Alan Reynolds

When government officials asked people if they had a job last month, 137.6 million said "yes." But when employers were asked, they said they had only 129.8 million on nonfarm payrolls.

There are several reasons why the number of people on business payrolls is bound to undercount the number of workers. If more people are working at home as self-employed consultants, or working through temp agencies, they would not show up as payroll employees. And "nonfarm payrolls" ignores the fact that agriculture added 155,000 workers in August. What is nonetheless quite remarkable is that these two measures of employment are now much further apart than they were back in early 2001.

Experts decided the recession started in March 2001, two months after President Bush was sworn in, although stocks had by then been falling for a year and industrial production for seven months. According to the survey of households at that time, there were 137.7 million employed -- virtually the same as now. Yet the payroll survey then counted 132.5 million jobs -- 2.7 million more than now.

Depending entirely on which measure you choose, we have either recovered all the jobs lost during the recession or lost 2.7 million. Reporters who relish bad news and bad politics invariably tout the latter figure. Washington Post reporter Jonathan Weisman wrote hysterically of "the longest hiring downturn since the Great Depression" -- a patently absurd comparison. California Gov. Grey Davis claimed "no president since Herbert Hoover has seen job losses like this." In reality, today's 6.1 percent unemployment rate is the same as it was in 1994 or 1987 or 1978 -- years in which nobody pretended to see any similarities with the Great Depression.

The reason such a moderate rate of unemployment provokes such immoderate commentary is, of course, the looming presidential election. Yet to the debatable extent that employment might affect next year's election, it is the household survey rather than the payroll survey that surely matters. If 137.6 million people say they have jobs, what difference could it possibly make if the payroll survey implies that a few million of them are somehow mistaken about that?

Alan Reynolds

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