Macroeconomics

“Discouraged Workers” are coming back into the labor market.

Data on employment levels for April and May 2015 look favorable.

Both months have shown increments above 200,000 jobs. However, the unemployment rate stubbornly hovers around 5.4%. In spite of U.S.’ GDP negative growth in 2015Q1, the U.S. job market seems to be growing at desirable pace. Although there is no clear answer for the persistent unemployment rate on 5.4%, the return of “Discouraged Workers” into the labor force might hold a clue. Accordingly to the U.S. Bureau of Labor Statistics (BLS), “over the past 12 months long-term unemployment has decreased by 888,000”, which might open a window for thinking on “Discouraged Workers” as a pressure preventing the rate to decrease further 5.4%. That pressure is hard to see inasmuch as we focus on month to month analysis and especially when we focus into a specific threshold for jobs gains.


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Discouraged Workers:

So, the attention should be brought to the current dynamics of “Discouraged Workers”. That segment of the labor market should inform economists about two connected aspects. First, it may shed light onto current expectations of workers, which also has an interesting impact on consumer spending. Second, by focusing on “Discouraged Workers” economists may explain such a persistent Unemployment rate. Some data from BLS reveal “discouraged Workers” are coming back to reenter the labor market, which constitutes an upward pressure strong enough for the Unemployment Rate to start dropping significantly. It is worth noting that “Discouraged Workers” are not count as unemployed persons since they had not looked actively for a job during the four weeks preceding the BLS’ Survey.

 

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Data wise, level of employment increased by 223,000 jobs in April 2015, and roughly by 201,000 in May. In April Job gains went mostly to Professional and Business Services, Health Care and Construction, the U.S. Bureau of Labor Statistics reported on June 2nd. Meanwhile, ADP reported on June 3rd that their estimates for May are 201,000 job added. Losses were on Mining in April accordingly to BLS, whereas ADP reported losses on Manufacturing in May 2015.

 

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Finally, data from the U.S. Bureau of Labor Statistics show that on April 2015 there were literally no changes in the Unemployment Rate when compared to the same month in 2014. By looking at major groups, percentages are still the same for Asian which have the lowest rate at 4.4%, followed by Whites which is at 4.7%; Hispanics are 6.9% and African Americans at 9.6% unemployment rate. Nonetheless, jobs added to the economy for the month of April 2015 were roughly 223,000. Most of those job gains went on to Professional and Business Services sector, Health Care Business, and Construction. Mining though experienced losses due to low oil prices.

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