National Unemployment Rate Drops to 7.6%

The US economy added 88,000 nonfarm payroll jobs in March, and the national unemployment rate dropped to 7.6%.

Good, right?

Well, there is a reason why the markets gapped down today - the numbers were quite ugly, despite the fact that the unemployment rate dropped.

For starters, the nonfarm payroll jobs number was MUCH lower than anticipated. Goldman Sachs, Citi, Bank of America and others were expecting a number of at least 175k, which was much lower than the 88k number that was reported by the BLS (Bureau of Labor Statistics).

Now, let's get into the numbers for March.

The civilian noninstitutional population increased from 244,828,000 to 244,995,000, for a total increase of 167,000. This group of comprised of people 16 years of age and older who are not inmates of institutions and who are not on active duty in the Armed Forces.

The civilian labor force DROPPED from 155,524,000 to 155,028,000 in March, for a total decline of 496,000. This group is comprised of the people in the civilian noninstitutional population who currently have a job or are seeking a job.

Divide the civilian labor force (155,028,000) by the civilian noninstitutional population (244,995,000) and you are left with the civilian labor force participation rate, which clocked in at 63.3% in March. This number is down 0.2% from February and down 0.5% from this time last year.

The number of employed people in the United States fell by 206,000 in March to 143,286,000, while the number of unemployed people dropped by 290,000 to 11,742,000.

Divide 11,742,000 (total number of unemployed people in March) by 155,028,000 (total civilian labor force) and we are left with an unemployment rate of 7.6% (7.574% to be exact).

The big number, however, is this one - the number of people NOT in the labor force increased by 663,000 in March.

Now, just because you are no longer unemployed DOES NOT mean that you have found a job. If you stop looking for a job out of frustration, you are not considered to be employed or unemployed - instead, you are "not in the labor force". The number of unemployed people dropped in March, as did the number of employed people.

So why did the unemployment rate drop in March if less people were employed compared to February?

The answer? Many people fell out of the ranks of the "unemployed" and instead moved into the "not in labor force" group.

For instance - let's say that you have given up on finding a job because there just aren't any jobs available. You would be classified as a "discouraged worker" and wouldn't be officially included in the unemployment numbers.

Or, let's say that you haven't actively looked for a job in the past four weeks, but you want a full-time job and have looked for work in the past 12 months. This would qualify you as a "marginally attached worker", and you wouldn't be officially considered as "unemployed".

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There is a reason why the markets traded down after the BLS issued the March employment report - the numbers just weren't very good.

Source: BLS.gov

Filed under: General Knowledge