One of the most important economic releases to come out each month is the Employment Situation Summary report issued by the Bureau of Labor Statistics. This report presents a range of data series related to the nation’s employment and unemployment. The report is compiled by the BLS and the Bureau of the Census, and contains data from two separate surveys: The Establishment survey, which collects data from a sampling of more than 400,000 businesses across the country, and the Household survey, which is based on a sampling of about 60,000 households. It is the most comprehensive look at the labor market until the annual GDP numbers are released – generally 3 months after the end of a given year.
The jobs report for January continued to show amazing inconsistencies between the statistics, with virtually no actual job growth (113,000 new payroll jobs), while at the same time reporting the unemployment rate falling to 6.6 percent. The inconsistencies are mainly due to the fact that the jobs report is based on two different surveys, which trend well in the long term, but can suffer from short term divergence.
According to the BLS, even though job growth was not high enough to account for population growth, the number of long-term unemployed (those jobless for 27 weeks or more) declined by 232,000 in January to 3.6 million. This is a significant decline (about 20 percent of the year over year change in long-term unemployment) and likely reflects that fact that generous unemployment insurance benefits have been eliminated. But these people have not simply fallen out of the labor force, as the BLS reports that the labor force participation rate edged up to 63.0 percent.
So while the number of payroll jobs increased by just 113,000, total employment, as measured by the household survey, increased by a substantial 616,000. Interestingly, ever since the last recession the ratio between payroll and household employment has been narrowing. At the height of the recession household employment was 107 percent of payroll employment. This has fallen fairly steadily to 105.2 percent in December. In January; however, the ratio increased dramatically to 105.6 percent. This suggests that many of the people falling off of the unemployment insurance rolls are either starting businesses or working as 1099 employees or consultants. Research has suggested that the generous unemployment benefits enacted as part of the Stimulus had encouraged people to collect checks rather than starting entrepreneurial enterprises, and while January is just one month’s data, the divergence between those who report working and those on someone else’s payroll is dramatic.
The growth in non-payroll employment may be a good thing for the economy, but the details from the Jobs report also suggest that particularly for African-Americans neither the job market nor the opportunity for business ventures is improving. The unemployment rate among African-Americans jumped from 11.9 to 12.1 percent as the number of employed persons remained virtually flat. For young African-Americans unemployment rose to 38 percent and the number of people with jobs actually fell. On the other hand, unemployment among those with a college education fell to just 3.2 percent, and for those with some college the rate was down to 6.0 percent. These statistics reinforce the fact that both job and wage growth are skewing away from unskilled toward skilled workers, and that the likely best path toward sustained economic growth and with that higher wages is through improvements in education, not through income transfer programs or government industrial planning policies.
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