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Monday, March 12, 2012

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.


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