ECONOMICS: Jobs, Jobs, Jobs-And Surveys
Wesbury, Brian S.
RO0M0 4AL, wLasOnuTwot [ 1 2 a good day for PcEres,siFrdeindtaBy, Moshar. Icth 5, was reported that non-farm payroll employment increased by only 21,000 in February, well below the consensus...
...Every company that hires a new employee is required to file with the UI system and therefore, with a slight lag, these records will likely include every payroll employee at some point...
...If these statistics are representative of other states, and I suspect that they are, the US...
...Last year, however, the BLS instituted a new system to track the birth and death of firms...
...In essence, the new owners are self-insuring—a typically American entrepreneurial undertaking...
...But payrolls are not where the action is today...
...In the past, this survey tended to understate job growth in good times because it undercounted new business formations...
...In a comprehensive and even-handed analysis of the two employment surveys, Tim Kane of the Heritage Foundation wrote that "contraryto the conventional wisdom, the best measure of job growth now comes from...the Household Survey...
...The data necessary to make this calculation are taken from other surveys and Unemployment Insurance (UI) tax returns...
...The real growth is entrepreneurial...
...While much has been written about jobs, the facts are often obscured by overly politicized, or pessimistic, views...
...Most independent contractors and many small partnerships avoid being counted at all...
...The reason the above information is important is that the Establishment Survey does not count these types of jobs...
...Some say that job growth is being held back by productivity or outsourcing...
...As in all debates about economic statistics, there is some truth in everyone of these arguments...
...According to records kept by the Tennessee secretary of state, 7,412 LLC's were formed in Tennessee during 2003, a record number...
...Datacollection techniques are becoming quickly outmoded...
...Your barber, hair stylist, manicurist, or masseuse are often independent contractors...
...The world has changed and our statistical machinery just can't keep up...
...is experiencing a wave of structural and entrepreneurial change...
...People are considered employed if they did any work for pay or profit during the survey week...
...Americans are starting companies and testing their entrepreneurial wings as never before...
...According to the Household Survey, however, 1.9 million jobs have been created...
...One is called the Establishment Survey...
...Icth 5, was reported that non-farm payroll employment increased by only 21,000 in February, well below the consensus forecast of 125,000...
...Two important conclusions relate to the above analysis...
...The economy is doing much better than the jobs data suggest it should be...
...Without significant job growth, none of this could have happened...
...According to the Household Survey, the number of self-employed people in the U.S...
...From this survey, the BLS estimates total payroll employment...
...Virginia Postrel, in a recent New York Times essay, pointed out that the BLS counts just 27,160 massage therapists in its payroll statistics...
...z Brian S. Wesbury is chief economist at Griffin, Kubik, Stephens & Thompson, Inc., a Chicago-based investment bank...
...First, rash actions by government to stop job outsourcing or limit foreign trade are not necessary...
...The jobs picture is much better than conventional wisdom would have it...
...Something is wrong...
...His findings suggest that self-employment and the problems of measuringpayrolls as people change jobs has led to an understatement of at least 1.6 million jobs by the Establishment Survey so far in this recovery...
...While the two surveys often diverge, especially early in a recovery, never before has the difference in their growth rates been as large...
...The unemployment rate is calculated by asking respondents a series of questions related to employment...
...The proof is in the pudding...
...But outward appearances can be deceiving...
...My brother's two employees used to be counted in the payroll survey, but no longer...
...Self-employment and Limited Liability Corporations (LLC) are growing like weeds, and these types of employment do not fit into the normal payroll employment framework...
...The Bureau of Labor Statistics (BLS) completes two different surveys of employment each month...
...Simply put, there is no way that the economy could have grown at the fastest rate in 20 years during the second-half of 2003 with no job growth...
...Moreover, new and existing home sales hit all-time highs in 2003, retail sales grew at their fastest rate in four years in February 2004, and the net absorption of office space turned positive in the past year after many years of decline...
...The Household Survey: For this survey, the BLS samples 60,000 households nationwide during the week that includes the 12th of each month...
...CCORDING TO THE ESTABLISHMENT SURVEY, since the end of the recession in November 2001, payroll jobs have declined by 718,000...
...Government employees gather information on all members of the household over 16 years of age...
...He finally gave up and asked his two employees to become partners in business so that he could eliminate the insurance costs...
...Statistical methods designed 20 or 30 years ago are not adequate for measuring our new economy...
...However, the American Massage Therapy Association has more than 46,000 members and estimates that there are between 260,000 and 290,000 massage therapists in the U.S...
...As a result, they are overlooked by the Establishment Survey, but captured by the Household Survey...
...In other words, the BLS is undercounting massage jobs by at least 200,000...
...Others say that the US...
...While the payroll statistics reported each month are very good at measuring the number of people employed in traditional jobs, they are not good at measuring employment in an entrepreneurial economy...
...Let me describe them...
...They do not show up on any company's payroll...
...is going through structural changes that make it impossible to create net new jobs...
...The survey is designed so that respondents must answer questions and not give opinions...
...Second, if people really do vote their pocketbooks, then no matter how many times they are told that jobs have been lost and the economy is suffering, their own life experience will tell them differently...
...But government statisticians stand behind their numbers, and Alan Greenspan believes that the Establishment Survey is the better statistical tool for measuring employment...
...My brother has run a small painting company in a Midwest college town for the past 15 years...
...The answer to this dilemma is staring us right in the face...
...the other is called the Household Survey...
...Inexpensive accounting software and cheap computer power is making it easier than ever to start a business...
...The cost of unemployment, workers' compensation, and liability insurance was more than $10,000 per year and rising...
...These jobs are missed entirely by the payroll survey...
...Slow job growth does not make for a great environment in which to run for re-election...
...L ARGE COMPANIES ARE LAYING-OFF WORKERS by the hundreds of thousands and the economy is chang'ng so fast that many more people are deciding that an entrepreneurial effort is losing its relative risk...
...The self-employed do not pay unemployment insurance and are missed by the payroll survey...
...So are the trades people who built your house...
...The Establishment Survey: During the week that includes the 12th of each month, the BLS collects data on payrolls, hours worked, and earnings from 400,000 business establishments nationwide (out of a total of more than 8 million...
...The Establishment Survey is designed to measure payroll employment...
...Still others suggest that the unemployment rate is much higher than reported, because people are dropping out when they can't find work...
...Payrolls may be growing slowly, but that is no longer where the real job creation is taking place...
...Each month 25 percent of the survey respondents are changed, so that no household remains in the survey for more than four months...
...As a result, George Bush did not have quite as bad a day as it may have appeared when job growth was reported as being anemic...
...Despite the fact that the unemployment rate remained at a very low 5.6 percent, major media outlets and the presumed Democratic nominee, John Kerry, pounced on the news...
...People are considered unemployed if they do not currently have a job, but have actively sought work in the previous four weeks...
...Our dynamic, "New Era" economy is difficult to measure with data collection techniques designed in decades past...
...Keeping roughly 75 percent of survey respondents the same from month to month and 50 percent from year to year achieves continuity...
...Each month, the reported number of net new jobs is adjusted by what is called a Net Birth/Death Adjustment...
...It also attempts to quantify the number of self-employed...
...Job growth is actually much stronger than the payroll data suggest, and the unemployment rate is a better signal of labor market conditions...
...has climbed by 644,000 since the recession ended, and there is good reason to believe that this number is understated significantly...
...While small businesses can get a break on insurance as they get larger, if they want to stay small (as my brother did) the cost becomes a huge burden...
...In the boom year of 1998, just 6,934 were formed...
...This is becoming hard to swallow...
...Eight months later, the same households are then surveyed during the same four months in the following year before ending their participation in the survey...
...But to understand the entire story, you must understand the economic data...
Vol. 37 • April 2004 • No. 3
