For release: March. 31, 2004

Contact:	Charles Henderson
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Can it be a Jobless Recovery if More People are Working?

ST. LOUIS, Mo.— One of two official employment series produced by the Bureau of Labor Statistics (BLS) indicates that the number of non-agricultural jobs has fallen, while the other series says that the number of people working has increased. Which to believe, especially in an election year? Federal Reserve Bank of St. Louis economists Kevin L. Kliesen and Howard J. Wall analyzed the two series and the reasons for the discrepancies between them for the April publication of The Regional Economist, the St. Louis Fed's quarterly magazine of business and economic issues.

In the two years following the end of the recession in November of 2001, the BLS' estimate of non-agricultural jobs (payroll employment) had fallen by about 809,000 while the agency's survey of the total number of people working (household employment) had risen by more than 2.3 million. How can that be?

Kliesen and Wall said that answering the question requires an understanding of how the different types of labor-market data are collected and what each of the two employment measures are designed to communicate.

The BLS' "Current Population Survey" (CPS) is based on a sample of 60,000 households and is used to construct data on the labor-market status of individuals —whether they're employed, unemployed, or out of the labor force altogether. On the other hand, the BLS' "Current Employment Statistics" (CES) is based on the payroll reports of a sample of more than 390,000 firms that employ nearly 50 million non-farm wage and salaried workers.

"The major difference between the two surveys," said Kliesen and Wall, "is that the household survey covers more employment categories than the payroll survey, such as self-employed workers, farm workers, and so on."

Another difference they noted is the way in which the survey treats people who may hold more than one job. For example, the household survey simply reflects whether someone is employed or not, so a person with two jobs will be counted only once.

A third difference is how each treats unpaid absences. For example, the household survey counts a person who is temporarily absent without pay as employed, while the other doesn't count the person in that situation at all.

Trying to reconcile the differences, Kliesen and Wall broadened the payroll employment series, accounted for unpaid absences, and eliminated the double-counting of employees with more than one job. In addition, they cited some studies which suggest that the widening gap between two surveys may be due to an underestimate of the working-age population. After accounting for all that, however, they were able to reconcile only about a third of the discrepancy between the two series.

An additional reason offered by Kliesen and Wall is the possible undercounting of the growth of new firms. "There is a concern that current methods do not keep up with the relatively rapid growth of establishments during recovery periods," they said. "If so, then scaling up from the sample will underestimate the actual number of employees."

While they noted that the two measures are still a long way apart, they concluded that the BLS "has taken steps to avoid the problems of the past."

The Regional Economist is also available online at the St. Louis Fed's web site.

With branches in Little Rock, Louisville and Memphis, the Federal Reserve Bank of St. Louis serves the Eighth Federal Reserve District, which includes all of Arkansas, eastern Missouri, southern Indiana, southern Illinois, western Kentucky, western Tennessee and northern Mississippi. The St. Louis Fed is one of 12 regional Reserve Banks that, along with the Board of Governors in Washington, D.C., comprise the Federal Reserve System. As the nation's central bank, the Federal Reserve System formulates U.S. monetary policy, regulates state-chartered member banks and bank holding companies, and provides payment services to financial institutions and the U.S. government.

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