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US employment tutorial, summary [ClearOnMoney]
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Commentary

US employment tutorial, summary

8 Mar 2010 by Jim Fickett

The economy is, by definition, people producing goods and services for each other, so the employment situation is among the most fundamental measures of economic well-being. The employment tutorial posts have focused on the larger, long-term trends. Here is a list of the component posts, with the key point from each one:

1. A short list of indicators to watch. The two main measures of the US employment market are non-farm payrolls (number of jobs, from a survey of employers) and unemployment (from a survey of households). One other key indicator is needed: some measure of partial employment, for which we use “part-time for economic reasons”. Two leading indicators, temporary jobs and initial unemployment claims, round out the set.

2. The 2007 downturn. The downturn beginning in 2007 was the worst, for the employment situation, since the second world war. That fact will remain relevant in understanding the employment situation over the next several years.

3. Initial unemployment claims The key value of initial jobless claims is that they are close to the ground, giving a quick readout on current conditions. One must exercise some care in interpretation: (1) jobless claims constitute a very noisy series, and (2) long-term comparisons are generally not meaningful. The key thing to watch is the trend over a few months.

4. Non-farm payrolls. Nonfarm payrolls (NFP) are a good proxy for the total number of jobs and, many details and caveats aside, give a clear read on the trend. Note that the month-to-month changes are quite noisy and one should really look at either (1) the year-over-year change, or (2) the trend in the month-to-month changes over several months.

5. "Part-time for economic reasons". It is important to watch some measure of partial employment; those working part-time but preferring full-time is one valid choice. A high count (1) inhibits growth in total jobs, as part-timers compete for full-time work, and (2) is a negative factor in the outlook for consumer spending.

6. Unemployment. U-3, the standard unemployment rate, is defined as the fraction of the labor force that does not have a job and is actively looking (defined as taking action in the last 4 weeks). U-6, a broader unemployment rate that is sometimes quoted, is important for sociological issues but not for understanding the current economic trend – it is essentially a constant multiple of U-3.

7. Temporary jobs. Since it is easier to hire and fire temps than permanent workers, temporary jobs are a useful early indicator for jobs overall. Despite some talk to the contrary, the data still show a strong correlation between changes in temporary jobs, and changes in overall jobs 4 months later.

For the current employment situation see US employment.