Underemployment in the United States

Many students who graduated during the Great Recession and over the last few years were unable to find jobs for which they were trained. The so-called underemployed workers are employed in an occupation below their level of qualification. For example, a graduate with a Bachelor’s Degree in economics who is waiting tables or working at a retail store is considered underemployed. Chmura calculates a proxy for underemployment by comparing educational attainment supply and demand in a given labor market at various skill levels.

Some metropolitan statistical areas (MSAs) around the country have a higher percentage of underemployed than others.  MSAs in Massachusetts, the District of Columbia, and California top the list of regions that possess a surplus of high-skilled workers in the latest update to Chmura Economics & Analytics’ underemployment dataset.

Interactive FeatureUnderemployment is a useful supplement to other indicators of labor market health. The traditional measure of unemployment from the Bureau of Labor Statistics does not distinguish between workers who are employed in a position aligned with their skills and education. Workers who are underemployed and not necessarily contributing as much as they could to the labor market, represent potential lost productivity, wages, and tax revenue for the region.

High underemployment in a region may also be a positive measure, reflecting the desire of workers to live in a particular area (like the scenic Cape Cod waterfront of Barnstable Town, Massachusetts) and/or higher standards for occupations in certain regions (such as for computer occupations in San Francisco).

Chmura’s underemployment proxies for MSAs, along with more detailed methodology and definitions, are available on our website and at the county, MSA, and state levels within JobsEQ®.

Research assistance for this post was provided by Patrick Clapp.

Using Job Postings to Measure Employment Demand

An article in the Harvard Business Review recently touched on Why Job Postings Don’t Equal Jobs, explaining that these data should be considered unreliable when trying to estimate job demand under various circumstances. Specifically:

  • Professional-type jobs are more likely to be posted online
  • Companies often advertise the same job multiple times, and
  • For job boards that require payment to post openings, firms may post more openings when there is a discount offered, whether or not they currently need those workers.

A few additional concerns were not mentioned in that article:

  • Some jobs are posted for legal reasons, such as firms sponsoring foreign workers for permanent residence (green card). Firms have to “test” the labor market by advertising those jobs even though they have hired a foreign worker already and have no intention of hiring someone else. Most of these cases are professional jobs as well.
  • The methods used to collect and clean online postings and estimate trends over time can be problematic.

The methods used to obtain and clean job postings data are varied and are typically closely guarded. For an objective review of several providers of these data, see the Vendor Product Review:  A Consumer’s Guide to Real-time Labor Market Information. Vendors scrape and spider job boards automatically and manually, code results into anywhere from 5 to 70 data elements, and deduplicate 60 to 90 percent of job ads. Based on around 4 million job postings daily, and assuming ads are only duplicates (not triplicates, etc.), that could mean anywhere from 1.2 to 1.8 million job postings are thrown out as duplicates every day.

Methods for analyzing the postings range from keyword searches to natural language processing and text analytics, but small details in methodology can have outsized effects on what gets counted. Take, for example, the difference between searching job postings on Indeed.com for registered nurses using different keywords such as “rn,” “registered nurse,” or “registered nurses.”

Job Trends from Indeed.com

Source: Indeed.com

This simple search raises a few questions:

  • Which keyword or collection of search terms best represents job postings for registered nurses?
  • Do the keyword results change by region? 
  • In another field, how might different data providers distinguish between R, the statistical programming language, and H.R. (Human Resources) or R&D (Research & Development)?

The answers to these types of questions will likely vary by data provider and should be considered before relying on the data for analysis.

Many providers make a concerted effort to improve collection, parsing, and deduplication methods; however, significant changes in methodologies can cause additional confusion and inconsistency in job advertisement data if used in analysis over time. Changes to the deduplication methodology used by The Conference Board, for example, resulted in revisions lowering estimates by about 460,000 jobs for every month in the series. The overall curves were fairly consistent, showing similar shape and trends, but anyone relying on the actual levels for measuring or forecasting employment demand could find old estimates too high by hundreds of thousands of jobs.

Impact of revisions, HWOL data series

In summary, the use of online job postings data to glean labor market information is promising, but there are a number of concerns that suggest these data are not sufficient replacements for traditional labor market data.

Research assistance for this post was provided by Patrick Clapp.

Tracking Liftoff: When Will the FOMC Raise the Federal Funds Target?

Market watchers are anxiously awaiting the outcome of the Fed’s meeting this week.

The press release and conference at the conclusion of the June 16-17 Federal Open Market Committee (FOMC) meeting might provide insight into when they will start to increase the federal funds rate target.

Comments made by Federal Reserve officials prior to the meeting, however, supply some insight into the collective mind of the FOMC.

The graphic below allows you to track how FOMC members have adjusted their estimates of liftoff. Click on the photo of an FOMC member to see that person’s view about the timing of liftoff, how the view may have evolved since last December, and key quotes that are hyperlinked to full speeches.

The photos of voting members are shown in circles with nonvoting members in squares. Key economic indicators are presented on the right (where the data shown represent the original estimates that were available at the time of the meeting rather than more recent revisions).

Although it looks like liftoff is off the table for this week, it is still possible by year’s end. As many Fed officials say, the exact time of liftoff is data dependent. The graphic shows that it’s important to track FOMC member comments because not everyone interprets the data the same way.

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Research assistance for this post was provided by Claire Brunner.

Economic Impact: When will the Fed raise rates?

After six years of an essentially zero percent federal funds rate target, it looks like rates will begin increasing soon.

The timing of that rate increase is based on the current and future strength of the economy.

However, we get clues about when the rate increase will occur from speeches and interviews of voting members of the Federal Open Market Committee, which is the Federal Reserve’s policy-making committee.

Federal Reserve Chair Janet Yellen reaffirmed in a speech about 10 days ago that she believes it will be appropriate to raise rates this year.

“If the economy continues to improve as I expect, I think it will be appropriate at some point this year to take the initial step to raise the federal funds rate target and begin the process of normalizing monetary policy,” she said in her speech.

But she is not the only voting member.

For instance, Fed Governor Daniel Tarullo takes an opposite view of when to raise interest rates.  “In my view, it likely will not be appropriate to begin raising the federal funds rate until sometime in early 2016,” he said in a presentation May 4.

Richmond Fed President Jeffrey M. Lacker, a voting member this year of the FOMC, was quoted by Reuters last week saying, “What I’ve said is that a case might be strong in June. I still think that’s possible. But as I said . . .I haven’t made up my mind yet about June.”

The upcoming rate increase is good news.

It means that the FOMC members believe the economy is strong enough to continue growing with higher interest rates. Yet, policy makers also are concerned that a premature rate increase could dampen the recovery if it is still not strong enough.

The rate hike also is great news for savers. When the Fed raises the federal funds rate target, which is the rate that banks use when they borrow from each other on an overnight basis, banks then increase the rate they pay depositors.

The iMoneyNet money fund average, the seven-day average yield over all taxable money market funds, is currently  0.02 percent in the nation. Late in 2008, when the federal funds rate target was 0.50 percent, the money fund average was 1.22 percent.

Some analysts believe that the federal funds rate target will eventually get back to a more normal rate of 3 percent over the next two years. If historical relationships hold true, savers will see a money fund average around 3 percent as well. This would certainly help retirees who are on a fixed budget.

On the other hand, borrowers will find that it costs more to get a home mortgage or to use a credit card.

The interest rate on many loans is tied to either the prime lending rate or LIBOR. The prime rate is currently at 3.25 percent and the one-month LIBOR is 0.18 percent.

In 2008, we saw how quickly the prime and LIBOR rates fell when the Fed dropped the federal funds rate.

While the federal funds rate target stood at 3 percent in February 2008, the prime rate was 6 percent and the one-month LIBOR rate was 3.14 percent. It dramatically changed by November, when the federal funds rate target was 0.50 percent and the prime rate was 4 percent and the 1-month LIBOR rate was 1.44 percent.

Longer-term interest rates also typically rise with increases in the federal funds rate, but are more dependent on inflation expectations.

The average rate for a 30-year fixed mortgage was 3.87 percent as of Thursday, up from 3.84 percent a week earlier and matching the level at the end of 2014, mortgage lender Freddie Mac said. The average 15-year rate increased to 3.11 percent from 3.05 percent.

A forecast from Chmura Economics & Analytics expects the 30-year fixed mortgage rate to rise to 6 percent by the end of 2016.

For now, it looks like higher interest rates are still possible by year’s end.

As many Fed officials say, the exact time of liftoff is data dependent. But it’s important to track FOMC member comments because not everyone interprets the data the same way.

Tracking Liftoff: When Will the FOMC Raise the Federal Funds Rate Target?

After six years of an essentially 0% federal funds rate target, liftoff is just around the corner.  But, based on comments made by Federal Open Market Committee (FOMC) members, that corner keeps moving.

Before the January FOMC meeting, we found that of the fifteen FOMC members, three were looking for a rate hike in the first half of 2015 and one was saying it would occur in the second half. Prior to the March meeting, six members were looking for a rate hike in 2015. Prior to the April FOMC meeting, ten seemed in favor of a rate hike in 2015.

Economic data in April suggested U.S. economic growth slowed in the beginning of 2015. Of the six monetary-policy related public interviews or speeches by FOMC members that were delivered after the April FOMC meeting, four members continued to look for a rate hike in 2015 and the other two believed a rate hike wouldn’t be appropriate until 2016.

The graphic below, which will be updated for upcoming meetings, allows you to track how FOMC members have adjusted their estimates of “take off.” The photos of voting members are shown in circles with nonvoting members in squares. Key economic indicators are shown on the right (where the data shown represent the original estimates that were available at the time of the meeting rather than more recent revisions).

Below the graphic is a table highlighting each FOMC member’s view on the timing of liftoff with a link to the full text of the corresponding speech or interview.

For now, it looks like liftoff is off the table for June but still possible by year’s end.  As many Fed officials say, the exact time of liftoff is data dependent. But the graphic shows that it’s important to track FOMC member comments because not everyone interprets the data the same way.

Subscribe to our RSS feed to receive notifications when the graphic is updated.