TOPICS > Economy

What Clues Does ‘Strange’ Unemployment Report Hold?

February 4, 2011 at 5:58 PM EDT
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January unemployment numbers sent mixed signals for economic recovery. The jobless rate dipped to 9 percent, but a survey of businesses found only a net gain of 36,000 jobs last month. Jeffrey Brown assesses those numbers with New York Times economic reporter David Leonhardt.
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JIM LEHRER: Today’s other main story: the new jobless numbers.

Jeffrey Brown reports that.

JEFFREY BROWN: On the one hand, the unemployment rate dropped; on the other, very few jobs were created. That was the news from two government reports today. The so-called household survey showed the unemployment rate dropped to 9 percent in January, down from 9.4 percent a month ago.

But a separate survey of businesses found only a net gain of 36,000 new jobs last month, far too few even to keep pace with population growth.

We parse the numbers now with David Leonhardt, economics reporter and columnist for The New York Times.

Welcome back.

DAVID LEONHARDT, The New York Times: Thank you.

JEFFREY BROWN: So, it’s strange report, isn’t it? And it comes at a time when everybody is looking for signs of what’s — what — where we are.

DAVID LEONHARDT: It is a strange report. I have been writing about the job report now for about 11 years, and I think is the strangest one I have ever seen.

JEFFREY BROWN: Really?

DAVID LEONHARDT: Yes, because, sometimes, the two reports seem to show different things, but you can construct a story that makes sense.

In this case, you really can’t do that. And so what we’re left wondering is, well, which is telling the truth, the survey of households, which looks more optimistic, or this survey of businesses, in which the government goes out and says, how many people work at your place of employ?

JEFFREY BROWN: And just briefly, to describe what these two do. So one is really households, and it asks people, are you working?

DAVID LEONHARDT: That’s right. And the disadvantage with that survey is it’s much smaller. It involves many fewer people, because, if you think about that, when you go door to door with households, you capture fewer jobs than if you are going to a business and saying, how many people do you employ?

JEFFREY BROWN: Now, in the — the household one, the one where it gives us that number — right now, it’s 9 percent — one factor we often talk about — and we have talked about it before — sometimes, it is the discouraged-worker factor, right?

DAVID LEONHARDT: That’s right.

JEFFREY BROWN: The people who have stopped looking for work, they are no longer counted. So the number goes down, but that’s actually not necessarily a good thing.

DAVID LEONHARDT: That’s exactly right.

JEFFREY BROWN: Is that a factor this time?

DAVID LEONHARDT: It is a factor, but it is nowhere near the whole story.

So, we do have some people who moved from officially unemployed to unofficially unemployed, which means they are not counted in the unemployment rate. And that makes sense because we have so many people who have been out of work for so long, six months, eight months, two years.

At a certain point, these people give up looking for work and are no longer counted as unemployed. But the unemployment rate in the last two months has declined eight-tenths of a percentage point.

JEFFREY BROWN: A lot.

DAVID LEONHARDT: The biggest drop in almost 60 years. By no means is that all discouraged workers. It is a weird situation in which the report seems to be picking up jobs that the business survey is not picking up. We don’t know if they are really there or not.

There also seems to have been some data issues which suggest that, in fact, a few months ago, unemployment wasn’t as bad as we thought then, but it hasn’t really come down as much as we thought now. So…

JEFFREY BROWN: And then there is also another issue which got a lot of attention, is the weather.

DAVID LEONHARDT: Yes, weather.

JEFFREY BROWN: It is winter, right?

DAVID LEONHARDT: Yes.

JEFFREY BROWN: So, what — so, explain that.

DAVID LEONHARDT: So, if you want to tell a hopeful story, this is really your only chance, because even with all these mixed signals…

JEFFREY BROWN: Go ahead.

(LAUGHTER)

DAVID LEONHARDT: Yes. I’m going to try.

JEFFREY BROWN: I’m sure everybody would like to hear that one, yes.

DAVID LEONHARDT: You would say, OK, the household survey looked good in December. And we’re going to believe it, because, at turning points, sometimes the survey of businesses isn’t that good, because a lot of new jobs at turning points in the economy come from businesses that are just starting.

And the Labor Department doesn’t know how to go find a business that didn’t exist a few months ago. So, maybe the household survey is picking those up. December looked pretty good.

JEFFREY BROWN: So, in other words, the business survey just isn’t picking up — maybe there is a turning point.

DAVID LEONHARDT: Right.

JEFFREY BROWN: But the business survey is behind, and hasn’t…

DAVID LEONHARDT: That’s right.

JEFFREY BROWN: … and hasn’t caught it yet.

DAVID LEONHARDT: If you went out and started a new company tomorrow, the Labor Department wouldn’t necessarily know to come ask you how many people you were employing.

And if you multiply that by thousands, you could actually have a significant number of people working at firms like that.

JEFFREY BROWN: Is there reason to think that that may be the case?

DAVID LEONHARDT: It usually happens at turning points. And we seem to be at a turning point. So it’s not a completely-out-of-the-question factor.

But — so, if you believe that the household survey was actually good, and if you believe that it was right in December, then you tell yourself, well, January, had all these storms, and so it was artificially depressed.

And so maybe, in fact, the job market is getting better. Lots of other indicators suggest the job market should be getting better. And so maybe it is getting better. But then you still have to come back to the point of, OK, if we tell this optimistic story, which requires a little bit of a leap of faith…

JEFFREY BROWN: Yes.

DAVID LEONHARDT: … we still have to long until the job market is actually healthy.

JEFFREY BROWN: Now, in that regard, the larger context is this continuing debate over whether we are seeing what is called structural unemployment, right? And — and it has implications, not only for the people who are unemployed but for policy-makers.

Explain the debate here.

DAVID LEONHARDT: Yes.

So, the debate breaks down somewhat traditionally right-left. You tend to hear more from the right and from businesses that we have a lot of structural unemployment, meaning we have jobs we want to fill, but we don’t have workers who are qualified to fill them.

JEFFREY BROWN: The jobs are out there, but the people are not ready to take them?

DAVID LEONHARDT: That’s right. There is a mismatch between job openings and workers. And so that’s why we don’t see a lot of hiring. And thus, things like stimulus wouldn’t help very much, because if the workers don’t match the needs you have, you are not going to hire even if there is more consumer spending.

Then, on the other side, which you tend to hear more from the left or from labor, is that, no, in fact, there is a big shortfall in what is called aggregate demand. People just aren’t spending enough. And so if we can prevent government cuts, if we can have some stimulus, it will make a difference.

JEFFREY BROWN: And — and get businesses to start hiring again?

DAVID LEONHARDT: Yes, yes.

And so the strongest evidence for the structural unemployment is the fact that the gap between what college-educated workers and everyone else are making is widening. So, it does seem to be a factor. But it’s a little bit hard to make the case that it is the dominant factor, because unemployment has risen so much so quickly, why was it that we didn’t have this big structural problem just a couple years ago?

JEFFREY BROWN: So — so, I mean, real briefly, but this is just — is sort of an academic mystery; it’s a policy mystery; it is one that has a lot of implications?

DAVID LEONHARDT: Yes. And there’s a huge amount of uncertainty about the job market right now.

The thing we know is that it’s not good, and that it’s not going to be good for a very long time. The uncertainty is, how many years will it be before it feels healthy again?

JEFFREY BROWN: All right. David Leonhardt of The New York Times, thanks very much.

DAVID LEONHARDT: Thank you.