A Not-So-Jobless Recovery After All?
On Friday, September 5, the Senate Joint Economic Committee (JEC) hosted a hearing on seemingly contradictory employment numbers. The purpose of the hearing was to understand the discrepancy between Bureau of Labor Statistics (BLS) payroll and household surveys. As widely reported in the media, the payroll survey shows the economy losing about 1.1 million jobs since the end of the recession. Yet, the household survey shows a gain of over 1.4 million jobs. I bet you haven’t heard about those job numbers.
The BLS phones established businesses for the payroll survey. For the household survey they call people at home. A significant difference between the two surveys is that the household survey accounts for those who are self-employed, and small emerging businesses that may be overlooked by the payroll survey.
“The BLS surveys individual households to determine the unemployment rate, while it asks businesses about the number of people on the their payrolls to determine how many jobs have been lost or gained,” said Chairman Bob Bennett (R-UT) with respect to how employment figures are derived.
This could help us better understand why the unemployment rate fell to 6.1% in August (having peaked at 6.4% two months ago) while there was a collective jaw drop when we learned (thru the payroll survey) that 93,000 jobs were lost in the same month. Furthermore, the August household survey showed 147,000 jobs were gained. The under reported disparity has been occurring since the recession of 2001.
As Haseeb Ahmed writes in a September 9 Economy.com article, “something is amiss in the establishment survey” based on other economic trends showing a turn around in the economy. He is convinced that “the revision patterns of the early-1990s recovery cycle” will be repeated. A total of 1.4 million job gains were revised upward to 2.9 million in the first twenty-one months following the end of the last recession. As Ahmed sees it, the establishment surveys fail to fully capture the hiring activity of small businesses.
The BLS attempts to correct this oversight using certain factors, but they admit that these inputs -- based on historical observations – don’t catch upturns in hiring. Small businesses are usually the first to begin hiring during an overall labor market upturn and, writes Ahmed, “Initial estimates from the establishment survey, therefore, tend to understate employment gains in the early stages of the hiring cycle. In the past, subsequent revisions, based on more comprehensive data, have corrected this problem and lifted the originally reported numbers.”
With the U.S. economy gaining momentum (3.1% second quarter growth), retail sales increasing, business investment on the rise and consumer confidence on the up tick it would seem to make sense that payroll levels should also be stabilizing. The August job loss numbers seemed to defy the direction and momentum of the recovery while surprising most observers.
Just maybe those “establishment surveys” are missing something central to economic recovery and growth – but it wouldn’t be the first time official Washington missed the importance of small business and entrepreneurs in the economy.
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Karen Kerrigan is president of Women Entrepreneurs Inc. and chairs the Small Business Survival Committee.
