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Jim Stratton

Employment is one of the most closely watched economic indicators. Strong job growth means prosperity. Sustained job losses, recession. The two most closely watched employment indicators are monthly change in total nonfarm employment and the unemployment rate.

In looking at employment reports there is ample room for confusion. Two separate and distinct measures of employment are often reported in the media. Each indicator has value, but must be understood correctly. Both are reported by the Bureau of Labor Statistics (BLS) on a monthly schedule. Both are based on samples.

Nonfarm payroll employment

Also sometimes called “Establishment Survey Data” and “Employment, Hours and Earnings”. This report is based on the Current Employment Statistics (CES) survey of 390,000 business establishments. It yields a detailed breakdown of employment, hours and earnings for all major industrial sectors (except agriculture) and subgroups each month. When analysts talk about change in manufacturing jobs, for example, they are referring to the CES survey. The CES says nothing about unemployment. The CES survey does not include the self-employed, but it does sample firms of all sizes. In fact, about 40 percent of the establishment survey sample is comprised of business establishments with fewer than 20 employees.

Household survey data

Also called the “labor force report” and “labor force statistics”. This report is based on the Current Population Survey (CPS), which is a monthly survey of 60,000 households. This survey is used to determine the size of the labor force, the number of people employment, unemployed and the unemployment rate.

The household survey has a more expansive scope than the establishment survey because it includes the self-employed, unpaid family workers, agricultural workers, and private household workers, who are excluded by the establishment survey. The household survey also provides estimates of employment for demographic groups.

Notes

According to the BLS, the establishment survey employment series has a smaller margin of error on the measurement of month-to-month change than the household survey because of its much larger sample size. An over-the-month employment change of 104,000 is statistically significant in the establishment survey, while the threshold for a statistically significant change in the household survey is about 400,000.

The establishment survey is revised, or re-benchmarked, around March each year, resulting in changes to the reported data for the past 12 to 36 months. Both surveys report trends for the nation, states and metropolitan areas.

Employment Data and Trends

Here is the trend in total nonfarm employment since the beginning of 1998, using data downloaded at the end of March 2008. The data for January and February of 2008 are preliminary and will be revised. The chart shows the annual rate of change on a monthly basis. Numbers are in thousands of jobs.

Here is the annual change in a couple of specific industries that are closely linked to current turmoil in the overall economy. Employment growth in real estate peaked in May of 2006 and then began to slow, rapidly, reaching "negative growth" by April of 2007. Employment growth in securities, commodities and investments peaked in October of 2006 and gradually slowed and it is still growing as of early 2008.

The household survey is the source for the following chart, which shows the trend in self-employment since 1998. The estimated number of self-employed reached about 10.9 million in April of 2005. It then declined and rose to another peak of 10.8 million in December of 2006. As of early 2008 there are about 10.0 million in the ranks of the self-employed. The chart shows the monthly estimate and the 6-month moving average, which smooths out the jagged changes in the monthly data.

--Jim737 14:35, March 31, 2008 (PDT)