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7.8% or 14.7% Unemployment Rate for September 2012?

Posted by FactReal on October 8, 2012

JOB REPORTS BASED ON SURVEYS:
Contrary to popular belief, employment reports from the U.S. Department of Labor are not based on exact math. They are based on two sample surveys:
1. The Household Survey asks about 60,000 households about their employment situation.
2. The Establishment Survey interviews 141,000 businesses and government agencies, representing about 486,000 individual worksites, to obtain detailed industry data on employment, hours, and earnings of workers on nonfarm payrolls. (Scroll down for more definitions)
SUMMARY: Conflicts with the September 2012 Employment Report
1. Unemployment rate: 7.8% or 14.7%?
See Table A-15: The Household Survey for the month of September indicates that the unemployment rate was 7.8% (a.k.a. U-3). But the total unemployment rate was 14.7% (a.k.a. U-6) if you count ALL the unemployed workers including discouraged and part-time workers.
2. Jobs created: 114,000 or 873,000?
According to the Establishment Survey (see Table B-1), the economy added just 114,000 jobs in Sept. 2012. But amazingly, the Household Survey (see Table A) shows 873,000 jobs added!!! So who do you believe? People answering the surveys at home or businesses?
Source: Bureau of Labor Statistics – September 2012 employment report (Released October 5, 2012)
ANALYSIS OF THE SEPT. 2012 JOBS REPORT
Unemployment rate: 7.8% or 14.7%?
Just one month before the U.S. elections and less than 2 days after Obama’s sub-par debate performance against Republican candidate Mitt Romney, the Dept. of Labor reported on Friday that the U.S. unemployment rate dropped 0.3% to 7.8% in September. That is the first time the jobless rate falls below the 8% level since Obama took office in January 2009. However, the jobs report also indicates that the better measure of unemployment (U-6) remained unchanged at 14.7%.
14.7% is the total unemployment rate (U-6) for Sept. 2012 according to the Household Survey (Table A-15). The U-6 is the total unemployed, plus part-time workers who want full-time work but can’t find it due to the bad economy, plus discouraged workers and persons marginally attached to the labor force who are not working but want a job.
7.8% is the unemployment rate as a percent of the civilian labor force for Sept. 2012 according to the Household Survey (Tables A and A-15).
(12,088,000 unemployed people divided by 155,063,000 in the civilian labor force).
Jobs created: 114,000 or 873,000?
873,000 more Americans were employed in Sept. 2012 according to the Household Survey (Table A). Economist Dean Baker called this sudden jump in employment “a statistical fluke.” Douglas Holtz-Eakin, former Congressional Budget Office director, called it “a statistical anomaly.”

This 873,000 increase in employment is the biggest one month job creation under Obama. Actually, it is historical. Bloomberg says it is the biggest one month jump since June 1983, excluding the annual Census population adjustments.

Under Obama, the monthly changes in employment levels have been mostly negative or in the low 100’s:

873,000 jobs? This figure is also strange, because businesses indicated there were only 114,000 jobs added in Sept. 2012 according to the Establishment Survey (Table B-1).
Economists tend to pay more attention to the Establishment Survey, which is based on a larger sample and is less volatile month-to-month than the Household Survey. The monthly changes in employment levels based on the survey of employers don’t show abrupt increase or decreases:
More job data
88,710,000 people are still NOT in the labor force (Table A).
12,088,000 people are still unemployed (Table A).
The participation rate went from 63.5% to 63.6% (Table A).
(The labor force participation rate is the percentage of the people in the civilian non-institutionalized population who either had a job or were actively looking for one)
Unemployment rates: Teenagers 16 to 19 years at 23.7%, Blacks at 13.4%, and Latinos at 9.9%.
418,000 people were added to the labor force (Table A).
16,000 jobs were lost in manufacturing.
10,000 government jobs were added (after a 45,000 jump the month before)
DEFINITIONS:
The employment report is based on 2 surveys: (BLS)
The Household Survey (a.k.a. Current Population Survey) provides information on the labor force, employment, and unemployment that appears in the “A” tables, marked HOUSEHOLD DATA. It is a sample survey of about 60,000 eligible households conducted by the U.S. Census Bureau for the U.S. Bureau of Labor Statistics (BLS).

The Establishment Survey (a.k.a. Current Employment Statistics Survey) provides information on employment, hours, and earnings of employees on nonfarm payrolls; the data appear in the “B” tables, marked ESTABLISHMENT DATA. BLS collects these data each month from the payroll records of a sample of nonagricultural business establishments. Each month the CES program surveys about 141,000 businesses and government agencies, representing approximately 486,000 individual worksites, in order to provide detailed industry data on employment, hours, and earnings of workers on nonfarm payrolls. The active sample includes approximately onethird of all nonfarm payroll employees.

U-6: Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor. BLS, page 26: “Persons marginally attached to the labor force are those who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the past 12 months. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for work. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule. Updated population controls are introduced annually with the release of January data.”

The official unemployment rate exclude people who have stopped looking for work. The unemployment rate is calculated by dividing the number of unemployed by the total number of people in the labor force. WSJ: “The unemployment rate is calculated based on the number of unemployed — people who are without jobs, who are available to work and who have actively sought work in the prior four weeks. The “actively looking for work” definition is fairly broad, including people who contacted an employer, employment agency, job center or friends; sent out resumes or filled out applications; or answered or placed ads, among other things.”

Primary source:
BLS: http://www.bls.gov/news.release/pdf/empsit.pdf

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