231-922-9460 | Google +

Monday, May 10, 2010

At a Glance: 2 Employment Surveys

Associated Press

The economy added a net 290,000 jobs in April — the biggest monthly total in four years. Yet the unemployment rate rose from 9.7 percent to 9.9 percent.

How did that happen? It's because of how the government calculates who's employed and who isn't.

The government does two employment surveys each month.

One is called the payroll survey. It asks companies and government agencies how many people they employ. This survey produces the number of jobs gained or lost during the month. In April, the payroll survey showed a net increase of 290,000 jobs. By contrast, in January 2009, the survey showed a loss of 779,000 jobs.

The other is called the household survey. Government workers ask households about the employment status of adults living there. Those without jobs are asked whether they're looking for one. If they're not, they're no longer considered part of the work force and aren't counted as unemployed. The household survey produces the unemployment rate each month.

As recessions drag on, many people who have lost a job and have looked for one for months, give up. These "discouraged" workers were counted as unemployed in the household survey while they were looking. But once they stop, they're no longer counted as unemployed. About 2.4 million people were classified as "discouraged workers" last month, up from 1.4 million when the recession began in December 2007. That exodus helped keep the unemployment rate from rising even higher.

Once a recovery gets under way, positive news — like rising stock prices or companies announcing plans to hire — leads discouraged workers to start looking again. As they rejoin the work force and look for jobs, these people are once again counted as unemployed in the household survey. And they drive up the unemployment rate.

All that's happening now. Previously discouraged workers have become encouraged enough to start looking again because companies have started hiring again. So these people are counted as unemployed again. The result is that in April, the unemployment rate rose from 9.7 percent to 9.9 percent.