Household survey indicators show some improvement in 2004: fewer workers were unemployed in 2004 and employment rose over the year; however, Current Population Survey data indicate that the labor market recovery since the 2001 recession has differed from recoveries in other postrecession periods

Monthly Labor Review, March, 2005 by Teresa L. Morisi

Unemployment declined, and employment, as measured by the Current Population Survey (CPS), rose in 2004. Reflecting moderate employment growth, the employment-to-population ratio edged up, while the labor force participation rate was little changed over the year. The end of 2004 marked nearly 4 years since the beginning of the 2001 recession. Like many other economic indicators, most major household survey indicators showed very different patterns over this period, compared with the average for prior recession and recovery periods. (1) (See box on page 4 for an explanation of the CPS.)

The unemployment rate and the number of unemployed persons fell in 2004. Most of the major demographic groups shared in the decline. The labor force participation rate held about steady, and the employment-to-population ratio edged up. The overall unemployment rate was 5.4 percent in the fourth quarter of 2004, 0.5 percentage point lower than in the same quarter of 2003. The jobless rate was 6.1 percent in the third quarter of 2003; by the first quarter of 2004, it was down to 5.6 percent. The rate edged down to 5.4 percent in the fourth quarter of 2004. (See chart 1.) The number of unemployed persons, 8.0 million in that quarter, was down by about 500,000 from the final quarter of 2003. (See table 1.)

The civilian labor force aged 16 and older (the sum of employed persons plus unemployed persons) grew by 1.7 million in 2004. Labor force growth just about kept pace with population growth over the year. The number of employed persons, as measured by the CPS, increased by 2.2 million from the fourth quarter of 2003 to the fourth quarter of 2004, a slightly faster growth rate than that for the 16-and-older population.

Reflecting the modest expansion in the labor force, the labor force participation rate for all workers, at 66.0 percent in the fourth quarter of 2004, was little changed from the fourth quarter of 2003 (66.1 percent). The labor force participation rate is the proportion of the civilian noninstitutional population aged 16 and older who participate in the labor force. The leveling off of the participation rate in 2004 was an improvement over the downward trend that occurred from the start of the latest recession in the first quarter of 2001 through the end of 2003. The rate reached its most recent high, 67.2 percent, in the first quarter of 2001, before declining to 66.1 percent by the fourth quarter of 2003. (See chart 2.)

The employment-to-population ratio, or the percent of the civilian noninstitutional population aged 16 and older who are employed, edged up by 0.2 percentage point in the second half of 2004, to 62.4 percent at year's end. The ratio declined by 2.2 percentage points from the first quarter of 2001 to the third quarter of 2003 and then showed little definitive change until mid-2004. (See chart 2.)

Labor force participation by adult men (those aged 20 and older) decreased slightly in 2004, to 75.7 percent, while participation by adult women was little changed at 60.3 percent. Employment of men increased by 1.2 million in 2004, compared with a gain of about 900,000 for women. Men saw greater improvement in their jobless rate during the year, although the rate was slightly above that of women at year's end. The unemployment rate for adult men fell by 0.6 percentage point in 2004, to 4.9 percent, while the rate for adult women declined by 0.4 percentage point, to 4.7 percent. (See table 1.)

Among the major racial and ethnic groups, Hispanics experienced the sharpest increases in labor force and employment. Although Hispanics made up about 13 percent of total employment in the fourth quarter of 2003, the increase in their employment in 2004 accounted for nearly half of the over-the-year gain in total household survey employment. The employment gain among Hispanics (who can be of any race) elevated the group's labor force participation rate and employment-to-population ratio. Labor force participation among Hispanics last peaked in the first quarter of 2001, at 70.1 percent. The rate then trended downward to 67.9 percent by the fourth quarter of 2003 and was 68.5 percent by the fourth quarter of 2004. The employment-to-population ratio for Hispanics increased by 0.9 percentage point in 2004, to 63.9 percent, while their unemployment rate edged down to 6.7 percent. (See table 1.)

In 2004, there was little change in labor force participation for whites, and their employment-to-population ratio edged up. The unemployment rate for whites declined by 0.5 percentage point over the year, to 4.6 percent. Blacks saw little change in their rate of labor force participation or in their employment-population ratio in 2004. The jobless rate for blacks, at 10.8 percent in the fourth quarter of 2004, was about the same as a year earlier and remained more than twice the rate for whites. (See table 1.)

Among teenagers, the pattern of declines in labor force participation and in the employment-population ratio that had been going on since near the onset of the last recession did not continue into 2004.: From the most recent high point of 52.6 percent in the second quarter of 2000, the participation rate for teens fell steadily to a low of 43.5 percent in the fourth quarter of 2003, stabilized, and then increased slightly to 44.1 percent at the end of 2004. The employment-to-population ratio for teens was about unchanged in 2004, at 36.6 percent, after declining steadily from 46.0 percent since the second quarter of 2000. The teen unemployment rate increased slightly in 2004, to 17.1 percent at year's end. (See table 1.)