Data Notes Part 1: Are Sideliners Coming Back Into the Labor Market?

November 3rd, 2012 at 4:40 pm

On shpilkes before the election so a good time for some data work.  Part 1, here, is a deeper dive in the job market.  Part 2 is a little bit of Sandy economics, with an emphasis on net vs. gross domestic product.

An interesting dynamic from the Household survey from yesterday’s report was the 0.1% tick-up in both the unemployment rate and the employment rate, a function of more people coming into the job market looking for work than actually found jobs.* Even though the numbers are large (578K growth in labor force; 410K growth in jobs), small ticks in the rates like these are statistically insignificant.  Still, the patterns are nevertheless worth exploring to see if there’s any sign that the improving labor market is pulling more folks into the labor force, a good thing given that the labor force participation rate has been depressed of late.

The flows data are helpful is this regard.  The first chart shows the flows into unemployment.  As you can see, the rate is falling largely due to people getting out of unemployment, i.e., moving from unemployment into either jobs or out of the labor force.  If you squint you can also see a bit of a downward move in people moving from employment to unemployment, a sign of diminished layoffs.  Also, as noted, last month’s tick up in unemployment from 7.8% to 7.9% was a function of more people looking for work.  In fact, the flows data show that people coming from out of the labor market into unemployment added 0.2% to the rate in October.


Source: CPS Flows data.

Do the flows data shed any other light on this question of folks coming off the sidelines and getting into the improving job market?

One suggestive trend would be if fewer of the unemployed were dropping out of the labor force altogether.  That’s certainly the paradigmatic person we have in mind here, right?  They’re stuck in unemployment, get discouraged with their lack of opportunities, and check out for a while.  Well, as the figure shows, after growing steeply in the downturn, over the past few months that group has been getting a bit smaller (solid line is a 6-month moving average).

Source: CPS Flows data; solid line is 6-mo moving avg.

So, some rough, early indication that if current trends continue, the improving job market will likely pull more folks back in.  Like last month, that may put some upward pressure on the jobless rate, but in the longer term, it’s a positive development.

*I was interested in whether there’s a correlation between this type of dual uptick in unemployment and employment rates and job growth.  It turns out that in months when this occurs, civilian employment grows 0.3% faster than otherwise, all else equal.  (I regressed the log change of civilian employment on its own lags and a dummy variable for months when both unemp and emp rates increased.)

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7 comments in reply to "Data Notes Part 1: Are Sideliners Coming Back Into the Labor Market?"

  1. Kenneth D. Franks says:

    “It (turns) out that in months that this occurs,”

    • Jared Bernstein says:

      fixed…thnx (i.e., thanks)

      • Rima Regas says:

        Are sideliners separate and apart from the 99ers? Do you differentiate?

        • Jared Bernstein says:

          Surely the 99ers are a subset of the sideliners.

          • Rima Regas says:

            It would be good to see you address the issues of the 99ers and ageism separately in the context of a discussion on the long-term unemployed and what to do to get them back to work.

            Also, as I am sure you are well-aware, many of them have exhausted all available avenues of relief. How are these people are surviving? What can we do to get the conversation on this issue?

  2. Brian F. says:

    Is there any possibility that the uptick in the participation is a result of people starting to look for work in expectation of ramping up ‘holiday-hires’?

    If that was the case then could be expect to see a dip post-holidays?

    • Jared Bernstein says:

      The data are seasonally adjusted to deal with those kinds of things–predictable seasonal patterns.