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Two Surveys, Two Different Stories in Jobs Report
Whether September's jobs numbers were mediocre or showed signs of improvement makes little difference for the millions of people without work. We need years of strong economic growth to even begin to get back to a healthy economy.
Two things were notable about Friday's job report. First, the unemployment rate made a surprising, statistically significant decline from 8.1 percent to 7.8 percent, and this drop wasn't a result of further decline in labor force participation. On its own, this is a signal of an improving labor market and, since this occurred just over a month from a presidential election, it got a great deal of attention—some of it bad as there was considerable but unfounded speculation that the numbers must have somehow been manipulated by the administration.
Second, most of the other data in the report was less positive. In particular, data from the much larger survey in the release indicated that were only 114,000 new payroll jobs created in September. This is more consistent with the continued sub-par economic performance we've been experiencing over the past six or seven months.
The monthly jobs report presents the results from two different surveys. One is a survey of businesses and uses payroll tax records—hence, it is often called the "payroll survey." The other is a survey of households conducted in person or by phone.
Data from the two different surveys often give slightly inconsistent views of the labor market, something that has been occurring for several months now, as seen in the accompanying chart below. Using the best single, real-time indicator from each survey—the payroll job growth data from the establishment survey and the employment ratio from the household survey—we can see this discrepancy.