By FRANK STRICKER
December 19, 2022
The Bureau of Labor Statistics (BLS) survey of households in November found that the official unemployment rate stayed at 3.7%. That’s low by conventional standards and lower than 4 to 5%, which is probably what the Federal Reserve is aiming for. Official unemployment rates for some groups stayed down. The rate for whites was 3.3% and for adults 3.5%. The unemployment rate for disabled people fell more than a point, but was still high at 5.8%. The rate for African-Americans was 5.7%. The rate for all teens was, as usual, quite high at 11.3%, but the black teen rate was even higher–16.8%. Military veterans from the Gulf-War era sometimes experience problems adjusting to civilian workplaces, but someone must be doing something right because their unemployment rate was just 3%.
In a separate publication, the BLS has begun reporting the unemployment rate of American Indians and Alaskan natives. Their rate last month was twice the national rate at 7.7%. The BLS does not smooth this group of unemployment rates for monthly and seasonal ups and downs, so it is not strictly comparable to other rates. But what we have shows a lot of ups and downs, especially ups. In 5 of 11 months in 2022 the rate for Indians and Alaskan natives was at least 6.8%.
Finally, the National Jobs for All Network’s estimate for real unemployment including those who want jobs but were not counted as unemployed and part-timers who could not find full-time work was not 3.7% but 9%. That is obviously not full employment.
Dropouts and Stayouts: What’s Going On?
In the Payroll (or Establishment) numbers gathered from non-farm employers, job totals increased by 261,000. Not great, but good. In the household survey that yields estimates of the total available labor force and unemployment, the number of employed fell by 138,000 and the labor force declined by 186,000. In fact, over two months (September through November) total employment fell by 460,000 in the household survey. At the same time nonfarm jobs increased 547,000 in the employer reports.
Confusing, right? We’ve seen this kind of thing before. We just have to live with one report that essentially shows the number of jobs increasing and another that shows them decreasing. I find little guidance from the BLS about how to alleviate my distress. There’s a reminder that the two reports are based on different kinds of samples and also that for job totals we should use the payroll numbers because they are based on a larger sample. True enough, but both samples are measuring U.S. workers–many of the same kinds of people.
And it is hard to ignore the household survey which shows that employment has been falling. How is that possible when employers claim to be offering over 10 million jobs every month. It makes you wonder if some of these job vacancies are fictional. Perhaps in the next job-openings report in January, we will get a smaller, more realistic count of job vacancies. Employers may start cleaning up their lists, especially if we get closer to a real recession.
Overall, if the Fed’s interest rate hikes work, there will be fewer job openings, more unemployment, and more layoffs. We’ve already seen significant layoffs at three big tech companies: 24,000 fired at Twitter, Amazon, and Meta in November. And Wall Street workers fear a wave of pre-emptive, pre-recession firings. The Fed wants more layoffs, more unemployment, less demand for workers, and millions of newly desperate jobless workers who will accept low pay. That’s key to the Fed’s classist solution to high inflation: clamp down on wages.
Just now, more people than expected are not looking for work, or not hard enough. As mentioned, the labor force shrank in recent months and although it staged a big recovery from the spring 2020 job collapse, it is still down a bit from the pre-pandemic era. Given all those juicy job opportunities that are supposed to be out there, that is a bit of a puzzle. But there are useful explanations on the supply side.
Let’s be clear. We are talking about a labor force participation rate (working or looking for work as a share of the population) that is down from the pre-pandemic period by just little over one percentage point. (63.4% in February of 2020; 62.1% in November of 2022). Not a catastrophe. But it has provoked much discussion about the factors that incentivize people to stop looking for work, or to search less vigorously than is required by the BLS for their unemployed label.
For decades now researchers and opinionators have been talking about the relatively low participation rates of males in the 25-54 age group. They’ve offered many explanations: low educational attainment, lousy job prospects, criminal records, disabilities, generous government benefits, and opioid addiction. For recent absences from the labor force, credible explanations include these: weak support systems for families with children, fear of contracting COVID and other diseases at work, perhaps a million extra retirements because of COVID, and the debilitating after-effects of contracting COVID–so-called long COVID. The estimates of how many people are staying home because of long COVID are extremely varied, ranging from several hundred thousand to 4 million! The latter seems unlikely. The labor force has not contracted that much. But there could be several hundred thousand people sidelined with long COVID.
Are Wages Stoking Inflation?
The Fed wants more people looking for work but not finding it easily. That’s a way to depress wages, and it is one key to the Fed’s conservative anti-inflation strategy. But are wages really “stoking” inflation, as one headline had it? Or are wages racing all the time to catch up? Including October of 2021 and running through October of 2022, after-inflation pay for average workers rose in 5 months (+1.3). It fell in 8 months (-3.9%). That does not sound like solid proof that rising employee pay is the ultimate driving force behind inflation. Other things must be as or more important. Shortages and supply chain problems are lessening but still important. And padded profits derived from high prices. Nobel economist Joseph Stiglitz claims that many important sellers feel that they can get away with large unjustified markups in an inflationary environment where consumers come to expect they will have to pay much more. And it’s a fact that oil companies and food giants, to name two examples, have been doing well in this inflationary environment. In some markets, there are few businesses and more of them with quasi-monopolistic pricing power.
But let’s end on a positive note. Overall, consumer price increases continue to ease. It did not seem like it when my wife and I did holiday grocery shopping last Sunday, but the Bureau of Labor Statistics reported on December 13 that prices rose only 0.1% in November. And the total increase for 5 months was just 1%. That’s a huge change from the preceding 5 months when prices jumped 4.6%.
Frank Stricker is on the board of the National Jobs for All Network and a member of Democratic Socialists of America. He wrote American Unemployment: Past, Present, and Future (2020). Deborah Schopp proofed the article. Mary Auth, June Zaccone, and Randy Jaye recommended articles that he learned from.