Why You Shouldn't Take The Employment/Unemployment Numbers As Gospel

Why You Shouldn't Take The Employment/Unemployment Numbers As Gospel

 

1)     They are based on a survey conducted by the government

2)     It is not an exhaustive survey, it’s a sampling.

3)     It’s conducted by THE GOVERNMENT

 

 

Sorting Fact From Fiction About How the Jobs Numbers Are Calculated

The Wall Street Journal.  Economy

Updated April 6, 2012, 5:43 p.m. ET

BY BEN CASSELMAN

 

Economists and nonexperts alike pore over the government's jobs numbers each month for hints about where the economy is headed. But confusion about how the statistics are calculated has led to some myths about the report and what it shows.

 

First, the basics:

 

·         Every month, the government conducts surveys of households and employers, which form the basis of the main employment statistics.

·         Under government definitions, which date back to the Great Depression, people count as employed if they are doing any work for pay at all, and as unemployed if they aren't working but are trying to find a job.

·         People who aren't working but also aren't trying to find work aren't considered part of the labor force.

 

Here are four common unemployment myths.

 

I don't receive unemployment benefits, so the government doesn't count me as "unemployed."

The official unemployment rate is based on a survey of about 60,000 households, not on unemployment benefits, which are administered by the states. The unemployment rate includes people who aren't eligible for benefits, such as those who quit their jobs voluntarily; those who are entering or re-entering the work force (after graduating from high school or college, for example, or after taking time off to raise a child); and people whose benefits have expired. But it also might not include some who do qualify for benefits; someone doing odd jobs while collecting unemployment benefits would qualify as "employed" in government statistics.

 

I'm a contractor, not an employee, so the government doesn't consider me "employed."

Anyone who has done any work for pay in the relevant week is considered employed, whether an employee, a contractor or self-employed. That includes informal work, such as child care or handyman-type jobs. Even work for "in-kind" pay, such as room and board, counts as employment. Owners of for-profit businesses are employed too, even if they don't pay themselves a formal salary, and people who work at least 15 hours a week for a family-owned business or farm count as employed, even if they aren't paid.

 

More than 350,000 people a week are getting laid off, so the unemployment rate should be rising.

The U.S. added 120,000 jobs in March and has averaged 154,000 jobs over the past six months. That is a lot less than the 350,000 to 400,000 people who file first-time claims for unemployment insurance each week, which can make it sound like employers are shedding jobs on balance.

 

The figure in the monthly jobs report, however, is a net number, taking into account both hires and layoffs. So if it says the economy "added" 200,000 jobs, that means employers hired 200,000 more people than they laid off. The figure is based on a monthly survey of 160,000 businesses and government agencies, conducted separately from the household survey. Employers are asked how many workers they have and whether they have added or lost employees in the past month. The answers are used to calculate payroll figures for the entire economy.

 

The unemployment rate is the best way to gauge the health of the labor market.

The unemployment rate is the most widely followed labor-market gauge, but it isn't the most complete. Especially in tough economic times, plenty of displaced workers don't count as unemployed. For example, someone who is laid off and decides to go back to school doesn't count as unemployed because he isn't currently looking for work. The same is true for someone who gives up looking because he doesn't think any work is available.

 

The Labor Department tries to track people who fall outside the traditional categories. People who aren't actively looking for a job but want one and are available to work are counted as "marginally attached" to the labor force. People who are working part time because they can't find a full-time job are counted as "part time for economic reasons."

 

 

John Broussard

Assistant State Treasurer

Chief Investment Officer

State of Louisiana

Department of the Treasury