Selected graphs and summaries from the Federal Reserve Bank of Atlanta "Financial and Economic Highlights", released February 8, 2012. The highlighted graphs are "Contributions to Change in Nonfarm Payroll Employment", "Diffusion Index of Private Nonfarm Payrolls", "Unemployment and Labor Force Participation Rates" and"U3 and U6 Unemployment Rates", respectively.
Contributions to Change in Nonfarm Payroll Employment:
The January payroll employment report indicated that the U.S. economy added 243,000 jobs over the month.
Nonfarm payroll employment increased by 243,000 and private payrolls increased by 257,000 in January, surpassing consensus expectations of 145,000 and 163,000, respectively. Payroll data from January 2007 onwards were revised as a result of annual benchmarking and updating of seasonal adjustment factors. Data prior to 2007 were also revised slightly as a result of the implementation of NAICS 2012 (which replaced NAICS 2007), but these revisions were minor.
November and December’s payrolls were revised up by 57,000 and 3,000, respectively. The bulk of the upward revisions were in professional and business services and goods-producing industries.
The largest monthly employment gains were in professional and business services, leisure and hospitality, and manufacturing, adding a combined 164,000 payrolls. Construction as well as education and health services experienced job gains of 21,000 and 36,000, respectively. The temporary help services component of professional and business services has been increasing employment since July 2011, and added 20,100 jobs in January 2012.
The only sectors to cut payrolls were information, financial activities, and government.
Diffusion Index of Private Nonfarm Payrolls:
The spread of job growth across industries improved in January.
In January, the diffusion index increased by 1.7 percentage points. Given improving monthly payroll numbers, an increasing diffusion index suggests that improvement in the economy is relatively widespread and that payroll gains are not limited to only a few sectors. The index has experienced a notable increase of 8.5 percentage points over the last two months. Its current reading is actually higher than its January 2007 level of 61.7 percent.
Unemployment and Labor Force Participation Rates:
The unemployment rate decreased to 8.3 percent in January, and the labor force participation rate decreased to 63.7 percent.
The January household survey results have an important caveat: January 2012 data include updated population estimates.
The U.S. Bureau of Labor Statistics (BLS) did not update the official statistics for December 2011 and earlier, which makes comparisons between December 2011 and January 2012 difficult.
However, the BLS did publish tables in the press release showing what the statistics for December 2011 would have been if it had used the new population estimates. The analysis here provides comparisons with both sets of December 2011 data.
The unemployment rate decreased by 0.2 percentage point, to 8.3 percent in January 2012. The official as well as the revised unemployment rate estimate for December 2011 is 8.5 percent, which means that the drop in the unemployment rate is not the result of updated population estimates.
The labor force participation rate change is more nuanced. When compared with the official December 2011 rate, it would appear that the rate has declined by 0.3 percentage point (to 63.7 percent), a large decrease.
However, BLS maintains that the rate would have been 63.7 percent in December 2011 (instead of 64 percent) had it used the new population estimates, the implication being there was no change in the rate from December to January.
However, even with no change, the participation rate remained at its lowest level since February 1982.
U3 and U6 Unemployment Rates:
The U6 unemployment rate, while still very high, has been declining recently.
Given its nuanced nature, the unemployment rate can be calculated using different criteria; BLS publishes six different unemployment rates, U1 to U6.
Out of those six, two are of major interest: the U3 and U6 rates. The U3 unemployment rate is the headline rate that everyone is familiar with. However, some economists believe that the U6 unemployment rate is actually a more robust measure of unemployment as it captures marginally attached workers as well as people who are working part time because they can’t find a full-time job.
As is apparent from the chart above, both the U3 and U6 rates shot up during the recession.
However, the U6 rate actually had a bigger level increase (7.7 percentage points) during the recession than did the U3 rate (4.5 percentage points).
Both are still very high, but both have been declining since September 2011; the U3 rate has decreased by 0.7 percentage point while the U6 rate has decreased by 1.3 percentage points. This suggests that the drop in the unemployment rate is not simply driven by mechanical factors (like a decrease in the labor force).
Technical note: Marginally attached workers currently want a job and have looked for work within the last 12 months. This primarily includes discouraged workers (those not currently looking for work because they believe no work is available given their circumstance), and persons not working as a result of family responsibilities, ill health, or school.