OLMIS

by Tracy A Morrissette
Published Jul-27-2009

Introduction Who's Factored Into the Unemployment Rate Calculation? The Availability of More Detailed Labor Force Data The Civilian Labor Force Total Employment Total Unemployment The Unemployment Rate A Note on Using the Detailed State Labor Force Data Conclusion

The unemployment rate is a general measure of labor market conditions in a geographical area. This article focuses on the specific facets of the civilian noninstitutional population (CNP) included in and excluded from the definition of the unemployment rate. These segments of the population are defined by the Bureau of Labor Statistics (BLS).

Table 1 provides a quick overview of the segments of the population that are factored into the unemployment rate computation. Simply stated, those in Table 1 under the heading "included" are factored into the unemployment rate calculation while those under the heading "excluded" are not. Data on some of the groups listed in the table are published by BLS, while others (many of the groups in the "excluded" column) are not published. For this reason, the table is an oversimplification. In reality, the classification scheme is more complex and there are procedures in place to deal with "gray areas" and similar issues.

The line drawn between included and excluded in Table 1 has led some to argue that the unemployment rate is either too specific or too broad of a measure and thus fails to capture the "true" state of the labor market. The version of the unemployment rate that shows up in press headlines is one general view of the labor market. More detailed labor market data are published by BLS that provides a closer look at labor market conditions. In addition to the headline unemployment rate, detailed data about the characteristics of the CNP are published for the United States each month. Among the details are data on those not in the labor force and demographic characteristics of the labor force.

Detailed labor market data for Oregon are only published annually on the BLS website. One source is the Geographic Profile of Employment and Unemployment (GP). GP data are based on annual averages from the Current Population Survey (CPS), and available on the BLS website at: http://stats.bls.gov/opub/gp/laugp.htm. The latest GP data are for 2004. Although not as detailed as the GP reports, more current detailed data are available for 2008 for states at: http://stats.bls.gov/lau/ptable14full2008.pdf. Oregon data are on page 40 of this report. These and other reports are located under the "Annual Average" section of the LAUS home page at: http://stats.bls.gov/lau/home.htm.

The CNP is comprised of all persons 16 and older who do not live in institutions (e.g., penal and mental facilities or homes for the aged) and who are not on active duty in the armed forces. The CNP is the population base for the derivation of the labor force data. Oregon's 2008 annual average CNP was about 3.0 million.

The CNP consists of two groups: those in the labor force and those not in the labor force. Individuals in the labor force either have a job (i.e., are employed) or are actively seeking one (i.e., are unemployed). In 2008, close to 2.0 million Oregonians, or more precisely 66.1 percent of the CNP based on unrounded figures, were in the civilian labor force. Those not in the labor force are without employment and not engaged in an active job search. Approximately 1 million Oregonians were not in the labor force in 2008.

Among individuals not in the labor force are those generally described as having some "marginal attachment" to it. The marginally attached have indicated that they want a job, are available to work, and have looked for work sometime during the prior 12 months. These individuals are not considered unemployed, however, because they did not actively search for work during the four weeks preceding the CPS reference week (the week of each month containing the 12^th day). "Discouraged workers" are a subset of the marginally attached. They are not looking for work because they believe there are no jobs available or there are none for which they qualify. BLS does not publish numbers for these groups for Oregon. Nationally, in 2008, however, 79,501,000 people were not in the labor force. Among these individuals, 1,614,000 (about 2.0%) were marginally attached and 462,000 (about 0.6%) were discouraged workers.

The employed consist of two main groups. The first group is all civilians who, during the survey week, did at least one hour of work as paid employees, worked in their own business, profession, or on their own farm, or who worked 15 hours or more as unpaid workers in an enterprise operated by a member of the family. The second group includes those who were not working but had jobs from which they were temporarily absent. Reasons for temporary absence from work include illness, inclement weather, vacation, childcare problems, maternity or paternity leave, labor-management disputes, job training, or other family or personal reasons, whether they were paid for the time off or seeking other jobs. In 2004, approximately 4 percent of Oregon's 1.7 million employed were temporarily away from their jobs. Each employed person is counted only once each month, even if he or she holds more than one job.

A full-time worker is defined as an individual who usually works 35 or more hours a week. If the individual has more than one job, then the hours at all jobs are aggregated to determine the usual full- or part-time work status. A part-time worker is defined as an individual who usually works from one to 34 hours a week. Particular attention should be paid to the word "usually" in both the full- and part-time definitions. During the reference week, a worker who usually works 40 hours a week may actually work only 25 hours. This worker, however, would be classified as a full-time worker since he or she usually works 40 hours. In 2004, around 80 percent of Oregon's employed were usually working full-time, while around 20 percent were usually part-time workers.

Individuals working part time for economic reasons, also known as "involuntary part-time," have indicated they are available for full-time work. However, for "economic" reasons such as slack work, unfavorable business conditions, inability to find full-time work, and seasonal declines in demand, these people are working part time. Those working part time for economic reasons comprised of about 3 percent of Oregon's employed in 2004. Likewise, there are those who usually work part time for "noneconomic" reasons, such as illness or other medical limitation, childcare problems or other family or personal obligations, school or training, and retirement or social security limits on earnings. Those working part time for noneconomic reasons comprised about 16 percent of employment in Oregon in 2004.

Not considered employed are persons whose only activity consists of working in their own homes, doing activities such as painting, repairing, cleaning, or other home-related work. Also excluded from the total employment number are those only doing volunteer work for religious, charitable, or similar organizations. Those only caring for children or elderly are excluded as well.

Total unemployment is composed of all persons who were not employed during the CPS reference week but were available for work and had made specific efforts to find employment some time during the four-week period ending with the CPS reference week. Individuals waiting to be recalled to a job from which they had been laid off, known as "persons on layoff," do not need to be looking for work to be classified as unemployed.

To be considered unemployed, one must make "specific efforts" to find employment. Depending on the job search method used, an individual without employment may be considered either unemployed or not in the labor force. Active job search methods are those that have the potential to result in a job offer without any further action on the part of the job seeker. Examples of active job search methods include going to an employer directly, going to a public or private employment agency, seeking assistance from friends or relatives, and placing or answering ads. Passive methods, which do not qualify as a job search, include reading (as opposed to answering or placing) "help wanted" ads and taking a job training course. Individuals using active job search methods are considered unemployed, while individuals using passive job search methods are classified as not in the labor force.

There are five major categories of unemployed persons grouped by their status at the time they became unemployed:

1. Job Losers: This is a group composed of (a) those permanently laid off whose employment ended involuntarily and who immediately began looking for work, and (b) those temporarily laid off from a job to which they expect to be recalled.
   
   
2. Job Leavers: Persons who have quit or otherwise terminated their employment voluntarily and have begun to look for work.
   
   
3. Persons who have completed temporary jobs, who began looking for work after their jobs ended.
   
   
4. Re-entrants: Persons who previously worked but were outside of the labor force before beginning their job search.
   
   
5. New entrants: Persons who never worked before and who are entering the labor force for the first time.

In 2004, roughly 56 percent of Oregon's approximately 140,000 unemployed were job losers and persons who completed temporary jobs, 9 percent were job leavers, 26 percent were re-entrants, and 9 percent were new entrants.

Now that the labor force concepts have been explained in some detail, those measured in the unemployment rate can be seen by looking at this equation:

unemployment rate = (unemployed / civilian labor force)

Basically, the unemployment rate is a measure of those who are without employment and are taking active steps to find employment, shown as a ratio of all those who are in the labor force (either employed or unemployed). Being included in the unemployment rate calculation can be thought of as having an attachment to the labor market - either one has a job or has actively sought to obtain one in the past four weeks. In the 2008 detailed CPS reports for Oregon, the unemployment rate was 6.4 percent.

GP and CPS annual employment and unemployment data for states will not be identical to the annual average estimates based on the official labor force values published each month. The official annual averages for Oregon were developed using time series models of survey-based data, whereas the CPS annual tables reflect survey-based data only.

Which data series should be used for analysis? The answer depends on the purpose of the analysis. If an analyst is tracking Oregon's unemployment rate over time, then the official data should be used. On the other hand, if an analyst is focusing on more detailed labor force information, then GP and CPS annual data are the best option.

Annual average unemployment rates for 2008 from the two data sets did not differ in a statistically detectable way. Rounded to the customary nearest one tenth, Oregon's CPS annual average unemployment rate was 6.4 percent, same as the official annual average unemployment rate reported at 6.4 percent. The official unemployment rate had a 90 percent confidence interval of 5.8 percent to 6.9 percent. This error range is based on unrounded data. Annual averages

This article provides a general overview of the population segments included in Oregon's unemployment rate calculation. The unemployment rate is a useful indicator of labor market conditions in a geographical area. However, it provides only one perspective of a complex and dynamic job market. For the nation, greater detailed data series provide more information about the labor market each month. This labor force detail, however, is not published each month for Oregon. The only labor force data published for Oregon by month are the civilian labor force, total employment, total unemployment, and the unemployment rate. More detailed information about Oregon's CNP is published annually on the BLS-LAUS website.