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Ed Dolan’s Econ Blog Unemployment Falls to 5.6 Percent but Labor Market Slack Remains Jan. 10, 2015 Terms of Use: These slides are provided under Creative Commons License Attribution—Share Alike 3.0 . You are free to use these slides as a resource for your economics classes together with whatever textbook you are using. If you like the slides, you may also want to take a look at my textbook, Introduction to Economics, from BVT Publishing.

Unemployment Rate Falls to 5.6
Percent  The US unemployment rate fell to 5.6 percent in December, a new low for the recovery.  The unemployment rate is the ratio of unemployed persons to the labor force. The labor force shrank by 273,000 for the month. The number of employed persons increased by 111,000 and the number of unemployed decreased by 383,000  The household survey on which unemployment data are based uses a different methodology from the establishment survey of payroll jobs Jan. 10, 2015 Ed Dolan’s Econ Blog

Broad vs. Standard Unemployment Rate
 The BLS also provides a broader measure of job-market stress, U-6  The numerator of U-6 includes  Unemployed persons  Marginally attached persons who would like to work but are not looking because they think there are no jobs, or for personal reasons  Part-time workers who would prefer full-time work but can’t find it  The denominator includes the labor force plus the marginally attached  U-6 fell to 11.2 percent in December, also a new low for the recovery Jan. 10, 2015 Ed Dolan’s Econ Blog

Payroll Jobs Continue Strong Growth
 The economy added a robust 256,000 payroll jobs in December  It was the eleventh straight month in which the economy added 200,000 or more jobs  October and November job gains were revised upward by a total of 50,000 Jan. 10, 2015 Ed Dolan’s Econ Blog

Yearly Job Gains Strongest Since
1999  Total payroll job growth over the past year was 2,983,000  That was the highest annual job gain since 1999 Jan. 10, 2015 Ed Dolan’s Econ Blog

Long-term Unemployment  Signs of
slack in the labor market remain  One is the level of long-term unemployment, which has remained very high by historical standards Jan. 10, 2015 Ed Dolan’s Econ Blog

Involuntary Part-Time Workers  Another
sign of slack is the large number of people working part time “for economic reasons,” that is, because they can only find part- time work or because their employers have cut their hours due to slack demand  The number of part-time workers has fallen, but it is much higher now than it was in 2008, the last time the unemployment rate was as low as 5.6 percent Jan. 10, 2015 Ed Dolan’s Econ Blog

Involuntary Part-Time Workers  A
third sign of slack is the large number of people who say they want a job, but are not working and are not counted in the labor force because they have not looked for work in the past 4 weeks.  These include:  Discouraged workers, who are not looking because they think there are no jobs available  Marginally attached workers, who have looked for work in the past year but not the past four weeks  People who want a job but have not looked in the past year Jan. 10, 2015 Ed Dolan’s Econ Blog

The Bottom Line: Labor Market
Strong but Room to Grow  The unemployment rate is now in the range of 5.25 to 5.75 percent that the Fed considers consistent with their mandate to maintain “maximum employment”  However, broader indicators of job slack suggest that there is no hurry to tighten policy. Significant room for growth remains before it will be time to tighten policy Jan. 10, 2015 Ed Dolan’s Econ Blog

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