Looking under the hood of today’s jobs report
Today’s jobs report came in somewhat underwhelming. This morning, I compared payroll employment growth to weak tea and the labor market saw little to no improvement in other key measures. Yesterday, I urged readers to look under the hood of the headline jobs day numbers and see how well the economy is treating workers across various demographic groups. Today, I’m going to take one statistic from today’s report and see how various groups have fared.
According to the Bureau of Labor Statistics, the official unemployment rate is 4.9 percent. Let’s just remember for a moment that the unemployment rate only counts people actively looking for work, taken as a share of the labor force. So, this leaves out the estimated 2.2 million workers who we expect will return or join the labor force as job opportunities improve. With these missing workers, the unemployment rate would be 6.2 percent. It also leaves out workers who want to work full-time but could only find part-time work or those who might have looked in the last year, but not in the last month. Adding these in, the underemployment rate would be 9.7 percent.
Even with those caveats, I must admit the official unemployment rate is still quite a useful measure. And, along with nominal wage growth, it’s a key measure the Federal Reserve watches when deciding how to act on interest rates. At 4.9 percent, the unemployment rate is 0.3 percentage points higher than it was in 2007, before the recession began, and 0.9 percentage points higher than the last time the economy was at full employment (2000). In fact, for five months in 2000, the unemployment rate was below 4.0 percent, hitting a low of 3.8 percent in April 2000. Examined another way, the unemployment rate is 1.1 times higher today than in 2007 and 1.2 times higher than in 2000.
In the table below, I show the unemployment rate across various demographic groups for the latest data released today side-by-side with data from 2007 and 2000. In the last two columns, I compare rates today to those in 2000 and 2007 by creating ratios to measure how much higher, if at all, the rates are today. Ratios are a bit more useful than straight percentage point comparisons because it adjusts for the fact that the unemployment rate of certain groups tend to be higher or lower than others.
Unemployment rates of various demographic groups, 2000, 2007 and today
|2000||2007||August 2016||Ratio (today compared to 2000)||Ratio (today compared to 2007)|
|Race and ethnicity|
|Education – Workers ages 25 and older|
|Bachelor’s and advanced degree||1.7||2.0||2.7||1.6||1.4|
Source: Author's analysis of the Current Population Survey public data series
When I look at this table, I see that the unemployment rate today is still higher across the board than before the Great Recession and significantly higher than the full employment economy of 2000. That said, there are some lingering differences. Notably, while the unemployment rate for those with a college or advanced degree (2.7 percent) is still much lower than those with a high school degree (5.1 percent), it is much higher today, 1.4 times higher, than in 2007 (2.0 percent). The black and Hispanic unemployment rates have recovered back to their 2007 levels, but remain much higher than the white unemployment rate, which remains more elevated than its 2007 level.
Young workers, workers of color, and less credentialed workers all suffer from higher than average unemployment rates. The Federal Reserve should eye these particularly elevated unemployment rates when deciding whether to raise rates. Not only is there little evidence of inflationary pressure from nominal wage growth, but also the recovering economy has yet to reach full employment, which will best allow the fruits of a growing economy to reach all branches of the labor market.
Further demographic cuts, such as crossing gender, ethnicity, and age require combining 12 months of data to get reliable estimates—as even the broad groups I’ve looked here can be volatile month-to-month. But, lucky for you, EPI’s new State of Working American Data Library does just that. EPI’s new baby, what I liked to call SWADL, provides an in-depth and historical data series on key labor force statistics and wages, including wage gaps. You can read my hype about it or just check it out yourself. August data will be incorporated into the data library next week when we have the microdata.