An Unfortunate Employment Turn

A dour employment rate can have several consequences for credit union if the trend continues.


The Department of Labor regularly releases an unemployment rate that reflects how many people have searched for jobs in the past four weeks and that fluctuating figure garners much media attention and regularly drives stock market turns.

The unemployment rate fell to 7.8% in September, triggering feelings of optimism as it unexpectedly tumbled below the 8.0% mark for the first time since January 2009. But that figure reflects only the number of people looking for jobs as a percentage of the total workforce – it doesn’t paint an accurate picture of the actual workforce size.

For that figure, the Bureau of Labor Statistics uses the employment-population ratio, which is not at rosy as the unemployment rate. It reveals that only 58.7% of the U.S. adult population has a job – close to the lowest level since the 1980s, according to CNN.

"The employment-to-population ratio is the best measure of labor market conditions and it currently shows that there has been almost no improvement whatsoever over the past three years," Paul Ashworth, chief North American economist for Capital Economics, was quoted as saying in a CNN article.

For credit unions, that means strategic planning season should include some anticipation of ongoing financial struggles from members who may be trying to secure regular income. If a employment-population ratio continues to shrink, credit unions may face growing delinquency and should perhaps prepare for more charge-offs and foreclosures.

But the poor employment scene is also one that should credit unions to extend their more consumer-friendly services to the unemployed, who may be tempted to turn to payday lenders or other alternative financial institutions for an immediate – but potentially harmful – financial boost.


Oct. 19, 2012


  • Does the BLS actually take into account the portions of the adult population who are not looking for employment due to age (already retired), the disabled (unable to work) and the wealthy who don't *need* to work? What about those who have started/hold jobs in the gray labor market (such as day laborers and those in illicit trades), or those in prison? It seems to me that if they use a ratio of those employed versus all of those in the adult population, and *don't* take the groups mentioned above into account, they're courting a data error you could toss an asteroid through!
    Diane R