Gauging Employent

THE BUREAU OF Labor Statistics ’ (BLS) monthly report on labor market developments is the government’s most widely anticipated statistical release and the one that most influences markets, forecasters, and policymakers. The report provides detailed information on employment from two sources: the Current Population Survey of households, which also provides data on unemployment, and the Current Employment Statistics survey of payrolls from nonfarm business establishments and government. These two sources often produce very different estimates of the monthly change in aggregate employment, and the payroll data are widely accepted as the more reli-able. They are featured on the first page of the monthly release and are the employment data most frequently discussed in the business press and other media. The annual Economic Report of the President has recently reaffirmed their reliability relative to the household data, as has Federal Reserve Board Chairman Alan Greenspan. Simply put, to judge by what the experts say and what the media report, most people interested in what is happening to aggregate employment rely on the payroll numbers. They use the household survey for the unemployment rate, demographic breakdowns, and various more arcane measures of labor market developments that only it provides. This paper questions whether the overwhelming preference for the payroll data as the measure of aggregate employment is justified, and concludes it is not