Employment Data

Lots of headlines are highlighting the depressing news of jobs,

See Reuters

http://www.reuters.com/article/2012/04/06/markets-global-idUSL2E8F62KX20120406

see Bloomberg

http://www.bloomberg.com/news/2012-04-07/employment-increase-in-u-s-trails-most-pessimistic-forecasts.html

See CNBC

http://www.cnbc.com/id/46976910

Is the jobs data really that bad? Let us dig into the real source of data and get try to understand what happens. Here is the “THE EMPLOYMENT SITUATION —MARCH 2012” released by BLS.

In sum, nonfarm payroll employment rose by 120,000 in March, and the unemployment rate was little changed at 8.2 percent, the U.S. Bureau of
Labor Statistics reported today. Employment rose in manufacturing, food services and drinking places, and health care, but was down in retail trade. So nothing is too bad from my viewpoint.

The biggest concern by the public is not the unemployment data (since it is down a bit which is good), but the employment of 120k which widely
misses the expectation from consensus of economists (~203k).

The above nonfarm payroll employment data come from so called establishment data. If we look at another statistic data- household data,
which are also from BLS. We might see a different story,

http://www.bls.gov/news.release/empsit.t08.htm#cps_empsit_a05.f.1

Excluding the government employment, the employment in private industries in March 2012 is 111,114 vs Feb 2012 110,778, so the
increase is 336 K, which is strikingly good!

How come the household data is much more upbeating than the establishment data?

According to BLS, here are the differences between these two
sets of statistics,

http://www.bls.gov/news.release/empsit.tn.htm

Household survey data

Household survey. The sample is selected to reflect the entire civilian noninstitutional population. Based on responses to a series of questions on work and job search activities, each person 16 years and over in a sample household is classified as employed, unemployed, or not in the labor force.

People are classified as employed if they did any work at all as paid employees during the reference week; worked in their own business, profession, or on their own farm; or worked without pay at least 15 hours in a family business or farm. People are also counted as employed if they were temporarily absent from their jobs because of illness, bad weather, vacation, labor-management disputes, or personal reasons.

Establishment data

Establishment survey. The sample establishments are drawn from private nonfarm businesses such as factories, offices, and stores, as well as from federal, state, and local government entities. Employees on nonfarm payrolls are those who received pay for any part of the reference pay period, including persons on paid leave. Persons are counted in each job they hold. Hours and earnings data are produced for the private sector for all employees and for production and nonsupervisory employees. Production and nonsupervisory employees are defined as production and related employees in manufacturing and mining and logging, construction workers  in construction, and nonsupervisory employees in private service- providing industries

It should be aware that a major source of nonsampling error in the establishment survey is the inability to capture, on a timely basis, employment generated by new firms. So could the drastically different employment data from household survey and establishment data be due to the latter one missed the employment coming from new firms? I think it is quite possible.

So what is the employment data we should trust then? How about simply average them. And the outcome is 228k which is about the expectation
from consensus of economists. So why the media is so pessimistic about the employment?

I see this is another good buying point for me if market is down on this “sluggish” data.