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Making Sense Of Employment Statistics

By Abigail Rome
December 11, 2009

With the current unemployment rate of 10% - only a hair away from highest rate in 26 years, recorded in October - economists and employment specialists, as well as job-seekers, are extremely attentive to labor statistics issued by the Bureau of Labor Standards. Month after month when the numbers come out, analysts and commentators pounce on them like lions to decipher their meaning and predict the future of the job market.

While the unemployment is rate is the most commonly touted statistic, it is only one of several measures that shed light on the status of labor in the U.S. Nor are the numbers all that are used for predictions. Depending on which side of the desk the pundit sits on - assuming he or she even has a desk to sit at - the findings are interpreted differently. And, whether the prognosis is positive or worrisome, just the news of it can influence the confidence of employers and employees, thereby affecting job rates.

Rise in new temporary jobs brings optimism

Let's start with the status of the temporary job market. Last week, the Bureau of Labor Standards announced that the number of new temporary jobs was 52,000 in November. This is significantly more than October's figure of 34,000, adding increasing force to the trend of steady increases that began in July. Heidi Shierholz, an economist who examines employment issues at the Economic Policy Institute in Washington, DC, sees this as good news. Better than expected, in fact. "Employers will hire temporary help workers to test the waters of a recovery before they make a commitment to full-time workers," Ms. Shierholz says.

According to a New York Times article, the American Staffing Association, a trade group representing the job recruitment industry, agrees that the rise in temporary jobs is a positive sign for the economy. Their 2009 study found that a sustained upturn in temporary employment is a strong indicator of an economy emerging from a recession. Steven Berchem, the Association's vice president, says, "Typically, you start to see improvement in general employment in about six months." Ms. Shierholz's prediction is a bit more conservative. Her estimate is nine months.

Jody Greenstone Miller, CEO of Business Talent Group, which provides temporary consulting and interim executive services, is optimistic about the growth of temporary and part-time work, but for different reasons. In her article in the Wall Street Journal, she envisions a new model for the 21st century, in which such work options may be preferred for workers, as well as employers. Businesses with specific short-term needs - such as launching a new product - can hire people on a temporary basis without having to worry about keeping them busy after the original task is accomplished. And, talented people may favorr temporary or part-time work in order to be able to follow other passions or start their own businesses.

The downsides of temporary employment

While employment pundits are sanguine about the rise in temporary jobs, many of those in these positions are less so. Many of them are like Joseph Paccione, who was laid off from a $60,000-a-year job as a technology specialist. They accept part-time or temporary work because they think that it will get them the needed foot in the door for full time work. However, according to the New York Times article, disappointments abound.

After a long job search, Mr. Paccione took a $17-an-hour temporary position filling out spreadsheets. Even after he used his computer savvy to increase his work efficiency and that of co-workers and got good recommendations from his supervisor, his hopes of long-term employment were dashed when he was let go at the end of the 7th week.

Many of these temporary workers - though not necessarily the top tier management consultants and operating executives whom Ms. Miller serves - reluctantly make ends meet with temporary assignments which may not reflect their full employment potential. Indeed, a recent Wall Street Journal article reports that many people who formerly had well-paying full-time jobs with benefits and advancement opportunities have had to resort to jobs that pay less. These are subset of workers who fall into the category of the underemployed.

Numbers of underemployed workers on the rise

Part-time workers who want full-time work, and those with jobs that are beneath their skill level, make up the underemployed. As might be expected, the number of underemployed people rises during a recession, but the government has no accurate measure. This is because the Bureau of Labor Statistics does not count how many people are working below their potential. Instead, it looks at what it calls labor underutilization. The U6 measure, as its called, quantifies the unemployed, those looking for work, and those who have stopped looking but who have looked sometime in the recent past. As of November, it had more than doubled in the two years since the recession began, reaching a dour 17.2%.

According to Ms. Shierholz, underemployment is a useful and more comprehensive measure of what is happening during a recession than the unemployment rate. "This is because it looks at a broader swathe of the workplace than just the unemployed. 17.2% is huge, but it's what we'd expect given our 10% unemployment rate and what we've seen in past recessions," she says.

Examining hours worked per week

Yet another employment measure worth examining is the number of hours people work during the average workweek. In a recession this number drops. In this case, it has remained fairly flat, at 33, since June. But, November's figures show an increase to 33.2 hours. Economists view this as a good sign because when employers have resources to allocate to labor, they first increase work hours for existing workers. Only later, once they feel more certain of recovery, do they hire new people.

In mid-November, before the most recent employment figures came out, Federal Reserve Chairman Ben Bernanke spoke at the Economic Club of New York. In his speech, he said, "The average workweek for production and nonsupervisory workers has fallen to 33 hours, the lowest level in the postwar period. He added, "Together with the reduction in hours worked, slower wage growth has led to stagnation in labor income. Weak income growth, should it persist, will restrain household spending." These statements do not bode so well for a rapidly recovering economy.

The value of employment statistics

So, what to make of these numbers which change on a monthly basis and which can be interpreted in many ways? One lesson is that employment statistics must be examined in a comprehensive fashion. Each individual measure, including the many others not discussed here, provides a single piece of a complicated puzzle portraying employment in the U.S. at one point in time.

While the numbers provide ample fodder for predicting the future of the economy, Ms. Shierholz, sums up the situation best when she says. "It really comes down to the fact that the labor market is extremely complicated.", Regardless of the monthly figures, employment will remain dynamic for months to come.

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