Deciphering US labor data

Paul Sturgeon
Cincinnati-based KLA Industries Inc.

Published: April 12, 2013 2:31 pm ET
Updated: April 12, 2013 2:34 pm ET

Related to this story

Topics Public Policy

There has been a great deal of discussion over the past few years around the labor market, the unemployment rate, and so on. Most of it is at best uninformative, and at worst, just plain wrong. We are often left with a lot of data and very little information. In the next few paragraphs I will explain where all this data comes from, what it means, and in the end, tell you where to find the information you need to cut through the noise.

The unemployment rate you probably think of first is the one published by the U.S. Department of Labor's Bureau of Labor Statistics (BLS). It is based on a monthly survey of households around the country. About 2,200 Census Bureau employees collect this data each month. Based on this survey, people are classified as unemployed if all of the following are true: they do not have a job, they have actively looked for work in the prior four weeks, and they are currently available for work. It also includes people waiting to be recalled from a temporary layoff.

So we have interesting fact No. 1 — whether a person receives unemployment compensation has no bearing on whether a person is classified as unemployed.

If you were employed for pay at all during the survey week, even if it was for one hour, you are considered employed. Also, if you did at least 15 hours of unpaid work in a family-operated enterprise you are considered employed, which I think qualifies as interesting fact No. 2.

Over 41 percent of the U.S. population is considered neither "employed" nor "unemployed." If the person surveyed does not fall into either of those categories, they are included in a category called "not in the labor force." This would include retirees and students, but also anyone not seeking work outside the home for any reason. So the actual rate you hear announced, 7.7 percent as of the first of 2013, is calculated by dividing the

number of people "unemployed" by the sum of those "employed" and "unemployed." Right now about 12 million people are "unemployed" out of about 155 million considered in the workforce.

The BLS also puts out the weekly report of those filing new claims for unemployment benefits, which is considered a good leading indicator of the unemployment rate. This is also a good time to point out that all the data we talk about here, both governmental and private, are estimates and subject to later revision. Interesting fact No. 3 is that the initial weekly unemployment claims have been revised upward in 59 of the past 60 months. While curious, the revisions are typically not significant, and it is better to look at the four-week moving average of initial claims, which smoothes out a number of factors.

Another closely watched employment measure is provided by ADP Institute, a private company that is also the largest outsourced payroll service provider in the U.S. ADP gets its data from clients, and the numbers are based on actual non-farm, private-sector payroll data. While some consider this a more accurate measure than BLS figures, the ADP numbers are also subject to revision, and historically some of the revisions have been significant.

One other thing to keep in mind is that how markets react to the various data — which they always do — is based almost entirely on how the data compares to what analysts were predicting. So a weekly report of initial jobless claims of 350,000 could be good if analysts were expecting it to be 370,000, or bad if the number was anticipated to be 330,000.

As Plastics News recently reported, U.S. plastics industry employment did not decline in 2011 for the first time in a dozen years, and actually eked out a 1 percent gain. So what can we conclude about the direction of employment in the U.S. and the plastics industry?

While I believe all the published employment data should be viewed with a bit of skepticism, there are a couple things I would recommend that you look at closely. The first is the Institute for Supply Management's "Report on Business" for manufacturing. The ISM has been publishing this on a monthly basis for a long time, and it draws from 18 industries in the manufacturing sector. After a strong first half of 2012, this index has softened recently. We need numbers consistently above 50 in the first part of 2013 to indicate that the manufacturing economy can sustain its modest momentum.

The second thing to focus on is the Conference Board Leading Economic Index.

The Conference Board is a global, independent business membership that is a non-advocacy, nonprofit research association. Like ISM, the Conference Board has been compiling data for a long time, and it has 10 components, including unemployment claims, manufacturers' new orders, building permits and stock prices. While the index had been increasing in the latter part of 2012, the December numbers were weak, down 0.2 percent.

On a final note, when looking at the labor market, all data must be considered in light of the baby boomers. The megatrend of over 10,000 baby boomers turning 65 years old each day has been happening for two years now, and will continue for another 16 years. Given the vagaries of calculating unemployment, and this steady drain of skills from the workforce, you can make some sense of the seeming paradox that is relatively high unemployment along with a severe talent shortage.

Paul Sturgeon is a certified personnel consultant and the business manager at Cincinnati-based KLA Industries Inc., an executive search firm specializing in the plastics industry


Comments

Deciphering US labor data

Paul Sturgeon
Cincinnati-based KLA Industries Inc.

Published: April 12, 2013 2:31 pm ET
Updated: April 12, 2013 2:34 pm ET

Post Your Comments


Back to story


More stories

Sale of Romanian PVC producer Oltchim assets postponed again

April 23, 2014 1:35 pm ET

The long anticipated privatization of insolvent Romanian PVC producer Oltchim has been postponed yet again, this time until mid-May.    More

Some medical devices could get faster approval with new FDA rules

April 22, 2014 7:41 pm ET

The U.S. Food and Drug Administration is proposing an expedited approval for medical devices for devices aimed at the diagnosis or treatment of...    More

Image

Two Ohio groups team up to accelerate development of future medical devices

April 22, 2014 9:55 am ET

The Austen BioInnovation Institute in Akron and Cleveland-based design specialists Nottingham Spirk announced a strategic partnership that the two...    More

Two Eastman buildings among 10 biggest energy savers in national contest

April 22, 2014 11:35 am ET

Two offices at the headquarters of Eastman Chemical Co. in Kingsport, Tenn., ranked in the Top 10 for energy efficiency in the latest Energy Star...    More

Chinese coal mining company Jinhui launches bioplastic factory

April 21, 2014 10:18 am ET

Chinese coal mining company Shanxi Jinhui Energy Group Co. Ltd. is diversifying into bioplastics, launching production this month on a $35 million, 20...    More

Market Reports

Market Data Book - Rankings & Lists

A one-stop download of Plastic News' exclusive annual lists and processor rankings containing essential data including sales, employees, end markets, materials and more.
EXCLUSIVE EXCEL FEATURE: full mailing address details for available plant locations.

Learn more

Thermoformed Packaging 2014 Market Review & Outlook North America

This in-depth report provides analysis and discussions of economic and political conditions, market trends, legislative/regulatory activity impacting supply and demand, business opportunities and threats, materials pricing, manufacturing technology, as well as strategies being implemented by thermoformed packaging companies. In addition, there are reviews of 25 leading thermoformers in the packaging segment, assessing their growth initiatives and performance metrics over 10 years.

Learn more

Mold Making and Tooling Review and Outlook 2014 North America

This report provides in-depth analysis of the mold and toolmaking market for North America, including discussions of trends, opportunities, threats, the latest developments in production and labor and equipment trends impacting moldmakers.

Learn more

Upcoming Plastics News Events

May 6, 2014 - May 8, 2014Plastics in Medical Devices 2014

May 12, 2014 - May 12, 2014Plastics News Brazil Pharma Summit

September 10, 2014 - September 12, 2014Plastics Caps & Closures 2014

February 3, 2015 - February 7, 2015Plastics News Executive Forum 2015

More Events