By: Jaime Parry
Time period: This site offers a wealth of economic data and information to promote economic education and enhance economic research. The widely used database FRED is updated regularly and allows 24/7 access to regional and national financial and economic data.
Geography: The Federal Reserve Bank of St. Louis is the center of the Eighth District of the Federal Reserve System. This District includes Arkansas, eastern Missouri, southern Illinois and Indiana, western Kentucky and Tennessee, and northern Mississippi.
Data it covers: Unemployment, Federal Funds Data, Labor, Economic Policy, Inflation ETC.
How they present it: Visualization (Graphs & Charts)
How to use: Use the search bar to type in the topic you’re looking for.
Making Sense of Unemployment Data
“Unemployment is like a headache or a high temperature—unpleasant and exhausting but not carrying in itself any explanation of its cause.”
—William Henry Beveridge, Causes and Cures of Unemployment
The Labor Force: Are You In or Out?
To measure the unemployment rate, the U.S. Bureau of Labor Statistics (BLS) surveys 60,000 households—about 110,000 individuals—which serve as a representative sample of the U.S population. Survey respondents (16 years of age and older) answer a series of questions that classify them as either “in the labor force” or “not in the labor force.” Workers classified as in the labor force are those who are either employed or unemployed (Figure 1). The employed are those 16 years of age and older who have a job. Those considered employed might include the underemployed—people who work part-time but want a full-time job and those who are overqualified for the job they have and earn less pay than they would at a job consistent with their education and experience. The labor force also includes those who are unemployed—those who don’t have a job but have looked for work in the past four weeks. As of December 2015, there were 157,833,000 people in the labor force.
Those classified as not in the labor force are not working and not looking for work. So, they are not employed and also not considered unemployed. For example, many full-time college students choose not to work so they can focus on their studies. Some parents choose to stay home to care for their young children. And many older adults retire because they saved and have enough financial resources and no longer have to work. In each case, these people have excluded themselves from the labor force because they do not wish to be employed. Even though they do not have jobs, they are not considered unemployed. Another group classified as not in the labor force is discouraged workers. These are people who do not have a job and are no longer looking for work because they think there are no jobs available to them. Such discouragement is likely to occur during a recession as people lose jobs and then have difficulty finding another one. They likely will not start looking for work until they see signs that the labor market has improved. Because they are neither employed nor actively seeking employment, they are not counted as part of the labor force.
To calculate the unemployment rate, the BLS divides the number of people who are unemployed by the total number of people in the labor force (and then multiplies by 100). For example, an unemployment rate of 5 percent indicates that 95 percent of those in the labor force are employed.
Economists classify unemployment into three categories: frictional, structural, and cyclical. Frictional unemployment results when people are temporarily unemployed, either because they are new to the job market or are searching for a better job. Structural unemployment is caused by a mismatch in the skills held by those looking for work and the skills demanded by those seeking workers. For example, when an auto assembly plant is moved to another city, the skills held by the plant’s former workers may no longer be in demand in the workers’ current location. They may have to relocate to cities with auto assembly plants or learn new job skills. Because workers are always entering the labor force and switching jobs, a certain amount of frictional unemployment is inevitable. Likewise, changes in technology and preferences guarantee that economies also suffer from structural unemployment. As such, a certain amount of unemployment is considered natural. Fittingly, the natural rate of unemployment is the sum of frictional and structural unemployment. Cyclical unemployment is associated with jobs lost due to recession; it is the deviation from the natural rate of unemployment.
The standard unemployment rate (U-3) is an important measure of the health of national labor market conditions. Recent unemployment data indicate that the U.S. economy is near full employment. However, many observers doubt that the unemployment rate fully reflects the reality of underemployed and discouraged workers—both of whom are not counted as unemployed. They often refer to the downward trend in the labor market participation rate as an indication of labor market weakness. However, taken in the context of the demographic shift, the current low unemployment rate is likely an indication of a strong labor market.