If you have scanned any of the major media sites today you probably observed a story on the Employment Situation Report for June (the report can be found here http://www.bls.gov/news.release/pdf/empsit.pdf ). There are two numbers that you may have heard associated with this report, 6.1% and 288,000. So, what are these numbers and why do they matter?
First, the Employment Situation Report has data from two surveys, one that is issued to households and another that is issued to firms. The 6.1% is the unemployment rate (also known as U-3) for June 2014, which comes from the household survey. It is important to note that the unemployment rate is calculated using the number of people unemployed divided by the labor force (or employed + unemployed). For a detailed description of the definitions look here http://www.bls.gov/dolfaq/bls_ques23.htm The 288,000 is the net change in nonfarm payroll employment in June 2014 (these numbers are seasonally adjusted to avoid effects such as summer or Christmas hiring).
So, what should we take away from today’s Employment Situation Report and these two numbers? The first takeaway is that the report is positive and continues a general positive trend in the labor market. Economists will tell you that any single month can contain noisy data, but the report also contained revisions to the April and May report, adding almost 30,000 for those two months. The unemployment rate continues its downward trend from 7.5% a year ago to 6.1% in June.
In previous months you might have heard people state that while the unemployment rate was falling, it wasn’t necessarily positive because people were leaving the labor force (if you do not look for a job, then you are not counted as employed or unemployed). However, in June, the labor force increased and the employment to population ratio increased. Another positive sign is that individuals who are considered long term unemployed (27 weeks and over) decreased by 293,000. As an educator, I should note that the unemployment rate for those with a Bachelor’s degree and higher is 3.3%, those with some college is 5%, High School graduates and no college 5.8%, and less than a High School diploma 9.1%, so please continue to seek higher education.
Is there any bad news in the report? Sure, there are still 9.4 million individuals who are willing and able to work, but cannot find employment. Also, the number of individuals who have been unemployed for 27 weeks and over is still over 3 million. While June’s report is positive and continues the positive trend in the labor market. The economy and labor market still have a way to go. Keep your eyes out for the advanced estimate of the 2nd Quarter GDP which will be released at the end of the month.
~Dr. Michael Enz
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