February Job Creation – Do People Getting Unemployment Insurance Count in the Participation Rate?

Good News on the Job Front. There were 246,000 new jobs created in the private sector in February of 2013. At the same time, the government cut 10,000 jobs. Therefore, a net of 236,000 Additional Jobs were created.

According to the Wall Street Journal,

The US public sector once again shed jobs in February, losing 10,000 positions. Since June 2009, 742,000 state, local, and federal jobs have been eliminated, half of those in public education.

The slashing of government jobs is only likely to intensify with last week’s passage of $1.2 trillion in ‘sequester’ job cuts. According to the Congressional Budget Office, the imposition of the sequester will result in 750,000 job losses, and significantly increase the unemployment rate.

There was other news to go along with that. The January number was revised down according to the Bureau of Labor Statistics:

The change in total nonfarm payroll employment for December was revised from
+196,000 to +219,000, and the change for January was revised from +157,000 to
+119,000.

Therefore, we have 236,000 new jobs in February plus 23,000 additional in December less 38,000 overstated in January.

This all comes to a net of 221,000 more jobs.Which is 821,000 more jobs over the past 4 months.

I was talking with a friend about the unemployment rate. And he asked about the participation rate. He asked, what about the millions on unemployment insurance that are not seeking a job?

I immediately stated those people are counted as unemployed as they are required to search for a job to get unemployment insurance benefits. I have been thinking about my answer since that night and today thought I would research it. Here is what I found.

Before we go there, we have to understand the Participation Rate. Described by About.com:

Question: What is the Labor Force Participation Rate?

Answer: The labor force participation rate is the percentage of working-age persons in an economy who:

• Are employed
• Are unemployed but looking for a job

Typically “working-age persons” is defined as people between the ages of 16-64. People in those age groups who are not counted as participating in the labor force are typically students, homemakers, and persons under the age of 64 who are retired. In the United States the labor force participation rate is usually around 67-68%.

According to Quick MBA:

Limitations of the Unemployment Rate Measurement

The unemployment rate is not a perfect indicator of employment in the economy. The following are some reasons:

• Discouraged Workers – those who want a job buy have given up looking and therefore do not fall within the definition of the labor force. These persons tent to make the reported unemployment rate lower than it otherwise would be.
• Collecting benefits buy not job seeking – while a state uneimploment office may require a person to actively seek a job in order to collect uneimployment insurance benefits, some benefit recipients do not really want a job and do not put much effort into the job search. Due to this effect, the reported unemployment rate is higher than it otherwise might be.
• Underemployed – a person is counted as employed if he or she is working part-time; however, that person nonetheless may be seeking full-time work.

Corporations have sharply increased dividend payments to investors. TheNew York Times reported Friday that S&P 500 companies are expected to pay over $300 billion in dividends this year, a sharp increase over last year’s payout of $282 billion. American corporations bought back $117.8 billion in their own stock last month, the highest total on records going back to 1985.

“Corporations are flush with cash and that cash sitting in the corporate coffers is earning next to nothing,” Rob Leiphart, an analyst at Birinyi, told theTimes. “Companies have to do something with it.”

Just my Opinion...Based on Facts...Jeff Cameron