Employment Reality

There seems to be much confusion about this morning’s employment release.

The BLS bases its report on two surveys, a household survey and an employer survey. Neither is exhaustive, so it results in proportions that are then applied to a base population.

So, for example, if they phone 1,000 adults and 500 report that they are employed, the BLS then believes that 50% of the adult population has a job, at least before seasonal adjustments and so forth. If the population is 100,000 adults, then 50,000 must have jobs. So this January the BLS adjusted its population base, using data from the 2010 census. The population increased by roughly 1.5 million. Accordingly, all the other numbers that are calculated from that base using proportions from the surveys changed.

Specifically, the number of people not in the labor force increased dramatically, by 1.25 million. However, the population increase was predominately in people 24 and under, and and those 55 and over. Therefore, at least some of the 1.25 million increase consisted of people we didn’t know about before. This doesn’t mean that 1.25 million people were dropped from the labor force, it means that there were people not in the labor force who hadn’t been counted previously.

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