November 05, 2012
Last month, when the Bureau of Labor Statistics released its report on the state of the September labor force, it showed a fall in the rate of unemployment from 8.1 percent of the labor force to only 7.8 percent. In response, the Heritage Foundation’s J.D. Foster argued these numbers were not sufficiently reliable because “The household survey, a relatively small sample, reported an astounding 418,000 jobs jump in the labor force at a time when it has been steadily shrinking, and the survey reported an 873,000 jobs jump in employment at a time when the economy is stumbling.” Foster did not provide numbers he thought reasonable.
Friday morning, however, brought us a new report on employment in October, and inspired Heritage’s Amy Payne to write “the economy created about 171,000 jobs, roughly equal to the usual number of new workers in the labor force.” Apart from the fact that 171,000 new workers would only be usual given an economy far from full employment, what makes this assertion interesting is that Payne argues that the “October report partly reversed the mysterious drop in the unemployment rate in the September jobs report.”
These make for an odd collection of claims. If the labor force is growing by 171,000 per month, we should have expected the labor force to grow 171,000 from August to September, and again by 171,000 from September to October, for a total of 342,000 over the two months. The fact that the BLS reported a jump of 418,000 from August to September would suggest that Heritage have anticipated a fall of 76,000 in the size of the labor force in October to bring it back in line with the trend. Instead, BLS reported 578,000 additional labor force participants in October. In other words, if the growth in the labor force was unreliable in last month’s report, it was much more so in this month’s.
Likewise, if the number of employed is growing by 171,000 per month, then the 873,000 increase in employed persons from August to September should have led to a 531,000 decrease in employment in October. Instead, BLS reported a 410,000 increase. As with the labor force numbers, the employment numbers seem more surprising in this report than the previous.
It is true that the fall in the unemployment rate reversed itself in part, but more reliable numbers surely do not explain it. At Heritage, it seems, two worse wrongs can make a right.
