Jumat, 06 Juli 2012

A tale of two jobs reports

The establishment survey of payrolls has been disappointing of late, finding an average monthly gain of only 105K new private sector jobs over the past four months. (I focus on private sector jobs because that's where the action is; the public sector workforce has been shrinking for the past three years due to budget cutbacks, and I view that as a good thing.) In contrast to the establishment survey, the household survey has registered a relatively strong average gain of 235K jobs over the same period. Since the jobs recovery began in early 2010, the household survey has registered about 5.1 million new private sector jobs, while the establishment survey has recorded 4.3 million. This discrepancy between the two surveys is large, and somewhat troubling. One survey says jobs growth is weak, the other says it is decent. Which one to believe?

The household survey is typically better at picking up new jobs in the early years of a recovery, since it is based on a sampling of the entire population, whereas the establishment survey only samples known businesses. So if there are lots of new businesses being formed, especially small ones, the household survey will find those but the establishment survey won't find them until a year or so from now when it is recalibrated to match IRS data. I'm inclined to trust the household survey more than the establishment survey right now, and so I conclude that the economy is still growing at a modest/moderate pace—nothing to get excited about, but nothing to get upset about either.

Another encouraging aspect of the June jobs report is that the labor force (all those with jobs plus those who are looking for jobs) is once again growing. Over the past year, the labor force has grown 1.1%, which is roughly its long-term average. Over the past six months, however, it's up at an annualized rate of 1.7%, and it has now reached a post-recession high. The overall growth of the labor force since the recession started is of course still miserable—the worst performance in modern times—but the change on the margin is now quite positive.

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