Arnold Kling  

The Two Labor Market Surveys

Comment of the Week, 2003-09-1... Minimum Wage and CEO Pay...

The U.S. Department of Labor uses two different surveys of the labor market. As Alan Reynolds put it,

When government officials asked people if they had a job last month, 137.6 million said "yes." But when employers were asked, they said they had only 129.8 million on nonfarm payrolls.

However, Alan Krueger says that there is less to this divergence than meets the eye.

If adjustments are made to the household survey to make it count jobs in a manner comparable to the establishment survey, then instead of an increase of 842,000 jobs since August 2002, the household survey indicates a loss of 425,000 jobs — almost as large as the 560,000 jobs lost according to the establishment survey.

Krueger does not go into detail about what "adjustments" are made. One of the controversies concerns an increase in self-employment, which would show up in the household survey but not in the payroll survey. If one of the "adjustments" is to take self-employment out of the household survey, then I would see that as a substantive adjustment, not simply a technical one.

One concern I have is that if Jane Doe separates from the payroll of BigCorp to become a self-employed consultant for BigCorp, her job disappears from the statistics but her output does not. If that is the case, then productivity growth would be artificially boosted. In private correspondence, Brad DeLong suggested to me that this is not the case--he says that BigCorp's value added would be net of Jane's consulting services. I agree that this would happen in principle, but I am not sure that the productivity statistics would use the correct net value added measure in practice.

For Discussion. What is the likelihood that some of the weak job growth and strong productivity growth of the past two years is in part a statistical mirage?

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CATEGORIES: Macroeconomics

COMMENTS (2 to date)
Lawrance George Lux writes:

The Unemployment rate is a vital statistic in Economics, and always debatable, because of the differect Accounting procedures. There is no doubt, though, of a horrific job loss since the beginning of the Bush administration. A possible half of this loss can be attributed to events outside the economic arena, but at least half must be attributed to poor administration policy; this policy assuring Profitability to Corporate enterprise, even within falling Productivity and Sales. This cushions Stockholder dividends from shock, and maintains the current Pay Benefits packages for Management. The trouble arises in it allows for Downsizing, even at the cost of Sales and Productivity. Business has been quick to utilize this avenue.

The most important element for Economic performance is maintenance and increase of Consumer Demand. This is totally dependent upon Household Income. The real disaster facing the current Economy lies in the real losses of Household Income, due to overall loss of jobs; but equally as well, extreme loss of Middle-Income jobs through downsizing. Recovery of these Middle-Income jobs are elemental for improved economic performance. lgl

Randall Parker writes:

Does the IRS ever try to estimate employment based on the data they have? They ought to be able to track (albeit with a greater time lag) self-employment rates with tax returns.

Even if the IRS figures would lag too far in time to track short-term trends they'd be a useful tool with which to calibrate other methods of tracking employment.

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