On Friday we'll see if the November unemployment numbers continue to show an accelerating economy, or one that's sputtering.
In October the economy added 171,000 jobs. That's more than previous
estimates, but at the same time the unemployment rate ticked up a bit
to 7.9%.
Which brings us to the topic of today's Just Explain It.
The monthly unemployment report: What does it measure AND how does
the government calculate it? How can we add jobs and at the same time
see the unemployment rate goes up? What is the "real unemployment rate"?
And, can you believe the numbers?
Here are the basics…
On the first Friday of each month, the U-S Bureau of Labor Statistics
releases its job assessment. The report contains employment data from
the previous month and is made up of two figures: the unemployment rate
and the total nonfarm payrolls - which is just that, all jobs outside
the farming industry that were added the previous month.
VIDEO
The government determines these figures by collecting information from a large sampling of individual households and employers.
To find out who's working and who's not, two things happen. First,
the Census Bureau surveys about 60,000 households…and only questions
about employment are asked. This is what's called the household survey.
At the same time, the Bureau of Labor Statistics checks in with
nearly half a million worksites. They gather the information on how many
employees were on the payroll the month before.
Then the independently collected numbers are compiled using a method the Labor Department has applied for decades. That's how the unemployment rate is calculated.
So how did the unemployment rate go up when more jobs were added?
The unemployment rate inched up to 7.9% because not all those joining
the workforce found work.
That brings us to what's called the "real unemployment rate."
Unlike the headline figure, the "real rate" is the broadest measure
of U.S. unemployment. It takes into account workers who have given up
looking for work, as well as those who are part-time, but would like a
full-time job.
In October, households indicated that the "real unemployment rate" was 14.6%. That's down one tenth of a percent from September.
And finally, as to the trustworthiness of the data, there is nothing
to worry about. The Bureau of Labor Statistics collects and assesses all
its data independent of the White House and Congress.
Related link: Why the Fiscal Cliff May Trigger a Recession
However, sometimes the jobs data is gathered by unreliable surveys
and has to be revised. The best way to judge the state of employment in
America, is to focus on the general trend — not just a single month's
report.
Did you learn something? Do you have a topic you'd like explained?
Give us your feedback in the comments below or on twitter using
#justexplainit.