Last week, the U.S. Bureau of Labor Statistics (BLS) released the Employment Situation Summary for December 2013. The report shows a decline in the unemployment rate to 6.7 percent, indicating an improving labor market; however, this national rate misses vital chapters to the labor market story.

According to the Household Survey, the number of unemployed persons and the unemployment rate were down by 1.9 million to 10.4 million and 1.2 percentage points in 2013, respectively. From the Establishment Survey, total nonfarm payroll employment increased by only 74,000 in December after 200,000 or more net jobs were added the previous two months, and job growth per month of 183,000 in 2013 was about the same as in 2012.

The average duration of unemployment remained at 37 weeks; however, longer unemployment durations (more than 5 weeks) made up a larger proportion of the unemployed from November to December. These long-term unemployed have been particularly hurt during the last recession and current sluggish recovery.

As documented in this BLS article, men experiencing long-term unemployment for the first time suffer from a sharp decrease in their average hourly wage the calendar year before becoming long-term unemployed, as shown in the figure below. Further, they face additional difficulties as their unemployment benefits are exhausted.


Interestingly, another article notes that individuals do not start looking for a job while receiving these benefits until 5 weeks before they expire, indicating that not extending these benefits-as being discussed by the U.S. Congress-might improve the labor market by incentivizing individuals to search more and find employment.

Despite a falling unemployment rate over the last year, the labor-force participation rate declined by 0.8 percent to 62.8 percent and the employment-population ratio was unchanged at 58.6 percent. Both of these indicators are far below their highs before the 2007-09 recession and tell a more complete story compared with the unemployment rate: some are better off, but many are still hurting.

Low-educated and low-skilled workers have suffered disproportionately. For example, as shown in the figure below, labor-force participation rate for those with less than a high school diploma decreased by 1.7 percentage points, from an already low level of 45.4 percent in August. Similar to November, the number of persons employed part time for economic reasons stayed at 7.8 million. These individuals were working part time because their hours had been cut back or because they were unable to find full-time work.


Job creation also varies among different sectors and industries. The job gains in December are concentrated in retail trade and wholesale trade; however, employment declined in the information sector. The average workweek for all employees on private nonfarm payrolls edged down to 34.4 hours in December. The average hourly earnings for all employees on private nonfarm payrolls edged up to $24.17, which is up 1.8 percent over the last year but only 0.6 percent adjusted for inflation.

Although job creation is better than rising unemployment, it’s critical that Congress begin taking steps to reduce the tax and regulatory burden on businesses so that the free market can go to work creating more and higher quality jobs. As the Texas Model has already proven, when you reduce the footprint of government, you unleash the power and potential of the private sector and the prosperity that comes with it.