NCPA - National Center for Policy Analysis


April 23, 2007

No single government statistic has a weightier impact on public policy, the stock market and even the public mood than the monthly jobs number.  Consequently, these employment numbers have become unreliable, says the Wall Street Journal.

For instance:

  • The Department of Labor (DOL) undercounted the number of Americans working by just under one million from April 2005 through March 2006.
  • The original monthly reports suggested 1.9 million new jobs, but the final revisions were corrected to 2.85 million.
  • That means about one of every three new jobs wasn't detected by the statisticians at the DOL.

This year the great jobs undercount has continued, says the Journal:

  • An analysis by economists at First Trust Advisors in Chicago has found that from April 2006 through February 2007 (the latest revised numbers available), the federal government originally reported almost one-half million fewer Americans working than actually were working.
  • On average, the first monthly forecast for this period was 113,000 jobs; the second report from a month later counted 138,000 new jobs; and the final revision was 157,000 jobs.

These lowball estimates are eventually corrected, but the initial mistakes can have political and policy consequences, says the Journal.  An official jobless rate that is higher than the real rate can lead Congress to spend more on jobless benefits, for example, or contribute to protectionist pressure against foreign goods.

It can also influence close elections, because the media tend to play up jobs news. In retrospect, we now know that John Kerry's claims of a "jobless recovery" in 2004 were fiction, says the Journal. With the latest revisions, job growth in this expansion has been similar to the pace of the 1990s expansion.

Source: Editorial, "The Jobs Miscount," Wall Street Journal, April 23, 2007.

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