PINTO UOT i AYRRORCONDNT VAs Once a month, the Bureau of Labor Statistics releases its monthly estimate of ‘unemployment in the United States. This estimate of the unemployment rate is then widely discussed and analyzed. Policymakers may change economic policy as a result. There is often much activity on financial markets in reaction to the unemploy- ment rate. In spite of all the media coverage that the unemployment rate receives, there is much misconception by the public as to what the unemployment rate shows and what interpretation should be attached to changes in the rate. This article concerns the unemployment rate in 1992. ‘Attor studying your text, reading the article, and answering the questions, you should be able to: 4 Define and discuss the advantages and disadvantages of the government's statistical definition of the labor force, unemployment, and employment @¢ Describe changes in the labor force, employment, and unemployment ‘Discuss the reasons for changes in the geographical and demographical distribution of unemployment as. The Job of Counting the Jobless freview © The U.S. unemploy- ment rate for January 1992 was 7.1 percent, unchanged from i December value. 4 The unemploymen rate for the Washi ton, D.C. metropot tan area jumped .3| percentage points t 4.9 percent in Decé ber. 4 Both the national ahd ‘Washington area unemployment figures were evidence of continued recession, @ There was a substat tial increase in the number of workers) who wanted full-timne jobs but could only| find part-time work. The Labor Depart- ment survey of businesses found that 91,000 jobs were lost, primarily in manufqe- turing and retail trade. 47U.S. Jobless Rate Stays at 7.1 Pet. he nation’s economic re- cessionapparentlycontin- ued last month as employ- ers cut payrolls and the unemployment rate remained frozen at a five-year high, government officials reported yesterday While the U.S. unemployment rate stayed at 7.1 percent, other figures showed the local jobless rate reaching its highest level in nine years, and ana- lysts. predicted the Federal Reserve would come under renewed pressure to cut interest rates once more in hopes of kindling a recovery. The Washington area unemploy- ‘ent ratejumped 0.3 percentage points to 4,9 percent in December, the highest level of the current economic slump. In 1991, the number of jobs in the region fell2.1 percent,accordingto yesterday's figures. “Itlooks to me like the recession is deepening,” said Richard Groner, chief of labor market information for the D.C. Department of Employment Ser- vices, which compilesthearea figures... Nationally, the monthly survey of American households found 389,000 ‘more peopleat work in January than in December, but many of the new jobs were apparently only part time, the Labor Department reported. The size of the labor force grew more than the number of new jobs, however, so that the total number of jobless cose 38,000 to 8,929,000, The separate Labor Department survey of businesses found the number ‘of payroll jobs fll 91,000, with manu- facturing and retail trade accounting for many of the jobs lost. The Labor Department survey also found that the length of the average workweek fell by ‘two-tenths of an hour, to 34.3 hours.... “The recession is stil with us,” said Bruce Steinberg, an economistat Merril Lynch & Co. “A lot of people thought wwe were bottoming out... but this data fits with the idea the economy is still shrinking.” Recession Job Losses ALook atthe Labor Force Number of People in Mitions May 1980, Jan. 1982 Change Civilian labor force 12496 12805 +108 Employed 11837 maz 125 ‘Unemployed 559 ass nM Working parttime for economic reasons 488 sn +108 No longer looking for work* oss 199) +023 Non-farm payroll employment 11030 108.78 44 * Figures are for 2nd quarter 1890 and th q Source: Labor Department ter 1981 and They are not included in unemployment figures. show individuals who are not looking for work because they believe no job is aval rr“The decline in both the number of payroll jobs and hours worked sur- prised many analysts, some of whom had predicted a modest increase. Some analysts said the report put new pres- sureon the Federal Reserve tocutshort- term interest rates soon. ‘On Capitol Hill, Senate Finance Committee Chairman Lloyd Bentsen (D-Tex.) said the figures “show an economy skatingonthinice” thatraised the odds of a renewed recession this year t0 50-50... ‘Asked at a House Budget Commi tee hearing yesterday whetherhe thinks the Labor Department report points to renewed downturn, Michael]. Boskin, Chairman of the president's Council of Economic Advisers, replied, “No, 1 lon'.” Predicting the economy would re- sume growing this spring, Boskin said, “Ie will take some time as we head further into the year before these indi- cators start t0 pick up and to im- Anne Swardson ond John M. Berry, “US. Jobless Rate Stays at7.1 Pet,” The Washington Post February 8, 1982. ‘©1982 The Washington Post. Reprinted with permission. prove.”... ‘The Maryland unemployment rate also rose sharply in December, the state Department of Economic and Employ- ment Development said yesterday. It reached 6.8 percent, up from 6.1 per- centinNovember. State officials blamed the increase on poor Christmas hiri Virginia’s unemployment rate, re- ported earlier in the week, fell to 5.5 percent from 5.7 percentin November. The District’s unemployment rate, which was reported as part of the local figures yesterday, rose to 8.4 percent from 8.0 percent. ‘William G. Barron Je. deputy com- missioner of the federal Bureau of La- bor Statistics, said the good news of the January increase in unemployment, the first substantial increase since Septem- ber, was mitigated by a sharp increase in the number of workers who wanted full-time jobs but could only find part- time work “At6.7 million, their number was at its highestlevel inthis recession,” Barton told the congressional Joint Econothic ‘Committee yesterday. Barron also noted some other bleak. aspects of the Labor Department's fe- port, including a percentage point n- crease in the jobless rate for blacks\to 13.4 percent, the highest rate during this slump. ‘The unemployment rate for whit last month was 6.2 percent, down fram 6.3 percent in December. The rate persons of Flispanic origin rose from 9.7 percent to 11.3 percent, the Labpr Department said. ‘The 91,000 drop in the number payroll jobs shown by the survey businesses last month, Barron sai “brought the total decline since lz October to ever 300,000. These ct backs negated all of the increase th hhad occurred over the prior six mont of 1991.”OCU Es sack, 1 OleNirS 1. How is the labor force defined? 2.2) How does te household suvey define unemployment? é 1) Inwhat ways does the measured unemployment rate understate “true” unemployment? }_ Why does the household survey exclude some unemployed people? 4). In what ways does the unemployment rate exaggerate “true” unemployment? 4. Some people argue thet adding jobs is mare impotant than measuring the numberof people who might be loking for work What ind of information does ths tell you thatthe unemployment rte does not? 4 a) According tothe houseald survey data, what happened othe size ofthe labor force, employment, and unemaloymet between May 1809 January 19927 Refer tothe article._ The monty Labor Deparment survey of businesses found the numberof ab decreased by 91,000 in January 1992 This is considerably different rom the increase in employment of 389,000 recorded by the household survey. Why do these two surveys provide such diffrent ‘numbers? What do you think really happened tothe labor market in January 19822 3. Several changes occured inthe labor market as a result ofthe recession In particular, what happened to 4) the number working part-time but loking for fulltime work? Explain this trend. the number no longer looking for work? Explain this trend. 61 Which ofthe stats mentioned nthe article ha he largest increase in thei unemployment rte? Why would you expect these sttes to have had diferent unemployment rates?