Statistics: What Unemployment Numbers Signal
Updated 2/12/20, Posted 5/14/13
By Jean Regan, President & CEO
In this seven part series, I’m focusing on different commonly referenced indicators and explaining their impact. These indicators are (1) the unemployment rate, (2) the inflation rate, (3) housing sales and starts, (4) the Federal Reserve’s Monetary Policy, (5) retail sales, (6) ISM non-manufacturing and manufacturing index, and (7) GDP growth.
Every week in the news, we are bombarded with more economic statistics. One week, the unemployment percentage looks favorable. The following week, more people are filing for unemployment claims than was anticipated. One month the manufacturing index signaling growth ticks upwards; the next month it dips downwards.
Productivity goes up; productivity goes down. The reported inflation numbers show that inflation is negligible, yet my food bill is significantly higher than it was a year ago.
What are we to make of all these confusing statistics? What do they mean? How are you impacted by them? For the next several weeks, I’d like to identify an individual economic statistic, define it for you, and let you know how I (as a business owner) use it in terms of making business decisions.
This week, let’s focus on unemployment numbers.
The unemployment rate is a measure of the prevalence of unemployment and is calculated as a percentage by dividing the number of unemployed individuals by all individuals currently in the labor force. I went to the US Department of Labor Bureau of Labor Statistics site and their February 11, 2020 posting said this: "Job openings fell to 6.4 million on the last business day of December. Hires and separations were little changed at 5.9 million and 5.7 million, respectively."
What the unemployment statistic doesn’t take into account is that people are moving out of the work force. Some are quitting the job search, others are retiring, others are moving from full-time to part-time, and yet others move into disability status.
This is called hidden unemployment and many believe this is a huge problem in the US and our unofficial published unemployment statistics are much higher.
What unemployment means to me, as a business owner:
When unemployment is high, we have more applicants vying for the same job. We can find employees with skill sets we are looking for. We can be more patient in taking the time to find a qualified associate.
When unemployment is low, we may not be able to find an individual with the exact skill set we are looking for. We may have to hire individuals and train them in the skill sets we are looking for. The hiring cycle is much shorter, as a potential candidate may be talking to several interested companies. If you wait to make an offer, they may take another job.
What this means for job-seekers:
Just as the mantra in purchasing real estate is “Location, Location, Location”, my advice in finding a job is to select the right company. What does this mean? Look for a company which values its associates. Look for a company which values associates just like it values its customers. Look for a company which invests in its associates.
What to do?
Whether your seeking employees or jobs, it can pay to get creative. A close friend of ours just landed his dream job by taking a few days off of work to attend a conference here in Chicago where his dream company had a booth. He invested in the travel and time to meet these people face-to-face. Just a few weeks later, he nailed the job and moved to Austin.
More Advice: Go above and beyond what most employers or job-hunters are doing (sitting on their computers and posting jobs or sending out virtual resumes). Use your network.
Like all cycles, this one will move on and if you don't like where we're at, fear not—it will change.