By Beth Hanson with George Lenard

Introduction

Here we continue to look at some labor market measures that provide meaningful alternatives and supplements to the most-publicized ones regularly released by the federal Bureau of Labor Statistics (BLS).

Duration of Unemployment

Duration of unemployment is an important measure of the economic and personal pain suffered by the unemployed; longer periods of joblessness are obviously much more troublesome for individuals and families — both financially and personally. Long-term unemployment is socially destabilizing and self-perpetuating, as individuals’ skills become rusty and they are perceived as less desirable hires.

St. Louis labor analyst Russ Signorino assessed the slow crawl out of the recession:

A lot of these people are really struggling more than they would have if they were affected by a previous recession because their length of unemployment would have been shorter. They’re having problems paying bills or they’re losing their homes and they’re losing their cars.

This recession is different than previous ones because it is lingering so long, and the duration of unemployment remains very long. The following graph from earlier in 2011 shows that the May 2010 peak of over 20 weeks average time unemployed was well above that of any recession since 1972, and the average as of February 2011 was still well above the peaks of past recessions.

Another figure to look at concerning duration of unemployment is the number of individuals at the high end of this measure. The number unemployed for over 26 weeks is far above that in any recession since 1969, and although trending down over the last year, still about twice as high as the severe recession of the early 1980s. This is a matter of great concern, regardless of improvement in other measures.

Who’s Left out of the Most-Cited Official Unemployment Rate?

Underemployed Workers

The standard unemployment rate is an incomplete picture of the labor market because it does not include those working “survival” jobs, nor does it include those who have given up on looking for work, but would like to work.

“Survival” job workers not included in the official unemployment rate are those working for less pay than before (sometimes less than half) and/or in a job for which they are overqualified that does not properly utilize their skills, training, and experience.

While these underpaid/overqualified workers are not counted in measuring labor-market weakness (they simply count as employed), the Bureau of Labor Statistics does maintain statistics on those who want and are available for full-time work but have had to settle for part-time.

Both “survival” job workers and these unhappy part-time workers can be best described as “underemployed.” They are not factored into the most frequently cited unemployment numbers, though they are not employed in their desired fields and/or not employed full time.

Discouraged Workers and Others Marginally Attached to the Labor Force

The BLS separately measures “persons marginally attached to the labor force,” defined as “those who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the past 12 months.”

This group includes “discouraged workers,” whose reason for not looking for work is that they are discouraged by the weak job market. Others considered “marginally attached” might be those who recently began attending school to strengthen their resume or those who have stopped actively looking for work to attend to family matters.

The BLS maintains unemployment-rate statistics that include these marginally attached workers and involuntary part-timers:

• The “U-5″ series includes the marginally attached as well as those defined as unemployed under the standard measure. As of June 2011, it stood at 10.7% (compared to the standard unemployment measure of 9.2%).
• The “U-6″ measure also includes the involuntarily part-time. It stood at a whopping 16.2% in June!

Labor Force Participation Rate

The labor force participation rate is a more extensive way of assessing changes in the labor market. The unemployment rate does not include those who are not actively seeking employment – in many cases they are no longer even counted as “discouraged workers” (if they have not sought work at all for over a year). They are simply not labor force participants.

With the unemployment rate formula being the unemployed/seeking work divided by the labor force, such people are completely omitted from the calculation — both numerator and denominator.

Here’s a look at the long-term labor force participation trend:

The labor force participation rate held steady at 64.2 percent for the first five months of 2011, dropping to 64.1 percent for June.

The participation rate may start climbing when many who have not been looking for work return to the job market in response to better labor market news. This, in turn, may have the perverse effect of increasing the unemployment rate at a time when things are actually starting to improve, because the labor force is the denominator used to calculate the unemployment percentage. When the participation rate increases, the hiring rate must rise proportionally to prevent the unemployment rate from climbing.

The Congressional Budget Office estimates that the participation rate will climb to 64.7 percent as the recovery strengthens before it slowly declines due to the increase in the number of retired Americans.

Arguably, dramatically lower labor force participation means the labor market is actually worse than the unemployment rate reveals — even worse than it appears when one counts the marginally attached workers. Many non-participants don’t even meet that definition, but still would prefer to be working.

On the other hand, our society may adapt to lower participation rates, such as through a decline in the number of families with young children choosing to have both parents working. The long view (above chart) shows that the drop-off in labor force participation during the current prolonged weak labor market still leaves participation rates higher than they were before the mid-1980s, when participation was in the midst of a long upward trend line that probably reflected the increasing employment of women.

Surveys of Employers’ Hiring Activity and Plans

Employers’ self-reporting regarding hiring is another frequently-reported labor market measure. It may be skewed towards larger employers, depending on survey methodology.

According to a Career Builder-USA Today mid-year forecast issued July 7, 2011:

[N]early half of employers (47 percent) plan to hire new employees from July through December of this year, up from 41 percent in 2010, according to the survey conducted by Harris Interactive© of more than 2,600 hiring managers and human resource professionals.

The percentage of companies hiring is also higher than last year in some instances:

• Companies hiring full-time, permanent employees – 35 percent this year, up from 28 percent in 2010
• Companies hiring part-time employees – 15 percent this year, the same as 2010
• Companies hiring contract or temporary employees – 12 percent this year, up from 9 percent in 2010

In a survey completed between May 16 and June 3, 2011, 51% of CEOs in the Business Roundtable’s survey said they will add to payrolls in the second quarter of 2011, down from 52% in the first quarter. Only 11% foresaw job cuts, the same as first quarter.

These results are significantly better than 2010, which began with only 29% anticipating hiring and ended with 45% having this outlook.

Recruiting-Based Measures

Job Openings Advertised Online

As classified job advertising has increasingly moved online, it has become easier to monitor aggregate data on advertised job openings. The number of job openings advertised is another indicator of potentially increasing or decreasing unemployment.

Several major online job boards publicize such data.

The Monster Employment Index has reported the following advertised-jobs trends thus far in 2011:

• April 2011 was up 9% over April 2010 and 7% over the previous month, led by increases in advertised positions in mining, quarrying, oil and gas extraction; with manufacturing at highest levels since late 2008, driving growth in
  manufacturing hubs such as Detroit and Cleveland.
• May 2011 was up 7% year over year, with “online job demand reaching the highest reading for the month of May in the index since 2008.”
• June 2011 was up 4% year over year, with wholesale and retail continuing to show “robust annual growth”; information sector expanding, “driven by increased demand in media and telecommunications”; and public administration showing steepest annual year-over-year declines.

Another measure based on job board activity is the CareerCast.com/JobSerf Employment Index, which calculates the number of available managerial job openings each month, and measures this against the volume of job openings during the same period in 2007, so that a score higher than 100 means that there are more available jobs than in 2007.

Under this index, managerial job growth in 2011 has picked up, though it is not at an astounding rate. The July 2011 CareerCast.com/JobSerf Employment Index shows:

The job market continues to struggle as employment activity dropped 2.1 points from June to July . . . The index fell to 98.2 points in July, which is the first time it has been below 100 points since last year. On the bright side, hiring activity is still 20 points ahead of levels seen in July, 2009.

A similar measure is the Conference Board Help Wanted OnLine™ (HWOL). This measure shows online advertised vacancies down 217,000 in July 2011.

Ratio of Unemployed Workers to Job Openings

With more job openings, including those posted in online classifieds, the ratio of unemployed people to job openings will go down (of course it also goes down as the unemployment rate goes down). This is an easy measure to think of in terms of how many people are competing for each job, though of course many factors affect how many qualified people are in fact actively competing for a given job.

The BLS reports:

When the recent recession began (December 2007), the number of unemployed persons per job opening was 1.8. When the recession ended (June 2009), there were 6.1 unemployed persons per job opening. The unemployed persons per job opening ratio has trended downward since the end of the recession and was 4.7 in May 2011.

Here’s a visual:

Aggregated Conference Board Employment Trends Index™

As the above should make abundantly clear, there are many different measures relevant to assessing the overall health of the labor market – far more than just the unemployment rate and jobs growth numbers that receive the most publicity. The Conference Board recognizes that a more accurate picture may be obtained by aggregating a variety of measures. Its Employment Trends Index™takes into account eight separate measures:

1. Percentage of Respondents Who Say They Find “Jobs Hard to Get” (The Conference Board Consumer Confidence Survey®)
2. Initial Claims for Unemployment Insurance (U.S. Department of Labor)
3. Percentage of Firms With Positions Not Able to Fill Right Now (© National Federation of Independent Business Research Foundation)
4. Number of Employees Hired by the Temporary-Help Industry (U.S. Bureau of Labor Statistics)
5. Part-Time Workers for Economic Reasons (BLS)
6. Job Openings (BLS)
7. Industrial Production (Federal Reserve Board)
8. Real Manufacturing and Trade Sales (U.S. Bureau of Economic Analysis)

The last two measures recognize that employment growth typically lags direct measures of economic activity, as businesses respond to increased demand by hiring additional employees.

The Conference Board Employment Trends Index™ for June 2011 shows a slight increase in June to 100.0, up from May’s revised figure of 99.5. The June figure was up 5.4%from a year ago. The July measure was described as follows:

The behavior of the Employment Trends Index in recent months is consistent with weak job growth, rather than an outright decline. The abysmal uptick in employment in the past two months is not just a reaction to the slowdown in economic activity in the first half of 2011, but also a result of employers becoming downbeat about their hiring needs in the coming months.

This month’s increase in the ETI was driven by positive contributions from three out of the eight components. The improving indicators include Initial Claims for Unemployment Insurance, Percentage of Firms With Positions Not Able to Fill Right Now and Real Manufacturing and Trade Sales, which is a forecasted component.

Conclusion

Combined, the alternative measures of employment provide a much more thorough view of what is a very complex economic reality than the few data points most commonly publicized in the media.

Related Reading:

Labor Markets and Business Cycles (CREI Lectures in Macroeconomics)

America Works: The Exceptional U.S. Labor Market (Russell Sage Foundation Centennial Volumes)

Reefer Madness: Sex, Drugs, and Cheap Labor in the American Black Market

The Declining Importance of Race and Gender in the Labor Market: The Role of Employment Discrimination Policies

From Bondage to Contract: Wage Labor, Marriage, and the Market in the Age of Slave Emancipation