[Excerpt]
Several economic indicators have shown that the labor market weakened from May 2007 to May 2008. The number of unemployed persons rose from 6.9 million to 8.5 million, and the jobless rate increased from 4.5 to 5.5 percent. Intuitively, a rise in unemployment might be expected to coincide with a decline in employment. However, total employment, as measured by the Current Population Survey (CPS), was little changed over this period. Recently released experimental data series on the flows of people between different labor force statuses help explain how unemployment increased

Bureau of Labor Statistics

English

[Excerpt] Several economic indicators have shown that the labor market weakened from May 2007 to May 2008. The number of unemployed persons rose from 6.9 million to 8.5 million, and the jobless rate increased from 4.5 to 5.5 percent. Intuitively, a rise in unemployment might be expected to coincide with a decline in employment. However, total employment, as measured by the Current Population Survey (CPS), was little changed over this period. Recently released experimental data series on the flows of people between different labor force statuses help explain how unemployment increased.June_2008_2.pdf: 51 downloads, before Oct. 1, 2020

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Why Has Unemployment Risen? Insights From Labor Force Flows

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6-2008 
Why Has Unemployment Risen? Insights From Labor Force Flows 
Bureau of Labor Statistics 
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Why Has Unemployment Risen? Insights From Labor Force Flows 
Abstract 
[Excerpt] 
Several economic indicators have shown that the labor market weakened from May 2007 to May 2008. 
The number of unemployed persons rose from 6.9 million to 8.5 million, and the jobless rate increased 
from 4.5 to 5.5 percent. Intuitively, a rise in unemployment might be expected to coincide with a decline in 
employment. However, total employment, as measured by the Current Population Survey (CPS), was little 
changed over this period. Recently released experimental data series on the flows of people between 
different labor force statuses help explain how unemployment increased. 
Keywords 
unemployment, labor market, Current Population Survey, churning 
Comments 
Suggested Citation 
Bureau of Labor Statistics. (2008). Why has unemployment risen? Insights from labor force flows. Issues 
in Labor Statistics (Summary 08-05). Washington, DC: Author. 
This article is available at DigitalCommons@ILR: https://digitalcommons.ilr.cornell.edu/key_workplace/1081 
Table 1.  Monthly flows to and from unemployment and average flows for selected months, June 2007-
May 2008 seasonally adjusted    
(Numbers in thousands)    
   
    
June 2007 ................................  1,743 1,747  1,805 1,582
July 2007 .................................  1,765 1,823  1,888 1,582
August 2007 ............................  1,723 1,767  1,935 1,596
September 2007 ......................  1,794 1,836  1,945 1,601
October 2007 ...........................  1,779 1,809  1,937 1,626
November 2007 .......................  1,714 1,877  2,025 1,704
December 2007 .......................  1,924 1,956  1,906 1,512
January 2008 ...........................  1,768 1,773  2,030 1,598
February 2008 .........................  1,789 1,731  1,916 1,813
March 2008..............................  2,057 1,990  1,974 1,662
April 2008 ................................  1,852 1,962  2,129 1,889
May 2008 .................................  2,045 2,315  1,854 1,665
June 2007-November 2007 
  average..................................  1,753 1,810  1,923 1,615
December 2007-May 2008 
  average..................................  1,906 1,955  1,968 1,690
Flows out of unemployment
Employed to 
unemployed (EU)
Not in the labor 
force to unemployed 
(NU)
Unemployed to 
employed (UE)
Unemployed to not 
in the labor force 
(UN)
Month
NOTE:  Flows of unemployment are based on the current month. Thus, the flow from employment to unemployment shown in 
the first row of column 2, for example, reflects a portion of the change in the official measure of unemployment due to transitions 
from employment over the May 2007-June 2007 period.   
 
Flows into unemployment
Why Has Unemployment Risen? Insights From Labor Force 
Flows
Summary 08-05/ June 2008    U.S. Department of Labor    U.S. Bureau of Labor Statistics
Several economic indicators have shown that the labor 
market weakened from May 
2007 to May 2008. The number 
of unemployed persons rose 
from 6.9 million to 8.5 million, 
and the jobless rate increased 
from 4.5 to 5.5 percent. Intui-
tively, a rise in unemployment 
might be expected to coincide 
with a decline in employment. 
However, total employment, 
as measured by the Current 
Population Survey (CPS), was 
little changed over this period. 
Recently released experimen-
tal data series on the flows of 
people between different labor 
force statuses help explain how 
unemployment increased.  
Each month, the Bureau of 
Labor Statistics (BLS) reports 
the number of persons employed, 
unemployed, or not in the labor 
force from data collected in 
the CPS. The net changes in 
these estimates are widely-used 
measures of the overall health 
of the labor market. Underlying 
these often relatively small net 
changes is a great deal more 
churning, as individuals move 
among the various labor force 
categories on a monthly basis. 
The data on labor force flows, 
available from February 1990 
forward, capture the movements 
of persons as they change their 
status between employment and 
unemployment, or enter or leave 
the labor market.1  Data derived 
from labor force status flows 
show that, on average, more 
than 15 million individuals, or 
6.5 percent of the working-age 
population, changed their labor 
force status in some way each 
month from June 2007 to May 
2008.  
Throughout most of 2007, the 
official measure of unemploy-
ment rose because of declines 
in the outflows from unemploy-
ment; that is, fewer unemployed 
persons were able to find em-
ployment (represented as UE 
in Chart 1), and fewer left the 
labor force (represented as UN 
in Chart 1). As a result, the share 
of those who remained jobless 
from month to month (UU) in-
creased from 47 to 51 percent, 
and the number of unemployed 
persons rose.2  (See chart 1.)
In contrast, inflows into un-
employment had little effect on 
the rise in unemployment during 
this period. The share of the em-
ployed that became unemployed 
(represented as EU in Chart 
2) remained relatively stable 
throughout both 2006 and most 
of 2007, at about 1.2 percent of 
total employment. Similarly, the 
flow of individuals from outside 
the labor force to unemployment 
(represented as NU in Chart 
3) also changed little in 2007, 
hovering around 2.3 percent of 
all persons not in the labor force. 
Thus, the more obvious reasons 
for an increase in unemploy-
ment--more employed persons 
losing their jobs or more entrants 
from outside the labor force be-
ing unsuccessful in their search 
for employment--did not con-
 1 The labor force status flow data are de-
rived from the CPS, a monthly sample survey 
of approximately  60,000 households.  For 
more information on labor force status flows, 
see Zhi Boon, Charles M. Carson, R. Jason 
Faberman, and Randy E. Ilg, “Studying the 
Labor Market with BLS Labor Dynamics Data,” 
Monthly Labor Review, February 2008, pp. 
3-16 and Randy E. Ilg “Analyzing CPS Data 
Using Gross Flows, “Monthly Labor Review, 
September 2005, pp. 10-18.  For more on the 
concepts and estimation of gross flow data, see 
Harley J. Frazis, Edwin L. Robison, Thomas 
D. Evans, and Martha A. Duff, “Estimating 
Gross Flows Consistent with Stocks in the 
CPS,” Monthly Labor Review, September 
2005, pp. 3-9. Additional information on the 
new research series of labor force status flows 
can be obtained at: http://stats.bls.gov/cps/
cps_flows.htm
2 To help discern the overall trends, the 
data presented in the charts were smoothed 
using 3-month moving averages. In each case, 
the official labor force, or stock, estimate was 
used as the denominator.
010
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Chart 1. The share of the unemployed that became employed, remained unemployed, or left the labor force, April 1990-May 2008, sea-
sonally adjusted 3-month moving average
to reduced flows out of unem-
ployment rather than increased 
flows into it. From December 
2007 to May 2008, however, 
the increased likelihood that em-
ployed individuals and new and 
returning entrants from outside 
the labor force would become 
unemployed largely contributed 
to the rise in unemployment. 
For additional information, 
contact Randy Ilg, an economist 
in the Division of Labor Force 
Statistics, Office of Employ-
ment and Unemployment Statis-
tics. E-mail: ilg.randy@bls.gov. 
Telephone: (202)691-5456.
Information in this sum-
mary will be made available to 
sensory-impaired individuals 
upon request. Voice phone: 
(202)691-5200. Federal Relay 
Service: 1-800-877-8339. This 
report is in the public domain 
and may be reproduced without 
permission.
  
tribute to rising unemployment 
throughout most of 2007.
From December 2007 to 
May 2008, however, the rise in 
unemployment occurred largely 
because of increases in the in-
flows. Over that time frame, the 
share of employed persons who 
lost or left their jobs (EU) rose 
by 0.2 percentage point to 1.4 
percent. The share of individuals 
from outside the labor force that 
became unemployed (NU) also 
rose by 0.2 percentage point, to 
2.6 percent. Most of the increase 
in the NU share occurred in May, 
when there was a sharp rise in 
the number of unemployed in-
dividuals from outside the labor 
force. (See charts 2 and 3.)  More 
evidence of the changes in flows 
into unemployment can be seen 
in the levels. As shown in Table 
1, flows into unemployment 
were substantially larger dur-
ing the December 2007 to May 
2008 period, compared with the 
6-month period from June 2007 
to November 2007.
As throughout most of 2007, 
the share of unemployed per-
sons who became employed 
(UE) continued to decline in 
2008, thereby contributing to 
the increase in unemployment. 
Partly mitigating this effect, 
however, was an increased like-
lihood that unemployed persons 
would leave the labor force (UN) 
altogether. That measure edged 
up in 2008, following a period 
of steady decline that began in 
mid-2006. (See chart 1.)
To some extent, the pattern of 
the UE outflow in the past year 
resembles that observed earlier 
in the decade. As shown in chart 
1, the share of unemployed per-
sons that became employed (UE) 
also trended down throughout 
2000; during the 2001 economic 
downturn, the decline was much 
more pronounced.
The patterns of inflows into 
unemployment (EU and NU) 
over the past several years look 
similar to the trends from the 
mid-1990s to the onset of the 
2001 recession. That downturn 
was marked by a sharp increase 
in job loss (the EU flow) and, 
to a somewhat lesser degree, 
by an increasing likelihood that 
entrants to the labor force would 
become unemployed (NU).  The 
combination of increased in-
flows to unemployment (EU and 
NU) and declining outflows (UE 
and UN) contributed to rising 
unemployment during the 2001 
recession. (See charts 2 and 3.)  
In summary, from May 2007 
to May 2008, the Nation’s job-
less rate increased by a full 
percentage point. The labor 
force status flows show that, 
throughout most of 2007, the up-
tick in unemployment was due 
70
6
5
4
3
2
1
Became employed (UE)
Remained unemployed (UU)
Left the labor force (UN)
P
er
ce
nt
Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb.
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008  
NOTE: Shaded regions represent recessions as designated by the National Bureau of Economic Research.  
SOURCE: Bureau of Labor Statistics, Current Population Survey.
00.5
1
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t
Chart 2. The share of the employed that became unemployed or left the labor force, April 1990-May 2008, seasonally adjusted 3-month 
moving average
3.5
3
2.5
2
1.5
1
0.5
0
Became unemployed (EU)
Left the labor force (EN)
P
er
ce
nt
Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb.
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008  
NOTE: Shaded regions represent recessions as designated by the National Bureau of Economic Research.  
SOURCE: Bureau of Labor Statistics, Current Population Survey.
Chart 3. The share of persons not in the labor force that became employed or unemployed,  April 1990-May 2008, seasonally adjusted 
3-month moving average
6
5
4
3
2
1
0
Became unemployed (NU)
Became employed (NE)
P
er
ce
nt
Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb. Feb.
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008  
NOTE: Shaded regions represent recessions as designated by the National Bureau of Economic Research.  
SOURCE: Bureau of Labor Statistics, Current Population Survey.


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Why Has Unemployment Risen? Insights From Labor Force Flows

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