The May 2014 Jobs Report: Digging Into The Details

by: Jeremy LaKosh

Summary

Many mainstream media outlets examine the unemployment rate, but there is more to the details.

Labor force participation remains depressed as number of adults not in the labor force has exploded.

If you go to college, you'll want to finish.

The youth in America remain grossly unemployed.

Over the past several years, the unemployment rate (currently at 6.3%) has been the key statistic to the health of the labor market. However, there are several other statistics measured by the government and maintained by the Federal Reserve that are more beneficial.

Highlights of the May 2014 Employment Report

The unemployment rate since January 2005

While the unemployment rate is popular, I find the U-6 rate to be more helpful when determining the health of the job market. The U-6 includes unemployed persons who have stopped looking for work and part-time workers who want to be full time employed. This is important to investors because the U-6 also represents a group who are likely under consuming in the economy. At some point, when the headline unemployment rate nears its long term potential (5 to 5.5%), I expect the U-6 rate to begin falling at an accelerated pace.

The U-6 unemployment rate since 2005.

Despite an improving labor market, fewer people are participating. The labor force participation rate has picked up some mainstream coverage of the past few years, yet it still gets overlooked.

Labor force participation

To illustrate this changing demographic, we should examine the number of adults no longer in the labor force.

To put the labor force participation problem into perspective, I wanted to take the year over year increase in number of jobs (non farm payrolls) and compare it to the year over year growth in adults not in the labor force.

This is particularly concerning to me. In the current era, an individual not working is in some way shape or form dependent on an individual that is employed. Whether it is a retiree on Social Security and Medicare or a college student living off of their parents, there are varying degrees of dependents among the adults not in the labor force. If this trend continues, the imbalances it creates could cause some difficulties in our economy.

When it comes to education, the gap between those with high school educations and some college has nearly closed. In short, those who have high school degrees are almost equally as employable as someone who starts college, but does not finish. This changes drastically among those who have bachelor's degrees. In short, it pay to finish college.

Another way to illustrate this is to chart the differences between each level of education. I did this for no high school to high school, high school to some college, and some college to college. Additionally, the purple line represents the difference in unemployment between those with high school and college educations.

Finally, I wanted to look at how my generation, the Millennials were performing in the job market thus far. Millennials continue to suffer the highest levels of unemployment as rates among ages 20 to 34 are much higher than those ages 35 and over (which in this case, have flattened to nearly identical).

Other Charts

I also wanted to include additional charts of statistics I've been following, but am offering no commentary of. I am more than happy to discuss these in the comments.

NOTE: All statistics for this article were retrieved by the Federal Reserve's Economic database and are seasonally adjusted statistics.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.