Website : www.bls.gov/news.release/empsit.toc.htm Review the most recently repor

Question

Website: www.bls.gov/news.release/empsit.toc.htm

Review the most recently reported U.S. unemployment data at the Employment Situation Bureau of Labor Statistics Web Site.

From the list of links, select Employment Situation Summary.

What is the unemployment rate for the current month and how has it changed from previous months? Select a specific profile of a person (it could be you!). For example, specify an age, gender, marital status, education level, work status %u2013 e.g. working part-time, marginally attached. Also specify the industry (e.g. healthcare, education, etc). What unemployment rates are reported for this individual? Is the unemployment rate for this individual higher or lower than the national average? Why do you think so?

Website: www.bls.gov/web/laumstrk.htm

Also, visit the following website that ranks unemployment data by State.

Specify a State that this individual may live in. What is the unemployment rate for that State? How does it compare to the average unemployment rate for the U.S.? What factors may be responsible for the disparity?

Discuss some factors that may have affected the U.S. unemployment rate in recent months.

Explanation / Answer

The unemployment rate is reported by the BLS on the first Friday of each month. It is useful to compare this month's unemployment rate compared to that of the same month last year, or year-over-year. This rules out the effects of seasonality. If you only compare this month's unemployment rate to last month's, it could be higher because of something that always happens that month, such as the school year ending. It may not indicate an ongoing trend.

However, the unemployment rate is a lagging indicator. This means it measures the effect of economic events, such as a recession. The unemployment rate doesn't rise until after a recession has already started. It also means the unemployment rate will continue to rise even after the economy has started to recover.

Why is that? Employers are reluctant to lay people off when the economy turns bad. For large companies, it can take months to put together a layoff plan. Companies are even more reluctant to hire new workers until they are sure the economy are well into the expansion phase of the business cycle. During the 2008 financial crisis, the recession actually started in the first quarter of 2008, when GDP fell 1.8%. The unemployment rate didn't reach 5.5% until May 2008. It reached its peak of 10.2% in October 2009, after the recession had ended. In the 2001 recession, unemployment went from 5.6% in 2002 to 6% in 2003, even though the recession ended in 2002.

For that reason, the unemployment rate is a powerful confirmation of what the other indicators are already showing. For example, if the other indicators show an expanding economy, and the unemployment rate is declining, then you know for sure businesses are confident enough to start hiring again.

The unemployment rate is another indicator used by the Federal Reserve to determine the health of the economy when setting monetary policy. Investors also use current unemployment statisticsto look at which sectors are losing jobs faster. They can then determine which sector-specific mutual funds to sell.

Unemployment hadn't been so high since the 1981 recession, when it above 10% for 10 months. During the 2001 recession, the unemployment rate peaked at 6.3% in June 2003. (Source: BLS, Historical Tables)

The recession may have caused a new natural rate of unemployment because of all the long-term unemployed. This creates a high structural unemployment rate, since their job skills no longer match the new jobs being created.

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