December 3, 2021

The unemployment rate plunged by 0.4% in November to 4.2% after having fallen 0.2% in October and 0.4% in September.  The labor force rose by 594 thousand in November.  But employment jumped by 1,136 thousand..  As a result, the number of unemployed workers fell by 542 thousand in November and the unemployment rate declined by 0.4%. Payroll employment rose 210 thousand.  How come the two estimates of employment are different?  First, the two are figures are derived from separate data streams.  The payroll number is calculated from employment numbers reported by a large number of employers across all industries.  Employment for the unemployment rate calculation is derived from knocking on doors and asking people if they have a job.  It is known as the  household survey.  One conceptual difference is that the household survey includes people who are self-employed which would not be captured in the establishment survey.  There is always monthly noise between the two series.  But the month-to-month differences are never this large.  Over time the two surveys seem to show roughly comparable gains in employment.  But the difference this time cannot  be explained by month to month wiggles.

Since the recession ended in April of last year payroll employment has risen by 18,450 thousand.  Civilian employment, which includes self-employed workers, has risen by 21,805 thousand.  Thus, it appears that the number of self-employed workers has risen by perhaps 3.5 million workers in the 19 months since the recession ended.  People seem to be tired of working for somebody else in a sometimes dirty or hostile work environment, and being underpaid while the bosses earn tons of money, Thus, the pandemic and the recession has created a dramatic change in the labor market.

While the official rate is the most widely used, the reality is that the official rate can be misleading because it does not include “underemployed” workers which is true.  There are two types of “underemployed” workers.  First, there are people who have unsuccessfully sought employment for so long that they have given up looking for a job.  Second, are those workers  that currently have a part time position but indicate that they would like full time employment.  The total of these two types of underemployed workers are  “marginally attached” to the labor force.  The number of these workers has declined steadily since the recession ended in April of last year, but it is still higher than it was prior to the recession.

We should probably be focusing more on the broadest measure of unemployment because it includes all of these underemployed individuals.  The broad rate jumped by 14.1% in April 2020 from 8.7% to 22.8%, but then declined steadily.  It declined 0.5% in November and now stands at 7.8%.  Full employment for this measure of unemployment is somewhere around the 8.0% mark which is where it was prior to the recession.

Given the steady gains in employment we look for GDP growth of 8.0% growth in Q4 and 4.9% in 2022.

Stephen Slifer

NumberNomics

Charleston, SC