Devil in the Details

For September, the politically important unemployment rate fell to 7.8% from 8.1%. This is the lowest level since January 2009. And, not surprisingly, accusations that the government had manipulated the latest employment report spread across Twitter and other insipid forums. What is important to understand is that there’s probably nothing wrong with the numbers; however, there is probably something wrong with the common man's interpretation of the numbers.

The Bureau of Labor Statistics unemployment rate is derived from a survey of households, which estimated net job-creation at 863,000 jobs for the month. But their separate establishment survey, derived from official payrolls, reflected a modest, seasonally adjusted gain of 114,000 jobs in September, which was slightly below expectations.

The inconsistent reports reflect the different samples used in the two surveys, one focused on households, the other on businesses. The two surveys often move in different directions in any given month, but over the longer term, have shown a predictable convergence.