Archives: Jobs Report Explained

Originally published in June 2010
Simon Nguyen

In recent weeks, I have been asked repeatedly to explain various statistics on jobs and unemployment. I’ll attempt to explain them in the simplest way possible. Reliable economic research has shown that the United States will have to produce a net gain of 150,000-200,000 jobs just to keep up with population growth. Anything less than the benchmark number points to a weak job market.

For example, the economy was found to have suffered a net loss of 30,000 jobs in January (2010). Politicians may cite the relatively small net loss as proof that the job market is improving. Yet, it is a deceptive claim. In REAL terms, the net number of able people without a job for the month was actually 180,000 (150K plus 30K). The job market obviously had not improved much from the previous month. But the consensus was that the pace is slowing and that’s a good thing.

The job numbers are often subjected to manipulation and misrepresentation. A good example of this would be the May 2010 job report. According to the report, the economy added a net gain of 431,000 jobs. The gain is the biggest since the year 2000. On the surface, the job numbers seem very positive. But when we closely observe the similarities between May 2000 and May 2010, we will come to realize how misleading the numbers are.

Both 2000 and 2010 are Census years. Of the 431,000 jobs gained in May, 95% of them are temporary Census positions which last only a few weeks. Politicians in Washington will likely brag about the 431,000 new jobs created, but knowledgeable people will come to understand that the true number is 31,000—one that is rather underwhelming.

The unemployment rate is the most misunderstood statistic. At the core, unemployment rates are comparative statistics. A rate of 10% does not necessarily mean one out of every ten people in the U.S. is currently unemployed. Rather, these rates serve as points of reference. Since current and historical rates are calculated using the same formula, we should be able to compare the current employment environment to those of the past. A higher rate than historical rates signals a weak job market. A significantly higher rate than average signals a really bad job market.

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