Truck and Barter: Number Employed vs. Unemployment Rate

November 05, 2004

Number Employed vs. Unemployment Rate

By Kevin

(Warning: This is another vague, interminable rant on the quality of data).

Occassionally, the number employed rises even while the unemployment rate rises--or both decline. This is normal and explicable. One could argue that the number of people looking for jobs increased more than the number of jobs. But one could also argue that the real reason for this inconsistency is purely statistical, not economic. The series aren't really linked, so the economic explanation is an illusion.

The number employed comes from a survey of businesses, and the unemployment rate (number employed/ labor force) comes from a survey of households. The household survey comes up with its own estimate of number employed, and uses a different definition, to boot; the only real link between the two surveys is the actual economy. The measurement processes of each survey program are incredibly different. It almost seems remarkable that the data are as close as we find them to be... The business survey indicated growth of 337,000 jobs in October and 139,000 in September. The household survey indicated growth of 298,000 jobs in October, after a decline of 201,000 in September.

Producing these data series is an enormous task for the Census and BLS: covering a dynamic population, utilizing bureaucratic organizations, serving heterogenous goals, blocking (or aborbing) political pressures, conducting independent survey samples, and employing differing complex methodologies combine to yield estimates that are some of the best numbers we have about economic exchange.

The tasks that newspaper reporters set for the data, require data that can expose and explain minute changes in overall employment, and employment among races. But the errors in each of these surveys are frequently larger than the granularity needed. How large? One indication is given in the article linked above:

The jobless rate for African-Americans jumped to 10.7 percent last month, up from 10.3 percent in September. The rate for Hispanics fell to 6.7 percent from 7.1 percent from the previous month, while the rate for teenagers grew to 17.2 percent from 16.6 percent. The rate for whites held at 4.7 percent.

Now, do you really think that the unemployment rates are that variable month to month? Or is this survey error? How would you extract the signal from the noise?

Posted at November 5, 2004 11:44 AM

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