## How To Read Unemployment Reports

Every time a national unemployment report comes out, I tweet the many details from @politicalmath. Frequently I get a lot of the same questions, so I thought I’d jot down a quick summary on unemployment reports and numbers and where they come from.

There are 2 kinds of employment numbers, summarized here:

1. Establishment Data (Current Employment Statistics or CES) – this survey covers 400,000 businesses and counts the number of payroll positions that are filled.
2. Household Data (Current Population Survey or CPS) – this survey covers 60,000 households and counts the number of people who are employed and unemployed.

When an employment report comes out from the Bureau of Labor Statistics (BLS), they usually report:

1. The unemployment rate, which is calculated using household data
2. The number of jobs added, which comes from the establishment data

Sometimes this data can seem contradictory. For example, between March and  June 2011, we gained 290,000 jobs but the unemployment rate went up .4% (from 8.8% to 9.2%).

There can be a couple reasons for this. The first one is that, the “jobs added” number comes from subtracting last month’s establishment jobs number from this month’s establishment jobs number, but we never use either of those numbers to calculate the unemployment data.

Why?

Because the essence of the establishment jobs number is asking employers: “How many people work for you?” It gives a nice accurate number, but it doesn’t tell us anything about how many people don’t work for them. We don’t have any number on the unemployed, only a number for jobs.

For unemployment, we have to go to individuals and ask them: “Are you employed or unemployed?” Then we take the unemployed number and divide it by the total number of people who are in the labor force, which counts both the employed and the unemployed.

But even the differences between the establishment jobs number and the household jobs number can be big. According to the household jobs number (which is supposed to exclude farm workers and the self-employed), we had 139.6 million jobs in August 2011. According to the establishment jobs number, we had 131.1 million.

That’s a difference of 8.5 million jobs, and that kind pf spread is pretty normal. The variation changes a little month-to-month, but we could get a report of  jobs created from the household number and jobs lost from the establishment number. In fact, we saw something similar in August where the household number said we gained 331,000 jobs, but the establishment number said we gained 0.

So why is the establishment number reported?

Because the establishment survey is so much larger, more reliable and gives more consistent results. In the graph below , we can see that even though the establishment data counts fewer jobs, it is a less erratic count.

So… that is a quick explanation of the employment report. I dig into this data once a month, so I’m pretty familiar and I’m delighted to answer questions or explain in greater detail in the comments.

### 12 comments

1. Sam says:

60,000 households seems like a small number. Is this the same survey that is used to calculate local unemployment rates for each city/county?

2. Do you still plan to do an update of your Texas jobs numbers post? Since you confused changes in states’ labor forces with interstate migration, your “favorite chart” turned out to be meaningless. I suspect I’m not the only person who is interested to know what part of that post you still consider valid.

3. John Andrews says:

I did the math on Cain’s 9-9-9 plan and at my salary. I would save a little less than \$400 (if I spent every penny) It looks like it will be a regressive tax, but can you tell what point will people start paying more and how much more?

4. Jeff Chesney says:

I recall from your prior posts that the Unemployment rate also factors in the following:
1. Excludes people who are not looking (e.g. Stay at home parents, retirees)
2. Excludes people who were looking for work and have decided to go back to school
3. Includes people who have started looking for work (again?)
4. Excludes people who have given up and are no longer looking for work and are not employed.

How do these factors affect the results you describe above? Or am I off base asking the question?

Thanks,
j.

5. Love your site.

An obvious point that usually doesn’t get mentioned in discussions of these two employment numbers is this: if people decide to start looking for jobs, they “reenter” the workforce. This can increase unemployment, even if the number of employed people remains constant. At this point, with so many discouraged workers, if things start to look better and jobs are created at a modest pace, we could see more people entering the workforce than jobs created. So, we could see optimistic jobs numbers AND rising unemployment numbers at the same time. I wouldn’t be surprised if that happens.

I’d be interested in your thoughts about our most recent post about the “lost decade” from 2001 to 2011. Please come by if you have a chance: http://bit.ly/qniScP

6. politicalmath says:

Sam,

60,000 is actually a huge data set. Most polls only cover 1-2 thousand people.

Kenneth,

Thanks for reading. I gave caveats about that last chart so that it wasn’t, as you claimed, meaningless. It counted an dynamic metric that we couldn’t see in other charts. Go read the post again carefully and you’ll see that.

Jeff,

Those other metrics (people who have stopped looking, but would like work) aren’t accounted for in the data I show above. It wasn’t until fairly recently (1994) that we started collecting that data at all in the labor reports. We could *probably* find that information in the Census data, but I haven’t figured out how to gather and process it yet.

7. politicalmath says:

ReasonableViews,

I’ve been making that point (good job numbers + high unemployment) for some time, albeit mostly informally. Part of the reason our employment situation is so terrifying is because we have lost so many people from the work force and our unemployment rate is still so high. It will likely take years (my guess is at least 3, more likely 5-6) before we see the unemployment rate at a 5-6% rate again.

8. Matthias,

With all due respect, your “personal favorite chart” created notional unemployment rates based on changes in the labor force of each state. But your narrative said 739,000 people “fled into Texas,” implying that what we were seeing was interstate migration as responsible for why some states looked better or worse than they “should” have based on their unemployment rates alone. In fact, there was nowhere near that much interstate migration into Texas (see http://www.census.gov/hhes/migration/). For example, net interstate migration into Texas in 2009 was 130,234, and that includes lots of people who aren’t in the labor force. The rest of the growth in Texas’ labor force was due to its higher birth rate and immigration from Mexico. Your “personal favorite chart” showed us nothing about the effects of interstate migration, which was the focus of your narrative about that chart, because you did not use interstate migration data.

You also claimed, without argument, that having your workforce increase by 739,000 was “at worst, a good problem to have.” However, since 2/3 of those were unemployed and only 1/3 had jobs, I don’t think that is true; at the very least, it is not self-evidently true.

I wrote more about this at http://middleclasspoliticaleconomist.blogspot.com/2011/09/whats-up-with-political-math.html. That post uses change in the employment/population ratio from December 2007 to August 2011 as the measure for relative employment performance during the recession. Texas comes in pretty good, #11, but not the best. As a general matter, I think metrics based on raw numbers, which yours was, are usually incomplete.

Thanks for your reply.

9. Being unemployed sucks!! lol good thing for popular job search engines

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