Monday, May 10, 2010

Unemployment figures increase as jobs creation increases

Although some of this was expected last month, the site SocImages points out and explains why unemployment figures are up, even as job creation is up.

One commenter - jfruh - pointed out that this might be due to population growth. Another commenter - Beelzebub - mentioned that he can't square why the U-3 and U-6 rates are both up this month over last month.

Taking these two points together, I did a small calculation:

Using the gist behind the comment by jfruh, let me do a quick-and-dirty calculation that incorporates population growth. First, I need to state some assumptions about this back-of-the-envelope (or napkin if you like) calculation:
  1. I will assume that the annual population growth rate of adults is 1% (roughly what the population growth rate was in 2008, as found by Google search).
  2. I will assume that the reported 2009 population was 307,006,550 (as found by Google search).
  3. I will assume that population growth is evenly distributed across months (i.e., that total yearly population growth can be divided by 12).
  4. I will assume that no one reaches retirement age (because I can’t find the growth rate of retirees).
  5. I will assume that only US citizens are working.

(2010 population – 2009 population)/12months = # adults added per month.

((307,006,550people * 1.01growth rate)-307,006,550people)/12months =

= 255,839 adults are added to the general work pool each month.

Of course, this estimate likely has really wide error margins (considering assumptions 4 and 5), so it is correct to say that the total jobs created are right now roughly on par — +/- a few percent — with population growth. Therefore a rise in both the U-6 isn’t too surprising given the relative difference between monthly population growth and jobs creation.

Kinda sucky, but hopefully somewhat explained?

UPDATE 1: jfruh apparently doesn't like my assumption #5, and apparently doesn't understand why I made the assumption:
This seems like a fairly fatal flaw. My understanding is that the only reason that the US workforce is increasing in numbers (unlike European and Japanese workforces) is because of immigration. Or do you mean “only legal US residents”?
True, I'll admit that it was the only one that I didn't explicitly explain, however, if he had taken time to look at how I was doing my estimation, I the that he should have been able to figure out why I was making that assumption. (Plus, it's a back-of-the-envelope calculation, for eff's sake!)

Still, I took time to ponderously explain the reasons to him:
I assumed that only US citizens are working because I only did a search for the US population and the US population growth. These numbers only include US citizens, and not legal and illegal workers. Therefore, the assumption needed to be made that only US citizens were working, given the numbers that I had.
Again, it’s a back-of-the-envelope calculation. I clearly stated my assumptions. I clearly stated that this means that the figure of 255,339 adults added per month has wide errors (especially given my assumption that only US citizens are working).
What more do you want from me? If you have the information about the growth rate in foreign workers in this country, then by all means let me know what it is, and I’ll add it to the calculation.
I await his response (hopefully with a monthly growth in foreign workers number).

UPDATE 2: I found a total projected immigrant population of 40,500,000 on Wikipedia. However, there was no indication of what percent of these people are expected to be "workers", or are competing for jobs...

UPDATE 3: Using the 40,500,000 immigrant population number, I decided to assume the same growth rate (1%) to be conservative with my estimate (since I'm using an projected estimate for the initial immigrant population). Therefore, assuming a 1% growth rate of this population, we have an additional 33,750 immigrant adults entering the workforce in April. Adding this together with the number above, you get 289,589 people; pretty close to the 290,000 jobs created number cited in the original story.

However, the addition of these 33,750 people to the total number doesn't change the fact that even the original value of 255,839 is within the same order-of-magnitude as the total number of jobs created. Therefore, jfruh's comment about immigrants -- although thematically salient -- doesn't move the value that significantly, since the amount of estimation error in the original calculation is already large enough to say that population growth is a major factor.

I think that (perhaps) when growth rates in the jobs market is marginally large, then population growth becomes a major factor affecting unemlpoyment; something that is exacerbated during a recession.

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