NCPA - National Center for Policy Analysis

Measuring Unemployment

January 7, 2004

On Friday, the Bureau of Labor Statistics announces the employment report for December. It likely will show a further decline in the unemployment rate -- the most politically potent of all economic statistics -- since initial claims for unemployment compensation have dropped sharply in the last several weeks, says Bruce Bartlett.

To understand what is going on, one needs to know that the Labor Department collects employment data in two different ways. The first, called the household survey, is based on monthly telephone interviews. The second, called the payroll survey, is based on actual employment records of domestic businesses.

For some time, though, there has been a growing divergence between the two surveys, says Bartlett:

  • The household survey has shown strong employment growth--an increase of more than 2 million jobs between Nov. 2002 and Nov. 2003 (including a statistical adjustment last January).
  • In the latest month it showed 138,603,000 jobs in the United States, but the payroll survey has shown anemic job growth over the same period; indeed, between Nov. 2002 and Nov. 2003 it shows a net decline of 235,000 jobs.
  • According to the payroll survey, there are only 130,174,000 jobs -- far fewer than shown in the household survey.

There are a number of technical reasons why the two surveys will always report different figures, says Bartlett. Among these are people with more than one job, who may be counted twice in the payroll survey, and the self-employed, who are counted only by the household survey.

Source: Bruce Bartlett, "Measuring Unemployment," National Center for Policy Analysis, January 7, 2004


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