The US unemployment rate fell to 5.6 percent in December, 2014. The economy added almost 3 million jobs in the year, the best since 1999.

1. Economics for your Classroom from
Ed Dolan’s Econ Blog
Unemployment Falls to 5.6
Percent but Labor Market
Slack Remains
Jan. 10, 2015
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2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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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