NYTimes.com Article: To Understand U.S. Jobs Picture, Connect the Dots,

This article from NYTimes.com 
has been sent to you by tganesh@stlawu.edu.


Statistics or words?  The fog over the rise and fall of employment in the US 
keeps growing.  This article is interesting for the ambiguity that makes for 
political use of some of the most important statistics. 

tganesh@stlawu.edu

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To Understand U.S. Jobs Picture, Connect the Dots, and Find the Dots

January 12, 2004
 By LOUIS UCHITELLE 



 

No economic statistic is watched more closely as a gauge of
the economic recovery's staying power - or of President
Bush's prospects among voters - than the monthly employment
numbers. Yet these numbers are failing to explain what is
really happening to the nation's workers. 

More people are working than have as yet been recorded in
the official job count - the one compiled by Bureau of
Labor Statistics that gets all the attention. But the
official unemployment rate, in turn, greatly understates
the number of people who would like to be working. 

In December, for example, the nation's employers added
1,000 new jobs, a small number, but the unemployment rate
plunged 0.2 percentage points, according to data released
by the bureau on Friday. How could there be only 1,000 new
jobs yet 300,000 fewer unemployed people, as the December
numbers suggest? 

The answer, economists say, is that the labor force has
changed, and the official data no longer easily capture
these changes, particularly the sharp rise in low-wage
employment. The disparities in the numbers are giving
politicians unusual leeway to make conflicting claims about
the employment picture. 

The Democratic presidential candidates, for example, heaped
scorn on the Bush administration for the almost nonexistent
job creation in December. The president, on the other hand,
pointed to the drop in the unemployment rate, to 5.7
percent from 5.9 percent in November, as "a positive sign
the economy is getting better." And the chairman of the
president's Council of Economic Advisers, N. Gregory
Mankiw, said in an interview that the official job count
showing 1,000 new jobs in December was not accurate by
itself. 

"I view all economic statistics as imperfect," he said.
"They have to be taken with a grain of salt." 

In challenging the reliability of the official count, Mr.
Mankiw sought to water down its message, which is that 2.3
million jobs have disappeared since President Bush took
office in January 2001. 

The official count is based on a monthly survey of net job
changes at 400,000 companies, called the establishment
survey. The Bureau of Labor Statistics also counts monthly
job changes through a less sweeping survey, one based on
interviews with 60,000 households. The household survey has
employment rising by 689,000 jobs in the Bush years. 

"I am not going to take a stand as to which survey is more
meaningful," Mr. Mankiw said - challenging in effect the
Bureau of Labor Statistics and the Congressional Budget
Office, which have declared the establishment survey the
more reliable one. 

What both surveys do is sort people into employed,
unemployed or out of the labor force. But, a growing number
of people do not fit neatly into these categories,
economists say. More often than in the past, for example,
people who lose a job list themselves as early retirees or
self-employed rather than unemployed. 

The labor force in America is limited to people who are
working or who tell interviewers in the household survey
that while they are not working, they are actively seeking
work. These are the people classified as employed and
unemployed. They totaled 146.9 million in December. 

Everyone else was on the sidelines, and those sidelines
have become more crowded since the booming economy began to
wind down in 2000. 

The best measure of this growth on the periphery is labor
force participation rate - that is, the percentage of the
working-age population listed as either working or
unemployed. It has fallen 1.3 percentage points, from a
peak of 67.3 percent in the last year of the Clinton
administration to 66 percent last month. 

Most of these dropouts "would still be in the labor force
working or trying to work if the economy were doing
better," said Andrew Sharpe, a labor economist who is
helping to direct a project financed by the Rockefeller and
Ford Foundations to develop a more realistic measure of
unemployment. "What we really want to do in this project,"
he said, "is measure idle labor capacity; that is, the
number of additional hours people would work if the jobs
were there, the pay were high enough and there was adequate
child care." 

These additional hours would come not only from people
lured back into the labor force, but from people listed by
the labor statistics bureau as employed, but only part time
and for fewer hours than they would like. The total in that
category has risen by nearly 1.5 million people since the
start of the recession, although last month there was a
drop of 92,000, perhaps in response to the gradually
strengthening economy. 

Even the bureau recognizes the inadequacy of its official
unemployment rate. Buried in its monthly employment release
is an alternative unemployment rate, called "labor
underutilization." That rate was 9.9 percent in December,
down from 10.1 percent in November, but unchanged from the
previous December and 4.2 percentage points higher than the
official unemployment rate last month. 

Trying to measure more realistically the slack in the labor
market, the bureau adds to the officially unemployed - that
is, those actively seeking work - the part-timers who want
more hours as well as those who tell the interviewers in
the household survey that while they are not currently job
hunting, they would take a job if one came along. 

Many early retirees and self-employed consultants would
also like to have jobs, but since they tell the
interviewers that they are retired or self-employed, they
are not counted in calculating the "labor underutilization
rate." If even some who fit that description were included,
that rate would rise above 10 percent, economists say. 

Still, the rise of 1,000 jobs in December, as measured by
the payroll survey, is probably understating actual job
growth by 30,000 to 60,000. That would not be enough to get
to 150,000 new jobs - the improvement that nearly every
forecaster had expected for December anticipating that a
strengthening economy would finally force employers to step
up their hiring - but it would help. 

The assumption of a shortfall in the payroll survey is
based on the view that the labor statistics bureau has not
yet updated its formula for using net job changes at the
400,000 representative companies in its survey to project
job changes at the 8.5 million corporations across America.


The expectation is that the recovery, particularly the
strong economic growth in the third quarter, has stepped up
job creation at existing companies while also creating jobs
at new companies not yet counted by the government. As the
bureau gradually updates its survey early this year, the
30,000 to 60,000 not-yet-detected jobs presumably will show
up in the monthly employment reports. 

"We cannot update the projections every month," said
Patricia Getz, an economist at the bureau in charge of the
group that does the updating. 

Absent the update, the payroll survey shows that employment
finally turned up in August after two and a half years of
almost uninterrupted job losses. But the improvement has
been sub-par, averaging only 55,000 new jobs a month,
including the December setback. 

Apart from the updates, the bureau carries out a detailed
annual survey of job changes at all 8.5 million companies.
That expanded survey, conducted each March and announced in
the early fall, just before the November election, may very
well produce an upward revision sufficiently large enough
to strengthen President Bush's argument that his policies
are reviving employment. 

"The reality is that nine months from now, when they have
the March 2004 survey fully calculated, that the adjustment
will show a lot more job creation," said Lee Price,
director for research at the Economic Policy Institute. 

In the meantime, administration officials - Mr. Mankiw on
Friday and the secretary of labor, Elaine L. Chao, last
year - point to the household survey with its more robust
job growth, averaging 175,000 new hires a month since
August, or three times more than the payroll survey. 

Some economists argue that while the household survey may
overstate employment growth, as the bureau maintains, it
nevertheless reflects, much more than the payroll survey,
job growth outside the corporate sector - and that is where
much of the job growth has been happening, particularly at
low wages. 

Illegal aliens, holding many of these jobs, are more likely
to show up in the household survey rather than the payroll
survey. Their numbers may be exaggerated in the household
survey, which is updated less frequently than the payroll
numbers, but low-wage work, whoever does it, is an ever
more important labor force phenomenon. 

Andrew M. Sum, a Northeastern University labor economist
and lead author of a recently released study of the two
employment measures that underscores the value of the
household survey, put it this way in a statement: "At no
other point in this nation's last five recovery periods
have so many people been employed as independent
contractors, as temporarily self-employed, or paid under
the table." 

http://www.nytimes.com/2004/01/12/business/12jobs.html?ex=1074959933&ei=1&en=b1df0bdbf2c4bad3


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