JUNE JOBS DATA: Contradictory and Troubling

By at 8 July, 2022, 11:24 am

by Raymond J. Keating –

Here we go again. The employment report for June, just released by the U.S. Bureau of Labor Statistics, served up contradictory information on jobs.

The establishment survey pointed to nonfarm payroll employment increasing by 372,000 in June. That’s great, right?

Sure, except that the household survey in the same employment report estimated that employment dropped by 315,000 in June.

For good measure, the household survey showed the labor force declining by 353,000 in June, and those not in the labor force increasing by a rather staggering 510,000. Indeed, the only reason the unemployment rate remained unchanged for June was due to the large drop in the labor force. However, the employment-population ratio declined from 60.1 percent in May to 59.9 percent in June, and the labor force participation rate dropped from 62.3 percent in May to 62.2 percent in June.

So, the household survey jobs story for June was anything but great – indeed, it was terrible.

This diversion between the two surveys has happened before, and it pays to take a moment to consider the key differences between the two surveys.

The establishment survey is a survey of nonfarm businesses, such as factories, stores, offices, etc., and provides data on employment, hours worked, and earnings. Excluded from the establishment survey are agricultural workers and unincorporated self-employed. In addition, there is a lag in counting new firms and firm deaths, which the survey attempts to make up for via various methodology adjustments. Also, the establishment survey double counts workers with more than one job.

The household survey, which as suggested surveys households and gathers employment, labor force and unemployment data. It is a broader measure of employment, as it includes the self-employed, agricultural workers, people who are unpaid family workers in family businesses, individuals working in private households, and people on unpaid leave. The self-employed factor and weaknesses in the establishment survey means that the household survey tends to better capture startup and small business activity.

Finally, the household survey tends to be more volatile from month to month compared to the establishment survey.

Over the longer run, the two surveys move in the same direction, but again, there can be differences month to month, as illustrated with the June data.

My preference has been for the household survey to take precedence over the payroll survey due to startup and small business factors. As a result, the June employment report adds to my mounting concerns on the economy.

Source: Federal Reserve Bank of St. Louis, FRED

And here’s one final depressing point. As noted in the chart above, U.S. total employment still has not recovered to where it was pre-pandemic, never mind the lost growth experienced over the past nearly two-and-a-half years.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest book is The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist.



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