Jobs Reports Show Mixed Message - Which Is Right?

The Labor Department reported today that the unemployment rate dropped to 9.7% today. At the same time, nonfarm payroll showed a decline of 20,000 jobs versus an anticipated gain of 25,000. What's going on? Which report is right?

The answer is that both might be right. The reports come from different data souces. The unemployment figures come from a survey of households. This shows that:

  • In January, the number of unemployed persons decreased to 14.8 million,and the unemployment rate fell by 0.3 percentage point to 9.7 percent.
  • In January, the number of persons unemployed due to job loss decreased by 378,000 to 9.3 million. Nearly all of this decline occurred among permanent job losers.
  • The number of long-term unemployed (those jobless for 27 weeks and over) continued to trend up in January, reaching 6.3 million. Since the start of the recession in December 2007, the number of long-term unemployed has risen by 5.0 million.

So, these numbers show modest improvements in the job market for all but the long-term unemployed. Those out of a job for 27 weeks or longer are not seeing any relief yet. Not surprising since we wouldn't expect the chronically unemployed to see improvements until a job recovery is really underway.

Nonfarm Payrolls

The other data source comes from nonfarm payrolls, and is a survey done of businesses, not households. This survey showed that 20,000 jobs were lost in January. Job losses continued in construction and in transportation and warehousing, while employment increased in temporary help services and retail trade. Since the start of the recession in December 2007, payroll employment has fallen by 8.4 million. Over the last 3 months, however,  employment has shown little net change.

So which number is right? Both. Different sources and different methodologies can yield different results. Getting the right answer from multiple sources is called triangulating the data. In this case, when examining two different data souces, the results don't look conclusive.

As a result, it's too early to say the jobs picture is improving. Job losses seem to have moderated and may even have bottomed out, but the employment picture isn't looking any better. When improvement really comes, we'll see both of these numbers begin to move up.

Sam Cass
Sam Cass: Sam Cass, MBA, JD, University of Texas at Austin. Always a fan of Leonardo Da Vinci.

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