Decrypting Employment Stats for Time Lines

The U.S. Department of Labor has two monthly surveys: the household survey and the establishment survey, which also is called the payroll survey. These surveys have two different objectives. The household survey estimates the employment status of the entire population and makes some demographic assessments, while the establishment survey assesses the distributions of employment among various industry groups and governments.

In addition to the two monthly surveys, on a weekly basis initial unemployment claims and continuing insured unemployed are reported. This article examines the relationship of data from all of these surveys to the end of recessions.

Total Unemployment

The following graph shows how the number of unemployed has varied since the late 1940s. We see that unemployment peaks have occurred at the official end of recessions or after the end.

Unemployment Since 1940s U.S. Department of Labor

The following table shows the interval between the end of each recession and the peak in the number of unemployed workers.

Peak in Unemployment U.S. Department of Labor

Of the last 10 recessions, we have had eight showing unemployment peaks nearly coincident with, but never preceding, the end of the recession. Twice unemployment has continued to rise for more than a year after the recession ended. The last two recessions witnessed a long delay before unemployment started improving, is this a new normal?

However, it isn't new news to most that if you wait for unemployment to decline to make investment changes for the end of a recession you may miss a significant opportunity. However, the ending date for a recession is often officially determined by the National Bureau of Economic Research, or NBER, many months after the fact. Thus, unemployment peaks have often occurred well before the end of a recession has been declared, although not for the last two recessions. A peak in unemployment, therefore, can be a valuable tool to confirm that a recession has ended before an official announcement.