View Percent Employed (hover mouse over graphs to view details)
Percent employed is the percentage of the non-institutionalized civilian population age 16 years and older that is employed. Percent employed graphs for several states are displayed as an example. (Change states using the selections at the left of the graph.)
This graph provides an important perspective when considering the unemployment picture. Unemployment numbers (U3) only count persons who have actively looked for work in the past 4 weeks. However, in a harder job market when larger numbers of people experience long-term unemployment, many eventually stop looking for work, which causes them to no longer be counted as unemployed.
This graph shows a very interesting pattern for the U.S. and for most states. The percentage of people who were employed was quite steady from 2002 through 2007, with the U.S. averaging 62.7 percent during that period. During the great recession, the percent of people employed dropped about 4.2 percent and then leveled off at about 58.5 percent from 2010 through 2012. With each 1 percent drop representing about 2.2 million people, a 4.2 percent drop is a large number of people who are no longer working.
Unfortunately, most states appear to be plateaued at a new lower percent of people employed and do not appear to be trending back up to the plateau level that existed prior to the great recession.
USING MULTIPLE MEASURES TO UNDERSTAND UNEMPLOYMENT
An important perspective about unemployment is that looking at any one measure in isolation can cause a distorted view of the total employment picture.
Unemployment (U3) – the official unemployment measure tends to be a short-term impact.
Part Time for Economic Reasons – Many people who are unable to find full-time work are forced to settle for part-time. Although not getting the hours or income they need, they are no longer counted as unemployed. As Part Time for Economic Reasons goes up, Unemployment (U3) goes down. Since the “great recession,” the number of people classified as Part Time for Economic Reasons has increased from about 4,300,000 to about 8,600,000. One problem with the U3 measure is that it does not reflect the employment problems harbored within the Part Time Due to the Economy group.
Discouraged Workers – People who search for work for long periods without finding anything can eventually become discouraged and slow down or pause their search. Once they go four weeks without actively looking, they are no longer counted as unemployed. When that happens, the U3 unemployment number goes down even though employment was not obtained for the job seeker. (Discouraged workers are a subset of a broader category referred to as Marginally Attached to the Work Force.) Therefore, another problem with the U3 measure is that it does not reflect the employment problems of the Discouraged Workers group.
Until the number of people classified as Part Time for Economic Reasons and Discouraged Workers get settled back down to normal levels, the U3 unemployment measure will understate the need for employment. Recovery in Part Time for Economic Reasons and Discouraged Workers appear to be longer term recoveries.
Percent Employed (employment-population ratio) – With the challenges the U3 unemployment measure presents in the short term, another way to view the labor market is to look at the percentage of people who are employed. This is calculated as: number of people employed divided by the non-institutionalized civilian population times 100. (The non-institutionalized civilian population includes everyone age 16 and older, except those who are institutionalized or in the military.) Comparing the percentage of people employed before the recession to the current percentage gives some idea of the number of people who have been lost from the labor market. If we had sustained the same levels of participation, there would be at least 7,000,000 more people in the work force.
In a strong economy, the U3 Unemployment measure is low and the Percent Employed is high. In a weak economy, the U3 Unemployment measure is high and the Percent Employed is low. Reputable economists state that there is a demographic impact of somewhere between 20% to 50% of the decline in people in the work force that is not related to the economy. Still, the economy-related exodus from the work force remains a significant impact.
An example of the dynamics among these various measures is presented below.
- Unemployed (U3) in September 2012 went down by 456,000 people compared to August 2012. This would appear to be great news. However, during the same period, the number of people working Part Time for Economic Reasons went up about 600,000 people. These part-time workers are now officially employed for U3 purposes, but their incomes have dropped dramatically, possibly even below those who are unemployed.
- The Percent Employed went up in September after having dropped the previous two months. This scenario plays out even more dramatically at a state level where a few states show a healthy economy, some reflect a weak economy, and in many states the measures are mixed.
Again, looking at any one measure in isolation can cause a distorted view of the total employment picture.
- Interpreting the Recent Decline in Labor Force Participation – Federal Reserve Bank of Kansas City.
- Explaining the Decline in the U.S. Labor Force Participation Rate – Federal Reserve Bank of Chicago, March 2012
- U.S. Bureau of Labor Statistics – News Release September 2012.
IMPORTANT NOTE ABOUT COMPARING STATE DATA TO NATIONAL DATA
The U.S. Bureau of Labor Statistics (BLS) issues the following caution about comparing state data to national. “It should be noted that BLS estimation procedures are designed to produce accurate data for each individual state. BLS independently develops the national employment series and does not force state estimates to sum to national totals nor vice versa. Because each state series is subject to larger sampling and non-sampling errors than the national series, summing them cumulates individual state levels errors and can cause significant distortions at an aggregate level. Due to these statistical limitations, BLS does not compile a “sum of states” employment series and cautions users that such a series is subject to a relatively large and volatile error structure.”
The data sets are from:
- U.S. Bureau of Labor Statistics Civilian Employment-Population Ratio – LNS12300000
- Unemployment Rate – Civilian Labor Force – by State OR
- Statewide Data – Employment status of the civilian noninstitutional population, seasonally adjusted