Labor Flows

This data will be updated on July 2, but let's make some sense of it now. The Civilian Labor Force equals the employed plus unemployed. Those who have quit looking for a job are "Not in the labor force."

The number of employed declined but not by the same amount as unemployed increased. How do one explain that changed in the labor force? [1] the pool of unemployed is not stagnant. Each month there are large flows of workers entering and leaving unemployment. I crudely computed that the unemployed changes by 33% each month based on the duration of unemployment. [2] Workers might be marginally attached to the labor force. These workers reluctantly take part-time jobs just to have some income. The BLS counts these individuals as employed. [3] College and high school graduations added thousands of new job searchers who are counted as unemployed until they are hired. [4] When the economy sours businesses rely on retirees to trim the their payrolls to avoid the psychological costs of layoffs. Many firms just choose to work their retained labor harder and longer. [4] Previously discouraged workers who where not in the labor force might decide to start looking for work. This is a good sign since it might indicate that market conditions are favorably changing. Checking Table A - Major Indicators of Labor Market Activity, I find that both average hours and wage have decreased from the previous month.

When the media reports the unemployment rate as 9.4%, this often misleads readers into believing that many workers are without work. The employment pool sees constant changes in the composition of the labor force. Keep this in mind when the new employment numbers are released on July 2.