Diverging Jobs Data Raise Questions About Labor Market Health: Payroll growth is strong, but household data and other indicators are weakening
Incorporating Equity Concerns in Regulation by Jeffrey Sparshott of The WSJ. Excerpts:
"The U.S. added workers at a strong pace over the past three months. It is also losing workers.
The conflicting employment data come from two different surveys—one of employers and one of households—used to calculate employment, unemployment and other key figures in the Labor Department’s monthly jobs report. The divergence raises questions about the labor market’s overall strength as more signs point to a slowing economy.
The survey of employers shows nonfarm payrolls growing by an average of 375,000 jobs a month over the past three months. The household survey shows the economy losing an average of 116,000 jobs a month during the same span.
Many economists consider the establishment survey more reliable—in part because the household survey has a smaller sample size and a larger margin of error. The two series tend to converge over time. But some are watching the deteriorating household data closely for early signs the labor market is at a turning point."
"Taken alone, a few poor months for household data alongside solid nonfarm payroll gains might not merit such concern. But the recent losing streak corresponds with other data suggesting slowing growth and some cracks in the labor market.
Gross domestic product, a broad measure of economic output, contracted at a 1.6% annual pace in the first quarter of the year and could decline again in the second quarter."
"The Labor Department also revises its nonfarm payroll numbers several times, but not the household data. Research on previous recessions and recoveries indicate that initial payroll estimates tend to understate job creation in the early stages of a recovery, and overstate it in the early stages of a downturn.
The divergence is partly because the surveys define employment differently. The household survey, for example, includes workers in private households such as nannies or housekeepers, farmworkers and the self-employed, while the establishment survey doesn’t. Someone with two jobs is counted twice in the payroll survey, once in the household survey.
When the Labor Department adjusts its household survey to the payroll definition of employment, the picture isn’t quite as bad—employment rose over the past three months, though by a still-meager average of 37,000 a month."
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