The Unemployment is 7.5%, or i it?

The Bureau of Labor Statistics reported that the unemployment rate for April had fallen to 7.5% from 7.6% in May.  This is the lowest since January 2009, when the rate was 7.3%.  The highest during the Great Recession was 10% in October 2009.  This is quite a ways from full employment, when there is no cyclical unemployment (unemployment because of the economic cycle, i.e.—hard times), and only frictional (workers between jobs) and structural  (workers must be retrained), remain.  Economists consider full employment exists when the unemployment rate is around 5%.

The unemployment rate reported by the government is known as the U3 rate, the proportion of the labor force that is unemployed and actively seeking employment.  U3 includes those unemployed 15 weeks or longer (U1) and ones who lost jobs or completed temporary work  (U2). U6 is the rate of primary concern, but is not considered the “official” unemployment rate.  It includes discouraged workers who have quit looking (U4) and those who have found part-time jobs.  The U6 unemployment rate was 13.9% in April, up from 13.8% in March.  Part-time workers are considered fully employed in U6, which makes the 7.5% rate smell a little fishy.

Major increases in employment during April included increases in the services sector—food services and drinking place, retail trade, and health care.  Other than health care, these are not exactly career positions.  Food services and bar tending are often temporary jobs that people seek as an interim while looking for real work.

The employment numbers can be encouraging or discouraging, depending on one’s interpretation, which depends on one’s politics.  210,000 people entered, or re-entered the labor force in April, but the labor participation rate remained a dismal 63.6%, down from 63.8% in January.   293,000 more workers were employed in March than in April.  But here’s the real problem:  The number of part-time workers increased by 278,000.  This means that only that only 15,000 workers got permanent jobs.  The U6 rate, at near 14%, is more realistic.

I’m sure you don’t recall that I said in a newsletter last October that as employers shift full-time workers to part-time to avoid the Obamacare penalty, the unemployment rate will decrease with perhaps negative effects on the economy.  Businesses do not have to provide health care to part-time workers, defined by Obamacare as those who work no more than 28 hours a week.  More workers get jobs but they have less income to support the economy.  Could this be the start of the Obamacare effect?

Posted by at May 22, 2013
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