American businesses created a surprisingly paltry 51,000 net new jobs in September, the Labor Department reported today. Still, the unemployment rate ticked down a notch to 4.6 percent.
Only people who are actively seeking work are counted as unemployed, so it is not unusual for the unemployment rate and the job creation figures to give apparently contradictory readings about the job climate. Still, economists had forecast much stronger job growth for the month — closer to the 150,000 or so new jobs that they say are needed to keep up with population growth.
I've learned to be dismissive of the "unemployment rate" that the Bureau of Labor Statistics hands out. For one, as it says here, they're only counting unemployed but employable people (anyone over 16) actively seeking work. This number is almost useless. If I had the time I'd go over Census numbers to see what the overall percentage of employed vs. unemployed was for the past 5 years. Then, adjusted for population growth, we could get some real idea of where we're at. Plus, under-employment is almost as bad in that it keeps people off the unemployment rolls, but doesn't pay enough for them to contribute to the economy in a meaningful way. And it's really hard to get a number for that. More intelligent people than me study such things and still can't get precise numbers. I found an explanation on Business Week Online.
But wait! The same report also showed the number of employed workers rose by 271,000, which helped push the unemployment rate down from 4.7% to 4.6%. Great news for the Republicans to trumpet going into an election.
But wait! How could the increase in jobs be different than the increase in employed workers? The short answer is that the jobs number is based on a survey of companies, while the data on employed and unemployed workers is based on a survey of households. Very often these two numbers diverge, on a month-by-month basis and even longer.
But wait! It gets even worse. Usually economists are more willing to trust the jobs numbers, because it is based on a broader sample than the household numbers. The survey of households includes only 60,000 households, which is only a small fraction of the U.S. population.
There you go: numbers from two different sources that don't agree. That's just what happens. I still think that an overall number of employed vs. unemployed in the entire population would be a more meaningful figure.
In any case, a lower unemployment number doesn't really help the argument of anyone who is still saying the economy is doing well, since it's not very accurate. Number of jobs created is, I think, a better number to work with and that one points out that not enough jobs are being created.
Overall, the situation still sucks. No surprises there.