Solman Answers Reader Questions on Latest Job Numbers

BY Paul Solman  November 5, 2010 at 2:49 PM EDT

Making SenseA flurry of questions today about the October job report from NewsHour’s Facebook and Twitter.

In response, a flurry of answers.

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Janet Vetter: The economy added 150,000 jobs but the unemployment rate remained the same? What is this telling us? And can I have one of those jobs?

Paul Solman: There are two separate monthly surveys. One is the unemployment rate, which comes from a survey of some 60,000 households, door-to-door. The other is the payroll survey, where the sample size is reported to be 140,000- businesses and government agencies.

The headline unemployment rate — 9.6 percent — includes all people who said they weren’t working in the week previous to the survey but were looking for work in that same week. (If you add in everyone who looked for work in the past year, but not in the past week, what the government calls “discouraged” workers, the unemployment rate jumps to 11.1 percent.)

Now here’s a remarkable thing about the October numbers. While the payroll survey says we added 151,000 jobs in October, the household survey estimates that there are 330,000 fewer Americans working full-time than in September. Seasonally adjusted, even.

Much of that is because the civilian labor force, which swelled in the summer, was down 250,000, which includes the newly “retired” and/or anyone who reports not having looked for work in the past year. You might call these the “deeply discouraged” or “definitively discouraged.” So discouraged, in other words, that they’re no longer considered workers at all.

But even when you subtract the 250,000 “dropouts” from the 330,000 tumble in employed Americans, you’d still get 80,000 more unemployed.

What to make of this? Well, there could be something wrong with either survey. Here’s how the cheeky, very smart “Lex ” column puts it in today’s online Financial Times:

Remember two things….First, initial estimates for monthly non-farm payrolls are stabs in the dark. By the Bureau of Labour Statistics’ own reckoning, the margin of error in the published new jobs number is 100,000, plus or minus. So the happy headline-grabbing 151,000 in August could almost as easily have read 51,000 (quantitative easing vindicated!) or 251,000 (Democrats rejoice!). Last month’s reading, for example, was revised up by 56,000.

Second, pay attention to the labour force participation rate. Only 64.4 percent of working-age population either has a job or is actively searching for one. The proportion has fallen to the lowest since 1984 (when the job-shy were likely to be homemakers) – and the trend is still down. That is not good.

People tend to think the payroll survey is more accurate than the household survey, Janet. But it’s possible that there may not be all that many new jobs for you to take.

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Mike Kinsman What job growth do we need to counter population growth?

Paul Solman: The usual answer is something like 100,000 jobs per month. And that figures, given that U.S. population is growing about 1 percent a year. The labor force is about 50 percent of the population: 150 million or so. One percent is 1.5 million: about 100,000 a month.

Here’s Heidi Shierholz of the Economic Policy Institute today:

At October’s rate of job growth, the economy would achieve prerecession unemployment rates (5 percent in Dec. 2007) in roughly twenty years.

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Carl Webb: And now with a Republican Congress, you can bet they’re gonna stop the extensions on unemployment.

Paul Solman: When it comes to what political parties would do, I’m not a betting man.

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Christina Hindley: In spring 2010, consumer confidence returned and the market rallied. That might have been enough for business to start hiring again and for banks to start lending again. But instead, they focused on their bottom line and made shareholders happy. Consumer confidence naturally fell, and I am afraid that we will be stuck like this for a long time. Fear-mongering effectively keeps people stuck.

Paul Solman: There are two leading measures of consumer confidence. One, the Conference Board Consumer Confidence Index, “which had declined in September, increased slightly in October,” according to the Board.

By contrast, the Thomson Reuters/University of Michigan final index of consumer sentiment fell in October to 67.7 from 68.2 percent in September.

Go figure.

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Kevin Newby: Is it [the added jobs] from seasonal employment?

Paul Solman: Presumably not. The number is “seasonally adjusted,” meaning they’ve supposedly taken seasonality into account.

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@Niuncentav010: How can 151k jobs for Oct. be good when yesterday new jobless claims for the week were 457k? What kind of jobs were they? Seasonal retail?

Paul Solman: In the words of the Bureau of Labor Statistics:

Within professional and business services, employment in temporary help services continued to increase in October, with a gain of 35,000. Employment in computer systems design and related services increased by 8,000 in October.

Health care continued to add jobs in October (+24,000).

Retail trade employment rose by 28,000 in October, including increases
in automobile dealers (+6,000) and in electronics and appliance stores
(+5,000).

Within leisure and hospitality, a job loss in arts, entertainment, and recreation (-26,000) in October offset a gain in food services and
drinking places employment (+24,000).

Mining employment continued to trend up (+8,000) over the month.

Employment in manufacturing changed little in October (-7,000).

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Emilian Geczi: As I read the report, the bulk of the new jobs are in low-paying sectors like retail, temporary, and food/drinks. The only exception is health care. How will the likely deadlock in Washington impact the creation of better-paying and more stable jobs?

Paul Solman: You’d think it wouldn’t help much, as your question implies. But I interviewed a liberal, eminent political scientist the other day who thought Congress would have to act if unemployment stays high, no matter the ideology.

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caleb d sinke: The health care industry is the only one that has consistently created jobs during the last several years and it usually offers better paying wages and benefits. How will the efforts of the new GOP House to repeal health care effect that job growth? Positively? Negatively? Or will it remain consistent either way?

Paul Solman: Yes, as the BLS wrote today after reporting the addition of 24,000 new health care jobs: “The gain was in line with the average increase over the prior 12 months (+20,000).”

All else equal, you’d assume that if there’s less money spent on health care, there would be fewer jobs in health care, no?

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Rich Janetka: There are no jobs out there that pay a livable wage. I have been unemployed for 18 months and can’t find a job that pays much more than minimum wage.

Paul Solman: The BLS one last time:

The number of long-term unemployed (those jobless for 27 weeks and over) was about unchanged over the month at 6.2 million. In October, 41.8 percent of unemployed persons had been jobless for 27 weeks or more.

See our series on the 99ers for similar stories.