Did a Million Americans Leave the Ranks of the Unemployed in April?

Friday's BLS report shows, on an unadjusted basis, that a million Americans left the ranks of the unemployed in April. The number of unemployed fell to 11.9 million in April from 12.9 million in March. Part of this decline came from a reduction in the size of the workforce of about 400,000 as the workforce participation rate fell to its lowest level since 1981. The rest resulted from an increase of about 600,000 in the number of employed Americans.

As a result of these household survey findings, the BLS reported an unadjusted unemployment rate of 7.7% -- down from 8.4% in March. In contrast, Gallup's unadjusted unemployment rate, based on nearly 30,000 random phone interviews, was 8.3% -- also down from 8.4% in March.

The slow economy suggests April new jobs created were likely a lot closer to the BLS payroll increase of 115,000 than the household survey's nearly 600,000. It also suggests that the unadjusted unemployment rate is probably closer to Gallup's 8.3% than the government's 7.7%. In turn, the foundation supporting the government's decline in its seasonally adjusted unemployment rate to 8.1% seems a lot weaker than that supporting Gallup's survey results showing an increase in the adjusted unemployment rate in April.     

Higher Unemployment Rate Likely Despite New Jobless Claims

Gallup's seasonally adjusted unemployment rate for April is 8.6%. The BLS could report less of an increase on Friday -- but not because of the latest jobless claims report, which shows a sharp decline during the most recent reporting week. That report reflects jobless claims that occurred after the mid-April time frame of the government's household unemployment survey.

Wednesday's ADP report suggests another relatively weak new jobs number -- adding fuel to the question of whether the decline in the unemployment rate earlier this year largely reflects such factors as the unusually warm weather and an early Easter as opposed to real improvement in the unemployment situation. Gallup's data seem to confirm that it is the government's unemployment data that have been misaligned, not the other economic data showing relatively slow economic growth.

Gallup's seasonally adjusted unemployment rate for March was 8.1% compared to the BLS unemployment rate of 8.2%. Of course, the unemployment rate the government reports on Friday may not be as high as Gallup's seasonally adjusted rate. The BLS might apply a smaller seasonal, as it did in February and March. Further, it looks like the workforce is continuing to decline and that could keep the unemployment rate lower than it would be otherwise.

While a weak new jobs number may impact Wall Street by itself, a combination of a weak jobs number and an increase in the unemployment rate might have a bigger impact on the Fed and the Street. In this regard, Gallup's unemployment data suggest QE3 may be coming a lot sooner than the FOMC expected when it met last week.

What to Look for With April Unemployment

April's unemployment rate may be key in determining whether the improvement in the U.S. jobs situation early this year was real or, alternatively, an artificial borrowing ahead of jobs due to the warm weather and an early Easter. As of April 9, Gallup's unadjusted unemployment rate stands at 8.2%, down from 8.4% in March. Using the BLS seasonal adjustment for April 2011 of +0.3 percentage points, this translates into a seasonally adjusted rate of 8.5% at this point in April 2012. While lots of time remains before the end of April, this suggests it may be well worth watching Gallup's Daily monitoring of the unadjusted unemployment rate in the days and weeks ahead.

The unemployment rate results released by the government last Friday were virtually the same as those Gallup released on Thursday. Prior to seasonal adjustment, both Gallup and the BLS reported an unemployment rate of 8.4%. In fact, Gallup's unadjusted results have closely paralleled the unadjusted BLS results since August of 2011 -- with the notable exception of February, when the spread was 0.4 points.


Gallup's seasonally adjusted rate for March was 8.1%, calculated using the BLS March 2011 seasonal adjustment of -0.3 points. The government's seasonally adjusted unemployment rate for March was 8.2%, calculated using a new 2012 seasonal adjustment of -0.2 points.

While the unemployment rate declined in March, the government's establishment survey disappointed by announcing only 120,000 new jobs created when 200,000 or more were expected. This reinforced worries that recent improvements in the jobs picture cannot be reconciled with the modest growth of the economy. It also seems consistent with claims that good weather pulled some job creation forward to January and February.

Not as well noticed is the insight provided by Gallup's Daily tracking of the unemployment rate. Gallup's seasonally adjusted unemployment rate dropped from 8.5% in mid-March to 8.1% for all of March. The question is whether this sharp decline in the last half of March is real or simply extended the pull-forward weather effects of earlier this year. Easter was early this year, on April 8 compared with last year's April 24. An early Easter not only tends to bring forward retail sales but also tends to do the same with jobs.

Since perceptions of an improving jobs situation appear to have positively affected economic confidence early this year, a reversal in Americans' job market perceptions could do just the reverse.

Gallup Adds Seasonally Adjusted Unemployment Rate to Its Employment Measures

Gallup today released its first seasonally adjusted unemployment rate trend. This series is based on the unadjusted unemployment rates Gallup has been reporting since January 2010. Each month, Gallup will now provide both an unadjusted as well as a seasonally adjusted unemployment rate based on the seasonal adjustment used by the Bureau of Labor Statistics (BLS) in the same month of the previous year.

Gallup's March unadjusted unemployment rate is 8.4% and its seasonally adjusted rate is 8.1%. Gallup's seasonally adjusted unemployment rate trend is generally consistent with the official BLS unemployment rate trend used in the past couple of years.


Gallup will continue to report its core unemployment metrics on an unadjusted basis. Gallup believes that its unadjusted metrics provide key insights into what is actually happening in the marketplace to Americans working and looking for work as well as in the overall economy. Gallup's metrics are based on a random sample of approximately 30,000 Americans each month, and follow the same general procedures as used by the BLS, with some methodological differences.

At the same time, we have determined that releasing a seasonally adjusted unemployment rate series provides some additional benefits, including:

• Allowing comparison of data across months on a fair basis when seasonal factors might otherwise affect the individual monthly results.
• Providing for analysis of underlying trends in the data by excluding seasonal variations.
• Producing more clarity about how Gallup's unemployment data relate to the results the BLS reports on a monthly basis.

Gallup finds this to be a good time to provide seasonally adjusted data. The factors associated with the 2008-2009 recession and financial crisis are now dissipating, increasing the accuracy of the seasonal adjustment process. Gallup now feels comfortable reporting a seasonally adjusted unemployment rate series dating back to January 2010.

The importance of adding Gallup's seasonally adjusted unemployment rate to Gallup's overall unemployment reporting is illustrated by Gallup's unemployment results early this year. On an unadjusted basis, Gallup's U.S. unemployment rate was 8.4% in March, down from 9.1% in February. Seasonally adjusting both months, based on the BLS adjustment process used in the prior year, provides a Gallup rate of 8.1% in March compared with an 8.6% rate in February. Both measures accurately reflect the month-to-month change in the unemployment rate as measured by Gallup. But, by seasonally adjusting the data, the Gallup results provide an enhanced context for those seeking to compare the numbers to the BLS seasonally adjusted rate of 8.3% for February.

Unemployment Numbers Suggest U.S. Economic Boom, or Not

A careful look at the government's unadjusted household unemployment data shows a stunning 740,000 jobs added to the economy in February -- three times the 227,000 reported based on the establishment payroll survey. If this is economic reality, then the underlying economy must be growing much faster than most Americans currently believe. If the U.S. economy is surging, and jobs increased at the rate of three-quarters of a million last month, why haven't we heard a lot more about it? And, given a rapidly expanding economy, how can Gallup's nearly 30,000 random interviews with Americans across the nation show a significant increase in the unemployment rate?

According to the government's household survey, the number of employed Americans increased 740,000 to 140.684 million in February from 139.944 million in January. This increase of three-quarters of a million jobs is how the unadjusted unemployment rate was 8.7% in February compared with 8.8% in January, even as the U.S. workforce increased by 629,000 employees and the number of unemployed Americans fell by 111,000.


On the other hand, a comparison of February's household survey results to the government's December 2011 unadjusted unemployment data suggests a much more modest improvement in jobs and the U.S. economy over the past two months. The number of employed Americans increased by 3,000 on an unadjusted basis between February 2012 (140.684 million) and December 2011 (140.681 million). On the same basis, the number of unemployed Americans increased by 738,000 to 13.430 million in February 2012 from 12.692 million in December 2011. The U.S. workforce increased by 741,000 over these two months. The government's unadjusted unemployment rate increased to 8.7% in February 2012 from 8.3% in December 2011.

This morning on CNBC, there was discussion about how the increase in payroll survey jobs is hard to reconcile with economists' growth estimates for the U.S. economy. If the payroll jobs numbers are right, then the economy is growing faster than estimated, or maybe, productivity is plunging. Of course, if there are questions about how we reconcile payroll jobs with other economic data, making economic sense of the household survey surge in jobs is even more difficult.