Fewer Americans Are Working as Payrolls Grow: Data Paradox

By Petr Svab
Petr Svab
Petr Svab
reporter
Petr Svab is a reporter covering New York. Previously, he covered national topics including politics, economy, education, and law enforcement.
July 12, 2022 Updated: July 15, 2022

Company payrolls have expanded in recent months, even as the number of employed Americans has declined, according to the findings of two different government surveys. The paradoxical results might indicate that U.S. job growth has been somewhat weaker than it has appeared.

Non-farm companies added more than 1.1 million employees in April, May, and June, according to the Bureau of Labor Statistics (BLS) establishment survey. In the same period, the total employment level in the country declined by nearly 350,000, the Census Bureau household survey said.

The discrepancy could indicate that the labor market hasn’t been as hot as the establishment survey indicated. That could have significant consequences because the state of the labor market informs businesses, traders, investors, and policymakers’ decisions. The Federal Reserve uses employment statistics as a crucial input toward whether to expand or tighten the money supply, which has tended to cause stock markets to rise or fall.

In recent months, the Fed has been gradually tightening monetary policy, acting on the assumption that there are too many job openings.

The two employment surveys don’t track each other perfectly because they measure somewhat different things.

The household survey asks people whether they are currently working, and BLS uses those results to come up with its monthly unemployment rate. However, the survey only measures employment within a margin of error of about a half-million workers.

The establishment survey asks companies how many people they employ. Diverging from the household survey, it excludes farm workers, those who are self-employed but not incorporated, household workers, and unpaid family workers. Its results have a margin of error of about 120,000 employees.

The margin of error itself can explain why the numbers don’t always rise and fall in tandem, but in this case, the discrepancy is nearly 1.5 million workers. It has seldom reached this size in the past half-century.

Another cause could be found in the groups excluded from the establishment survey. If the number of these workers goes up or down, it only affects Census Bureau survey results, not the BLS survey.

Usually—over time—the results of the two surveys snap more closely back together.

Some economists have pointed out that the current employment situation isn’t so much a product of excess job openings as it is of people leaving the jobs market.

In May, there were an estimated 11.2 million job openings and fewer than 6 million people classified as unemployed. However, the unemployment figure excludes people who weren’t looking for a job in the prior four weeks.

If the pre-COVID-19 pandemic economy only managed to keep up with population growth, adding about 74,000 jobs per month on average, the United States should have had about 2.8 million more people employed in May.

Petr Svab
reporter
Petr Svab is a reporter covering New York. Previously, he covered national topics including politics, economy, education, and law enforcement.