On a Friday morning, usually the first of the month, one of the most closely watched economic reports is published. Within minutes, headlines announce how many jobs the economy added and what the unemployment rate was. The headline numbers are useful, but they are also noisy, and the fuller report contains details that often tell a better story.
What the report is
Its formal name is the Employment Situation. The Bureau of Labor Statistics, part of the Department of Labor, releases it monthly, typically at 8:30 a.m. Eastern time on a schedule published well in advance. Holidays can shift the date.
The report draws on two separate surveys, and the difference between them accounts for much of the confusion about the numbers.
The two surveys behind it
The establishment survey. Formally the Current Employment Statistics program, this asks employers about their payrolls. It produces the headline figure for “nonfarm payroll employment,” the number of jobs added or lost, along with data on hours and earnings by industry. Because it counts jobs at businesses and government agencies, a person with two jobs can be counted twice.
The household survey. Formally the Current Population Survey, this is conducted by the Census Bureau for the BLS. It asks a sample of households about the activities of each member. It produces the unemployment rate, the labor force participation rate and demographic breakdowns. It counts people, not jobs, and includes groups that payroll data omit, such as the self-employed and agricultural workers.
The two can send different signals in a given month. That is not necessarily a sign of error: they measure different things, and each has its own sampling noise.
How unemployment is defined
A person counts as unemployed only if they do not have a job, have actively looked for work in the past four weeks, and are available to work. The unemployment rate is the number of unemployed people divided by the labor force, which is the unemployed plus the employed. Someone who has stopped looking is not counted as unemployed. They drop out of the labor force.
That is why analysts look at several related measures:
- The labor force participation rate, the share of the working-age population that is working or looking for work.
- The employment-population ratio, the share of the population that has a job.
- U-6, the broadest of the BLS’s alternative measures, which adds people marginally attached to the labor force and those working part time who want full-time jobs.
The BLS also reports the number of people working part time for economic reasons, the number of long-term unemployed and average weekly hours, all of which can show strains the headline rate hides.
Why the numbers change after release?
The first estimate is based on a sample of employers who have responded by the deadline, and it is not complete. The BLS revises the prior two months in each report as more responses arrive, and it makes a larger annual adjustment called benchmarking, which aligns the survey estimates with a near-complete count of jobs drawn from unemployment insurance tax records. Revisions can be significant, and they sometimes change the picture of whether the labor market was strengthening or weakening.
The household survey does not undergo the same monthly revisions, but its seasonal adjustment factors are updated each year. For this reason, economists often prefer to look at three-month averages and not a single month’s figure.
Seasonal adjustment
Hiring follows patterns: retailers add workers before the holidays, schools close in summer and construction slows in winter. To make months comparable, the BLS adjusts the data statistically to strip out regular seasonal swings. The adjusted figures are the ones usually quoted, and the unadjusted data are published too.
How can you read it well?
- Look at the trend. One month of data is noisy, so check the average over several months and the revisions to prior months.
- Compare the surveys. If payrolls and the household survey diverge, the difference alone is worth noting but not a reason for alarm.
- Check wages. Average hourly earnings help show whether pay is keeping up with prices, which you can compare with the consumer price index.
- Look at the details. Which industries added jobs? Did hours rise? Did participation change?
- Read the margin. The BLS publishes confidence intervals, which show that small changes in the headline number may not be statistically meaningful.
Policymakers watch the report closely, since employment is one half of the Federal Reserve’s mandate, as laid out in how the Federal Reserve sets interest rates. But no single report settles the question of how the economy is doing.
Release dates can also slip. If government funding lapses, agencies may suspend routine work, and data releases can be delayed, a mechanism described in how federal funding and shutdowns work.
The BLS publishes its release, technical notes and data tables on its website, and reading the first page of the release is often more informative than the headlines it spawns. This article is general information, not financial advice.
Sources: Bureau of Labor Statistics; U.S. Census Bureau; Federal Reserve Board; Department of Labor
