Understanding The Multiple Components Of The Jobs Report Will Offer A More Accurate View

Monday, August 06, 2012 07:07
edit
Understanding The Multiple Components Of The Jobs Report Will Offer A More Accurate View

Tags: active management | economic indicators | economy

People watching the jobs report often focus on the number of new jobs that were created. That's why the stock market surged on Friday's numbers.

 

But the unemployment report is made up of multiple factors. And the best way to gauge what’s happening is to consider all of them, not just one.

This Website Is For Financial Professionals Only


 
For example, the report released on Friday said there were 195,000 fewer people working in July than in June. That’s why the unemployment rate increased to 8.3%. There are two different types of reports on unemployment. One is called the establishment survey, which is derived from a poll of businesses. That’s where we get the number of new jobs that were created netted out by the number of jobs created (or lost) by the government.
 
The household survey is where we get the unemployment rate. The number of people working comes from this survey and that’s where the 195,000 less people working comes from in the July report. The establishment report counts the number of jobs; the household report counts the number of people working.
 
Over the long term, the two reports pretty much run in tandem. But they can be different on a month-to-month basis. The Department of Labor (DoL) has its own measure which aims to follow the establishment report. The DoL subtracts the types of workers not included in the establishment survey and adds multiple jobholders.
 
So the DoL survey could include farm workers suffering from the severe drought. These workers would not be counted in the establishment survey. So the DoL reports number showed that jobs increased by 108,000, not 163,000.
 
The fact that people were working multiple jobs just to make ends meet distorts the establishment report because there may have been more jobs created but not more people working.
 
Understanding how these reports are generated as well as how they figure into the long-term trend can offer you a truer picture of job growth and how well—or poorly—the economy really is doing.

Comments (0)

Write comment

You must be logged in to post a comment. Please register if you do not have an account yet.

busy