January Employment Numbers or How To Lose 1.1 Million Jobs But Keep The Unemployment Rate The Same

It’s that time again! First Friday of the month and job numbers for the previous month are released.

This month’s unemployment rate is (drumroll please…)

9.7%!

That’s a 0.3% decline in unemployment. But, if you’ve been reading this blog long enough you know that we can’t just let that go without caveats.

The Good Stuff

Good news is a matter of context. This news isn’t so much good in the sense that the economy is super awesome so much as it is good in the sense that it isn’t actively bad. But I’ll take “not actively bad” for now.

  • My big “thing” for the last half-year is that the nature of the unemployment rate calculation is hiding a huge story, which is the disappearance of the labor force. This latest report has the labor force increasing for the first time since August.
  • Actual employment increased a little over half a million (although comparing January to December is difficult because the population controls are altered at the beginning of every year). This is the biggest increase in approximately forever (since 2007).
  • The people who want a job but aren’t looking for one declined about 350,000.

The Bad Stuff

The good news on the job numbers is basically that they don’t suck. The bad news is that they really only look good when compared to December. Compare them to further back and they still look like of questionable.

For example, the last time we had 9.7% unemployment (back in August), we had 1394 million jobs. In January, we had the same unemployment rate, but only 138.3 million jobs. In 5 months, the unemployment rate is the same, but we’ve lost 1.1 million jobs. Mathematically stated:

August, 2009:
15.0 million people looking for jobs
divided by
154.43 million people employed or looking for jobs
equals
9.7% unemployment (139.4 million actual jobs)

January, 2010:
14.8 million people looking for jobs
divided by
153.17 million people employed or looking for jobs
equals
9.7% unemployment (138.3 million actual jobs)

Welcome to the world of job statistics. Basically, the unemployment rate is a measurement of people with jobs vs. people who are looking for jobs. If people stop looking for jobs for whatever reason, they move out of the “unemployed” category and even though a new job has not been created, the unemployment rate has gone down. Incidentally, I have a video on this phenomena that I made back in October (aired in November).

The Weird Stuff

You may have seen a headline along the line of “Payrolls Decline 20K as Unemployment Rate Falls to 9.7%” and said, “What the…?” This is basically the messy nature of statistics poking its ugly head up through the facade of mathematical certainty.

More simply stated: These numbers are estimates based on a set of surveys. The surveys are gigantic (tens of thousands of respondents) and employ certain controls to try to give a more accurate picture of what is going on. But there are two different surveys: one for household data and one for establishment data. Usually they show a similar picture. Right now they are showing a different one. The household survey says we have more jobs than last month while the establishment survey says we have fewer.

These numbers are not now, nor have they ever been, exact. But they’re good enough for government work (get it!).

5 comments

  1. […] the folks at Political Math help me figure this out (a little.) [Comments (0)]  […]

  2. Thomas Jackson says:

    More good news like this and we can all move to Mexico and steal their jobs. Using this logic when the last worker is fired we won’t have any unemployment, correct?

  3. […] logical explanation for the fuzzy statistical math on job reports is provided via the Political Math […]

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