignoring the financial crisis aftermath).  In January 2008, this figure was 62.9%.  The relationship between the employment-population ratio and the labor participation rate (LPR) is:    employment-population ratio = LPR * (1 - unemployment rate).


civilian pop to employment ratio


Those forced into part time work for economic reasons stands at 5,962,000 people.  This is a change of -161,000 from last month.  The annual decrease is now -587 thousand.  Also this is one area where individual series below do not add up to the total and this isn't magical math but just shows each series has it's own error margin.


part-time workers


There are two categories of those forced into part-time jobs due to economic circumstances.  Those who could only get part-time jobs and those already working who got their hours cut due to businesses not having enough work for them.  The number of people who could only get part-time jobs stands at 2,009,000 as shown below.  This is a large monthly decline of -145 thousand for the month. A year ago, the number of those stuck in part-time jobs was 2,349,000.



People can also work part-time hours due to slack business demand.  People who got their hours cut due to slack working conditions stands at 3,709,000, a 78,000 increase from last month.  Below is a graph of forced into part-time work because they got their hours cut, as a percentage of the total employed.   This is a recession economic indicator as weak economic demand forces businesses to reduce the working hours of employees.


forced part time workers


Part-time workers who are voluntarily working part-time jobs stands at 20,469,000.


forced part time workers


U-6 now stands at 9.7%, a -0.1 percentage point decline from last month.  U-6 is a broader measure of unemployment and includes the official unemployed, people working part-time hours because that's all they can get and a subgroup not counted in the labor force but are available for work and looked in the last 12 months.   The U-6 rate still leaves out some people wanting a job who are not considered part of the labor force, so while it is called an alternative rate, but it still ignores many who should be counted as unemployed.




The newly unemployed stands at 2,656,000, a 133 thousand monthly increase.  Below is a graph of those unemployed for less than five weeks.


long term unemployed


The long term unemployed, or those unemployed for 27 weeks and over, is 2,063,000 people.  This is a -150 thousand monthly decrease, a very large number and could in part show these people did not get jobs, instead are no longer counted as part of the labor force.  From a year ago the long term unemployed ranks has declined by -440,000.


long term unemployed


Within the CPS survey is how many people who are considered not in the labor force who report they want a job now.  It is a direct survey question.  The Census asks people who are not being counted in the unemployment statistics and official unemployment rate if they want a job.  The number who answer yes currently stands at 5,793,000.  Those who are not counted yet report they want a job includes the discouraged workers and marginally attached and is seasonally adjusted.  Those not in the labor force who report they want a job declined by -401 thousand from a year ago.  For the month those not considered part of the labor force who said they wanted a job increased by 81 thousand.


not in labor force want a job


The average length of unemployment is 27.7 weeks, a significant drop of -0.7 weeks from last month.  The average time to be unemployed has stayed completely out of alignment with the median duration.  A year ago the average duration of unemployment was 30.5 weeks.


median duration unemployment


The median time one is unemployed, which means 50% of people have gotten a job in this amount of time is 11.4 weeks, unchanged from last month.  A year ago the median time to be unemployed was 11.6 weeks, so the median time period seems to a stable almost three months.


average duration unemployment


This month's CPS report by itself has some ominous signs that the economic sluggishness is now showing up in labor statistics.  We predicted this would happen last month and now we predict more of the same going forward.  This question accompanies the usual caveat of the CPS being notoriously volatile with 100,000 data size swings routine from month to month.  Here are our past overviews CPS unemployment statistics, only graphs revised.

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