May 24, 2024

Economix: A Chart to Explain Confusion on Jobs

11:27 a.m. | Updated If you are confused about today’s jobs report — job growth was up in April, but so was the unemployment rate — the chart below may help.

The Labor Department does two different surveys of the job market, as I mentioned in an earlier post. A survey of employers produces the estimate of job growth. A survey of households produces the unemployment rate.

Since the recession began, the survey of households has been offering a more optimistic picture of the labor market than the survey of employers. That’s why the blue line in the chart is above the red line: the blue line — which represents the household survey — shows less job loss. The chart begins when the recession did, in December 2007.

Average monthly employment change since December 2007.Bureau of Labor Statistics, via Haver AnalyticsAverage monthly employment change since December 2007.

But now look at the very end of the chart. Do you see how the blue line dips, leaving it closer to the red line? That is today’s jobs report. It doesn’t mean unemployment actually rose last month.

There is still a dark lining here, as that earlier post mentioned. During economic recoveries, the household survey is typically more optimistic than the employer survey — and typically more accurate, too, in part because the employer survey misses jobs created by start-up firms. Over the past three and a half years, the household survey has again been more optimistic. But we learned this morning that it may not have been much more accurate.

Update: Some readers have asked whether the unemployment rate can rise even as employment is growing because more people start looking for work — and thus count as officially unemployed. Theoretically, the answer is yes. This does happen sometimes. But it didn’t happen in April. The unemployment rate rose last month because the household survey showed a decline of 190,000 jobs, not because of a surge in job seekers. That’s why there is no way to reconcile last month’s results of the household survey and employer survey. They make sense only in the context of previous months.

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