On Friday, the Bureau of Labor Statistics will announce the employment report for December. It likely will show a further decline in the unemployment rate--the most politically potent of all economic statistics--since initial claims for unemployment compensation have dropped sharply in the last several weeks. The White House will cheer and claim that the news is confirmation of the wisdom of its economic policies. To counter this good news, Democrats will have to work even harder to find a dark lining behind the silver cloud.
For some time, Democrats have been arguing that this has been a jobless recovery despite a fall in the unemployment rate from 6.4 percent in June to 5.9 percent in November. They have made this argument by using different data than that used to calculate the unemployment rate. Lately, they have also taken to recalculating the unemployment rate in nonstandard ways in order to make it seem higher than it really is.
To understand what is going on, one needs to know that the Labor Department collects employment data in two different surveys. The first, called the household survey, is based on telephone interviews with about 60,000 households per month. This survey is used to calculate the official unemployment rate, which consists of people not working but looking for work as a share of the labor force (those working plus those looking for work). Those not looking for work, such as retirees and stay-at-home mothers, therefore, are not counted as unemployed.
The second survey is called the payroll survey and is based on the actual employment records of domestic businesses. Economists generally consider this survey to be a more accurate measure of month-to-month changes in national employment. However, there is evidence that during cyclical upturns, such as we are in now, the payroll survey misses many new business startups, causing it to understate employment growth. Eventually, the Labor Department finds these businesses and adjusts its data upward, which it probably will do for recent payroll data when revised figures are released on Feb. 6.
Bruce Bartlett is a former senior fellow with the National Center for Policy Analysis of Dallas, Texas. Bartlett is a prolific author, having published over 900 articles in national publications, and prominent magazines and published four books, including Reaganomics: Supply-Side Economics in Action.
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