Demystifying Idaho’s Unemployment Rate

Idaho’s seasonally-adjusted unemployment rate was 2.6 percent for November 2018, the most recent data available. This is the 15^th consecutive month that Idaho’s rate has been at or below the low rate of 3 percent. But what does 3 percent employment mean? Three percent of what?

The answer to what the unemployment rate means and how it’s determined is best understood within the context of the numbers that are also reported with it each month. The unemployment rate is a figure that measures the unemployed segment of the labor force, which is itself a subgroup of the civilian population and one of a few terms that describe different states of people in the population and their relationship with work and the economy.

The major subgroups of the larger civilian population include the labor force, employed and unemployed. The relationship among these various groups provide the basic measures of the participation rate and unemployment rate.

The civilian population calculated by the U.S. Bureau of Labor Statistics is slightly different than the total population reported by the U.S. Census Bureau. This civilian population – its technical name is the civilian noninstitutionalized population – includes those in the United States who are 16 years and older that are not in the military or institutionalized. It makes no distinction regarding fitness for work due to health or the capacity to work. It is from this number that the all of the labor force data points are determined.

Data on Idaho’s civilian population as reported by the U.S. Bureau of Labor Statistics started in 1976 with an annual average of 589,300. It has grown 2.3 times this amount in three decades – November 2018’s level stands at 1,347,267. Comparing Idaho civilian population with its total population as reported by the U.S. Census Bureau, shows Idaho’s civilian population is lower than total population and has grown in proportion to the overall population — from 68.8 percent in 1976 to 75.8 percent by 2017. More people and a larger proportion of the population is old enough to work, and the proportion of those under 16 or in the military has shrunk in relation to everyone else since 1976.

The next number to consider, is if those who are in the civilian population are working or looking for work if they are unemployed. This subgroup of the civilian population is called the labor force. Idaho’s labor force has grown from its 1976 average of 373,500 to 854,243 in November. This is also about 2.3 times growth over three decades. Figure 1 compares the civilian population with the labor force. Note how the labor force changes at different rates than the civilian population, and the space between them has grown since 2006 in particular. The relationship between these two lines is measured and described by the participation rate.

The percent of the civilian population that is in the labor force is called the participation rate. It is the proportion of the labor force (those employed or looking for work if unemployed) as a subgroup to the civilian population. As of November 2018, it stands at 63.4 percent, which means that 63.4 people for every 100 in the civilian population are working or trying to find work. This rate matches the 63.4 percent average for 1976. This is not the result of a number that has changed little in 32 years, but has grown to as high as a 70.8 percent average for 1998. The gradual reduction of 7.3 points in the participation rate since then has a number of causes, the biggest include baby boomers retiring from the labor force and youth delaying getting jobs. (See Figure 2).

The next subset after the labor force is those who are employed. This is the measure of those counted in the civilian population and labor force who are working. As of November 2018, there were 831,851 people employed in Idaho, 2.4 times the 1976 average of 352,700. Figure 3 tracks closely with the labor force, except in periods of recession where the gap between the two increases. This gap is the number of unemployed. In Figure 4, the unemployed are quantified by the yellow line, and the white gap is colored with the same color to reinforce that the gap between labor force and employed is the unemployed.

This gap is what the unemployment rate measures. It is the percent of labor force that is unemployed. These concepts are broadly applied without distinction to the attributes of people in the civilian population, why or why they are not in the labor force, the type of jobs they have if they are employed or why they may be unemployed. While statistics exist that describe those attributes, they come from different reports outside of the monthly labor force statistics.