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Friday, November 8, 2013

Comparing New Jobs Numbers To Economic Reality

Job applicants arrive for an internship job fair held by the Miami Marlins, at Marlins Park in Miami, Oct. 23, 2013. (Lynne Sladky/AP)

Job applicants arrive for an internship job fair held by the Miami Marlins, at Marlins Park in Miami, Oct. 23, 2013. (Lynne Sladky/AP)

The October jobs numbers are out and 204,000 jobs were added, exceeding economists expectations by more than 80,000 jobs.

The unemployment rate went up to 7.3 percent from 7.2 percent in September, but that increase could be connected to the 16-day partial government shutdown last month.

So how reliable are the jobs numbers as an indicator for how the economy is really doing?

NPR’s senior business editor Marilyn Geewax shares her analysis with Here & Now’s Meghna Chakrabarti.

Guest

Transcript

MEGHNA CHAKRABARTI, HOST:

Well, on to jobs. The Labor Department put out the latest employment report today, a week late due to the last month's government shutdown. At first glance the news seems good. In October, employers added 204,000 jobs, many more than most economists predicted. But still, the national unemployment rate ticked up a tenth of a point, up to 7.3 percent. So a paradox. How does the economy add jobs but increase the jobless rate at the same time?

Here to explain is Marilyn Geewax, senior business editor with NPR. Hi there, Marilyn.

MARILYN GEEWAX, BYLINE: Hi.

CHAKRABARTI: So start us off with the good news. What parts of the economy added those 200,000-plus new jobs?

GEEWAX: It was good in a lot of different areas. Actually, the really strong segment was leisure and hospitality. They added about 53,000 jobs. But one thing that really jumped out also was manufacturing. They were up 19,000 jobs. That's a lot. You know, we've really struggled in the manufacturing sector. So to see companies adding employees, especially at a time when there was all that uncertainty coming out of Washington, it was really pretty good.

And then of course we got these revisions also for August and September. It turns out when they looked a little more closely at the data and went back and double-checked, there were 60,000 more jobs created in those two months than we had thought. So it seems that in the back half of the year we're actually on a fairly good roll with, you know, running at about 200,000 jobs a month being added.

Now, of course there's still an awful lot of people unemployed, but at least that's a pretty good trend.

CHAKRABARTI: Now, that good news is a nice antidote to all the doom and gloom we were hearing from the practitioners of the dismal science, the economists, saying that, you know, because of the furlough of government workers during the partial government shutdown, that the news would not be good. So how is that working out?

GEEWAX: Well, that also worked into this because we saw the unemployment rate tick up from 7.2 percent to 7.3. So how is it that you add jobs and yet you see the unemployment rate go up? Well, that's where the federal shutdown plays a role. The thing is, the Labor Department workers, they'll do this thing called a household survey. They called people up in the middle of October and said did you work last week. And hundreds of thousands of federal employees said no, I did not work last week.

That was an honest answer, but they really were just caught in a political fight. They weren't victims of an economic downturn. So it skews the data. When I've talked to economists, everybody keeps using the phrase noise. They keep seeing noise in the numbers. So, you know, I think that this'll sort of shake itself out. After you get several more months of reports, it should clear up a little bit, but October's numbers are a little bit confusing.

CHAKRABARTI: Confusing, OK, but let's go back to that good news, because we've got apparently more employers looking for workers. Does that mean people who are genuinely unemployed are pouring back into the workforce to get those jobs?

(LAUGHTER)

GEEWAX: See, now you're understanding economics. It's totally confusing what's going on because we're also seeing that people are dropping out of the labor force, which seems really weird because you would think that if employees are in fact hiring more people, wouldn't you get up off the couch and say, hey, maybe I wasn't able to get a job but things are looking better, let me get back out there.

So you would think that labor force participation would be rising, and in fact it fell four-tenths of a percent, back to a level we haven't seen since 1978. Now, again, that may just be this federal data that's sort of skewing things, but really there's a bigger question here. A lot of economists that I talk to are questioning what's really going on in the economy.

They worry that these monthly jobs reports that we all pay a lot of attention to, while they do have some value, they're becoming less accurate in this complicated economy that we have these days, where a lot of people are what they call digital freelancers - that is, somebody who says actually I'm not looking for a job, I'm just sitting at home, but they get a freelance job, and they are maybe a Web designer, or they're making an app for your smartphone, or they're a writer.

So they're not really exactly unemployed, but they're not really on anyone's payroll. And they just do work as it comes along. So that kind of ad hoc 21st century freelancy kind of economy is a very tough thing for the BLS folks, the Bureau of Labor Statistics, to capture.

You know, there are a lot - it's a lot easier to go out on a dock and count how many bales of hay are here, and how many bars of steel, and do you have a payroll job or don't you. Today's economy, I don't know, how do you measure the impact of sitting at home, developing an app, or what is the real value of a Twitter or a Google. These things are much harder to measure than bales of cotton and cars coming off the end of an assembly line.

So there are lots of questions these days about what can we do to make this information more accurate.

CHAKRABARTI: Well, it seems imperative that statistical tools catch up with the way our economy is changing, especially with the freelancer future you seem to be describing. I invite listeners of HERE AND NOW to send us their suggestions on how the BLS can increase or better its measurements of the actual labor force, hereandnow.org, send your suggestions there.

But Marilyn, my last question for you is: What are the implications for policymakers if indeed these job reports, because of all the reasons you just said, are getting less reliable?

GEEWAX: Well, it's certainly a big issue for the policymakers at the Federal Reserve because they need to know how strong or not is the labor force so they can determine is it time to start taking actions that will result in lower interest rates. Now, if it turns out that unemployment is still really bad, maybe they need to keep interest rates super-low so that you can help stimulate the economy.

But what if really we're finding out that lots of people actually aren't as bad off as we think, and that means the Federal Reserve might need to start that thing they call tapering - that is, taper down on some of these programs that they have that help keep interest rates very low. So this is a big question for the Federal Reserve and also for fiscal policymakers.

A lot of economists wish Congress would spend more money on data collection.

CHAKRABARTI: Well, Marilyn Geewax is senior business editor at NPR. Marilyn, thank you so much.

GEEWAX: Great to be with you.

JEREMY HOBSON, HOST:

And just a quick note, Meghna, on another story that's coming up later on ALL THINGS CONSIDERED, if you're going to be baking a pecan pie for Thanksgiving, prepare to pay more for it in part because of rising demand for pecans in China. That's coming up later on ALL THINGS CONSIDERED. This is HERE AND NOW. Transcript provided by NPR, Copyright NPR.


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