Confusing, but Not Surprising
The December jobs report disappointed on payroll employment, but slashed the unemployment rate. What’s up?
The most important fact is that two different surveys are used, and often they give conflicting signals.
‚óè The jobs number is calculated by asking employers (“payroll survey”) how many workers they have.
‚óè The unemployment rate is calculated by asking households (“household survey”) if they are out of work.
The payroll survey is consistent with steady, solid recovery.
‚óè While the top-line jobs growth — 103, 000 jobs — was a bit disappointing, the survey showed solid growth in hours worked and weekly earnings.
‚óè In addition, the November jobs were revised up to 71,000 from the disappointing 39,000.
The household survey was a confusing mix.
‚óè The number of people in the labor force fell by 260,000; discouraged workers are usually a bad sign for the labor market.
‚óè Employment in the household survey rose by nearly 300,000; good news by any standard.
‚óè The upshot of a smaller labor force and higher employment was the sharp drop in the unemployment rate.
The bottom line: Taken as a whole, the December report looked like a continuation of trend — not surprising. However, the confusing and anomalous drop in the unemployment rate is likely to reverse in the near term.
This originally appeared on National Review Online on January 7, 2011.