The unemployment rate is published by the Bureau of Labor Statistics, a division of the US Department of Labor. The rate is found by dividing the number of unemployed by the total civilian labor force. On July 8, 2011, the BLS published the most recent unemployment rate for June, 2011 of 9.2% (actually it is 9.182% up .129% from 9.053% in May, 2011). This was determined by dividing the unemployed of 14,087,000 (up from the month before by 173,000—since June, 2010 (one year ago), this number has decreased by 506,000) by the total civilian labor force of 153,421,000 (down by 272,000 from May, 2011). Since June 2010, our total civilian labor force has decreased by 263,000 people. On the surface, these new unemployment rates are scary, but let’s look a little deeper and consider some other numbers.
The unemployment rate includes all types of workers—construction workers, farmers, etc. We recruiters, on the other hand, mainly place management, professional and related types of workers. That unemployment rate in June was fixed at 4.7% (this rate is .3% up from last month’s 4.4%). Or, you can look at it another way. We usually place people who have college degrees. That unemployment rate in June was fixed at 4.4% (this rate is .1% down from last month’s 4.5%).
Usually at this point, I talk about Milton Friedman and his famous theory of the natural rate of unemployment and I use his ‘macro’ concept to discuss a ‘micro issue’; i.e., unemployment rates among professionals and college-degreed people*, but, as with last five month’s analyses that were so well received, I want to take a different tack—I want to quickly explore this topic of ‘Unemployment’.
*(For more info on Milton Friedman and NAIRU, please see my BLS Analyses archives on my website: email@example.com.)
THE IMPORTANCE OF GDP
“The economic goal of any nation, as of any individual, is to get the greatest results with the least effort. The whole economic progress of mankind has consisted in getting more production with the same labor…Translated into national terms, this first principle means that our real objective is to maximize production. In doing this, full employment—that is, the absence of involuntary idleness—becomes a necessary by-product. But production is the end, employment merely the means. We cannot continuously have the fullest production without full employment. But we can very easily have full employment without full production.”
–Economics in One Lesson, by Henry Hazlitt, Chapter X, “The Fetish of Full Employment”
IT IS IMPOSSIBLE FOR UNEMPLOYMENT EVER TO BE ZERO
‘Unemployment’ is an emotional ‘trigger’ word. It conjures up negative thoughts. But it is important to realize that, while we want everyone who wants a job to have the opportunity to work, unemployment can never be zero and, in fact, can be disruptive to an economy if it gets too close to zero. Very low unemployment can actually hurt the economy by creating an upward pressure on wages which invariably leads to higher production costs and prices. This can lead to inflation. A healthy economy will always include some percentage of unemployment. The debate is waged on what is the optimum, acceptable unemployment rate.
There are four main sources of unemployment:
1. Cyclical (or demand-deficient) unemployment – This type of unemployment fluctuates with the business cycle. It rises during a recession and falls during the subsequent recovery. Workers who are most affected by this type of unemployment are laid off during a recession when production volumes fall and companies use lay-offs as the easiest way to reduce costs. These workers are usually rehired, some months later, when the economy improves.
2. Frictional unemployment – This comes from the normal turnover in the labor force. This is where new workers are entering the workforce and older workers are retiring and leaving vacancies to be filled by the new workers or those re-entering the workforce. This category includes workers who are between jobs.
3. Structural unemployment – This happens when the skills possessed by the unemployed worker don’t match the requirements of the opening—whether those be in characteristics and skills or in location. This can come from new technology or foreign competition (e.g., foreign outsourcing). This type of unemployment usually lasts longer than frictional unemployment because retraining, and sometimes relocation, is involved. Occasionally jobs in this category can just disappear overseas.
4. Seasonal unemployment – This happens when the workforce is affected by the climate or time of year. Construction workers and agricultural workers aren’t needed as much during the winter season because of the inclement weather. On the other hand, retail workers experience an increase in hiring shortly before, and during, the holiday season, but can be laid off shortly thereafter.
Other factors influencing the unemployment rate:
1. Length of unemployment – Some studies indicate that an important factor influencing a workers decision to accept a new job is directly related to the length of the unemployment benefit they are receiving. There has certainly been some debate about the ninety-nine weeks (nearly two years) of unemployment benefits currently available in the US.
2. Changes in GDP – Since hiring workers takes time, the improvement in the unemployment rate usually lags behind the improvement in the GDP.
WHERE RECRUITERS PLACE
Now back to the issue at hand, namely the recruiting, and placing, of professionals and those with college degrees.
If you take a look at the past few years of unemployment in the May “management, professional and related” types of worker category, you will find the following rates:
June 2010 4.9%
June 2009 5.0%
June 2008 2.7%
June 2007 2.3%
June 2006 2.4%
June 2005 2.6%
June 2004 2.9%
June 2003 3.5%
June 2002 3.3%
Here are the rates, during those same time periods, for “college-degreed” workers:
June 2010 4.4%
June 2009 4.7%
June 2008 2.3%
June 2007 2.0%
June 2006 2.1%
June 2005 2.3%
June 2004 2.7%
June 2003 3.1%
June 2002 3.0%
So, while June 2011’s rates for these two categories, of 4.7% and 4.4% respectively, are not huge when looking at the big picture, it’s not anything to be very happy about either—especially when we see how well we had it during the 2002-2008 time frame (Obama took office January 20, 2009). But regardless, these unemployment numbers usually include a good number of job hoppers, job shoppers and rejects. We, on the other hand, are engaged by our client companies to find those candidates who are happy, well-appreciated, making good money and currently working and we entice them to move for even better opportunities—especially where new technologies are expanding. This will never change. And that is why, no matter the unemployment rate, we still need to market to find the best job orders and we still need to recruit to find the best candidates.
This artile is reposted by permission of Bob Marhsall. To lean more about Bob Marshall please visit http://themarshallplan.org/aboutbob