Greg Mankiw, the author of the most popular economics textbook, briefly explains why unemployment numbers are often so confusing. Read here. He excerpts several paragraphs from his textbook, ending with:
The problem is that even though the Household survey tends to be very volatile, this decline seems to lack face-validity, particularly after the prior month's numbers. The consensus estimate was that the government would report that the unemployment rate was unchanged at 8.1% in September. GDP growth was 1.3% in the second quarter and seems to be no better this quarter. The government's Establishment survey shows there were 114,000 new jobs created in September -- very close to the consensus of 113,000 -- and not sufficient to lower the unemployment rate.
The obvious conclusion is that a new employment measure is needed. Gallup has proposed such a measure -- Payroll to Population (P2P) -- the number of Americans employed full-time for an employer as a percentage of the U.S. population. This is a much simpler measure that has none of the numerous adjustments made to the seasonally adjusted unemployment rate. The P2P deteriorated slightly to 45.1% in September from 45.3% in August, suggesting the real jobs situation was essentially unchanged last month. ...
The Gallup piece goes on at some length to explain their case. Complicating matters with the current system is that the big announcement is made about monthly numbers, but a little later, those numbers are revised, sometimes significantly so, when more complete data is available. All the public ever remembers is the originally announced numbers.
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