195,000: How many fewer people were working in July than June, according to a key measure of employment.
The economy added 163,000 jobs last month, but 195,000 fewer people were working, according to two separate Labor Department reports. How is that possible?
Though they are reported at the same time, the two data points are derived from different places. The number of jobs added comes from a poll of businesses, called the establishment survey, while the unemployment rate and the number of people working comes from a survey of U.S. households. (Read more about the unemployment rate increase here.)
Over time the two reports generally follow the same pattern, but they can move in opposite directions from month to month. The two surveys count people in different ways. The establishment survey counts jobs, not people. So one person holding two jobs is counted twice. But the household survey also counts people — such as the unincorporated self-employed, family employees who aren’t paid, farm workers and those who consider themselves employed but aren’t being paid — who aren’t picked up in the establishment survey.
The Labor Department produces a separate measure of the number of people working that aims to match the establishment concept. To create that number, they subtract the types of workers not counted in the survey of businesses, and then add multiple jobholders. By that measure, the economy added 108,000 jobs — not quite as bright as the 163,000 in the establishment survey, but much closer.
The adjustment closes the discrepancy, but doesn’t exactly explain why it exists. On first blush, it seems like it could be farm workers suffering from a severe drought in the middle of the country who aren’t counted in the establishment survey, but the Labor Department says that the number of people who say they work in agriculture and related industries rose last month.
The drought may be playing a role if people who work as unincorporated independent contractors, such as freelance construction, maintenance or day laborers, are having more difficulty finding work because of the restrictions on water use. There also were more people working multiple jobs last month, which means more jobs reported than people employed.
Whatever the reason, the gap between the two figures highlights an important point about looking at data: don’t place too much emphasis on one month. The only way to understand what’s going on with the economy is to look at the trend, and whichever line you look at over the last few months, it’s too flat to fill the deep hole left by the recession.
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