June 26, 2017 Why's the FED Panicking?
May 25, 2017 LFPR anyone?
Apr 26, 2017 What's up with the FED?
March 10, 2017 Feb Employment Situation
Oct 10, 2016 Tax Burden
Aug 1, 2016 Here Comes the Debt
June 26, 2016 Moribund US Economy
June 16 2016 Labor Update
Mar 10, 2016 Spring Renewal for Labor Markets?
Feb 21, 2016 GDP Gap
Feb 16, 2016 FED and Monetary Policy
Jan 19, 2016 Employment Gap Age Groups LFPR
Jan 10, 2016 A look at the Employment Situation
Dec 30, 2015 Fed Funds Rate up 25 Basis points...so what?
Dec 15, 2015 Fed Funds on the rise? Has Yellen 'Fell-in'?
Oct 15, 2015 Labor Markets Seven years of misery
Oct 6, 2015 Sept: Horrible Month for Labor
Sept 30, 2015 The FED: Interest Rate Angst
Sept 11, 2015 FED on the Monetary Policy Front
July 31, 2015 Trade and Foreign Exchange Rates
July 20, 2015 Economic Growth?
July 10, 2015 Labor Picture by Age Group
July 2, 2015 Disastrous Month in Labor Rpt
June 19, 2015 Minimum Wage - Income Distribution
Jun 5, 2015 Encouraged Worker Effect
May 8, 2015 Updated Employment Situation for April
May 4, 2015 Languishing Labor Markets
Apr 7, 2015 LFPR Doldrums on the Labor Front
March 8, 2015 Less than Zero Interest Rates - Trade War
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2015 Volume Issue 5

Economic Newsletter for the New Millennium
June 5, 2015

Donald R. Byrne, Ph.D.

Associate Editor
Edward T. Derbin, MA, MBA

For a downloadable version, click here

Encouraged Worker Effect May 2015.pdf

...a bit more compressed version of same

Encouraged Worker Effect May 2015 - compressed.pdf

Encouraged Worker Effect

May 2015 Labor Report shows more Employed and more Unemployed – yep, it’s a good month!

Employment Situation – May 2015 (released June 5, 2015) http://www.bls.gov/news.release/archives/empsit_06052015.pdf

1-Household Data Summary May 2015 GREAT MONTH - CNP up 189; Labor Force up 397; Employed up 272; Unemployed up 125; and Not in the Labor Force down 208.jpg

Digging into the Monthly Employment Numbers

+ In the latest news release we saw an increase in the Civilian Noninstitutional Population (CNP) of 189,000 (those people 16+ who are not in the military, prison, or counted in some other institutionalized setting).

+The Labor Force (LF) (those Employed 272,000 + those Unemployed 125,000 actively seeking employment) increased by 397,000!  We’ll speak to the rising unemployed shortly.

+Since the LF expanded by 397,000 and the CNP grew by only 189,000 (a respectable number), this pushed the Labor Force Participation Rate up by 0.1%, moving from 62.8% in April to 62.9% in May.  This is a very good thing!

+Employed grew by a healthy 272,000 in the Current Population Survey as well as 280,000 in the Payroll or Establishment Survey.  It’s been a while, but it is good to see them moving in the same direction. 

+Employment-Population Ratio rose by 0.1%, the result of a robust Employment figure compared to the CNP (Employed 272,000 / CNP 189,000): the Employment-Population Ratio needle moved from 59.3% to 59.4%.

+Unemployed rose by 125,000.  Now how can that be a good thing you ask?  The key to this is that U3 Unemployment counts those people who are not employed, but are actively seeking employment.  Stick with this for a moment…

+The Unemployment Rate ticked up by 0.1%, going from 5.4% in April to 5.5% in May 2015.  How can this be viewed as a positive thing?  The key here is to focus on the unemployed as a measure of those not employed, but SEEKING EMPLOYMENT.  Whether or not this translates into higher employment levels in the subsequent months ahead remains to be seen, but this may well be a good indicator – we’ll see.

+Not in the Labor Force dropped by 208,000 in the month of May…wow!  What does this mean?  Well, on a NET BASIS, we saw the following: 

CNP grew by 189,000

The LF grew by 397,000 (of that 272,000 were added to the Employed and 125,000 flowed into the ranks of the Unemployed)   

CNP 189,000 = LF 397,000 + Not in LF -208,000

So, in essence, with the Labor Force expanding by more than the working age population actually grew, then this means that 208,000 people moved from the sidelines back into the LF. 

2- Walking through the Monthly change in the Employment Summary CNP 189 less Labor Force 397 (Employed 272 + Unemployed 125) = Not in LF -208.jpg

What does this latest monthly (Labor) report signal?

  While this is only one month, it provides us with a very good blueprint of what a healthy month should look like: 

1) An expanding labor force – hopefully larger than the additions to the working age population (Civilian Noninstitutional Population)

  2) Growing employment

  3) Static or even rising unemployment (pulling people back into the labor force) for several months to come

  4) Shrinking or static ‘not in the labor force’ component

Last words…Employment finally back to the 2007 level
(Nov 2007 to Sep 2014 --- nearly 7 years)

The point is that as we have indicated in the past, it was not until September 2014 that we clawed back to the pre-recession employment levels (146.6 million) from November 2007 (146.6 million) [note: according the NBER – National Bureau of Economic Research http://www.nber.org/cycles.html , the recession went from December 2007 – June 2009 --- go figure].  To further press the point home, the CNP or Civilian Noninstitutional Population expanded by 15.5 million in that same time frame. 

We have a lot of ground to make up in the months/years to come.

3-Emploment Nov 2007-Sep 2014 Clawing back to 146.6 million.jpg

Between Nov 2007 and Sep 2014 Civilian Noninstitutional Population grew by 15.5 million, while Employment only managed to recoup its losses.jpg