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Mixed numbers in January’s job report

Marketplace Staff Feb 4, 2011

Mixed numbers in January’s job report

Marketplace Staff Feb 4, 2011


Bob Moon: The new monthly jobs report came out this morning and it left a lot of economists puzzled. Employers added only 36,000 jobs in January and yet the unemployment rate fell from 9.4 down to 9 percent. To try to explain that drop, we’ve called on Heidi Shierholz. She’s a labor market economist at the Economic Policy Institute in Washington, D.C. Heidi, thanks for guiding us through this.

Heidi Shierholz: Thanks for having me.

Moon: Isn’t this a strange report? You’ve got one survey showing so few jobs being added, yet on the other hand the unemployment rate falls so much. How can that be?

Shierholz: It’s actually a very good question. This is indeed a confusing report. We are actually going to have to wait for next month’s data to really get a handle on what happened in January.

Moon: So help me understand what seems to be the impossible here: What’s the cause of this confusion?

Shierholz: The underlying cause of this confusion is that the government actually collects two different surveys. One survey, they go out and ask businesses: How many people do you have on payroll? And another survey, they go out and ask people: Are you employed right now? And usually, those surveys sort of move in tandem because they’re both getting at two sides of the exact same coin: How many jobs are out there in the economy. Every once in a while you hit a month where those two surveys, it’s difficult to reconcile them. January was one of those months. When you ask businesses how many people do you have on payroll, there wasn’t very much growth in the business survey. But when you ask people do you have a job, there was a lot of employment growth in that household survey. The rule of thumb, when you do have a difference like that, is you go with what the establishment survey says. And the reason that is is because the establishment survey is a survey of 400,000 businesses every month as opposed to the survey of households, which is a survey of 55,000 households. One thing that was really sort of quirky about the January data is that there were big snowstorms in the Midwest and the Northeast in the very week that businesses were asked how many people you have on payroll.

Moon: OK. Now I’m still scratching my head here, though. We’re seeing this huge pool of missing workers. One economist joked that maybe they were abducted by aliens or something. But in all seriousness, where did the rest of the unemployed go?

Shierholz: The improvement in unemployment that we saw in the household survey actually had nothing to do with increasing the pool of missing workers. In that survey, it really did show that unemployment declined because people got jobs.

Moon: OK. Now I know that these figures are always revised, but is January an especially difficult month for calculating unemployment?

Shierholz: Yeah. There’s a lot of revision thrown into the mix in January. So you get these big population revisions in the household survey. In the establishment survey, they do this big benchmark revision that shows a much larger, comprehensive, practical census of businesses that happen in March of every year. So one of the things that we learned when the data came out is that the economy actually had around 500,000 fewer jobs last December than we thought it did. Now, that didn’t impact the month-over-month changes, but it does show when this data comes out that the Great Recession actually took half a million more jobs than we previously thought it had.

Moon: What I’m hearing from you and other economists is a great big to be continued, huh?

Shierholz: That’s right. It remains to be seen what the real underlying story is to this. Next month I’m hoping and praying that we won’t have big snowstorms during the reference week, so we can get a really clear read for February and get a much clearer idea of just how fast the labor market is improving at this point.

Moon: Heidi Shierholz is a labor market economist at the Economic Policy Institute in Washington, D.C. Heidi, thanks for joining us.

Shierholz: Thank you very much for having me.

Moon: We put together a cool graphic that illustrates the U.S. labor market by those who are employed, unemployed or not looking.

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