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A Survey of 60,000 Households Says…

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Nick-Case-smileOn the first Friday of every month at 8:30 AM eastern time an update to one of the most important economic data series is released – the monthly jobs numbers for the United States. Last Friday was no different and we learned that 242,000 jobs were created in February while 4.9% of the population remained unemployed. Also included in the report was data that showed average hourly earnings declined slightly for the month, down 0.1%. While these numbers are critical in gaining insight into future growth prospects for the economy they probably also oversimplify the detailed and complex process with which they are calculated.

Every month a division of the U.S. Department of Labor called the Bureau of Labor Statistics is responsible for collecting and analyzing data regarding employment trends in the United States. The data actually comes from two distinct surveys, one called the Current Population Survey (CPS) or more commonly known as the “household survey” and the other called the Current Employment Statistics (CES) or “establishment” survey.

The CPS or “household survey” is conducted by polling 60,000 households in roughly 800 different geographic areas throughout the country. The questions in the survey focus on determining the current number of people in the labor force and whether or not those people are employed or unemployed (i.e. actively looking for a job and available for work). If someone is not currently either employed or unemployed, then they are not considered part of the labor force and are excluded from the CPS survey. The CPS survey (which is carried out over one week during the month) asks questions such as “Last week, did you do any work for (either) pay (or profit)?” and “Last week, could you have started a job if one had been offered?” Using the results of these questions the size of the total labor force as well the number of active participants is estimated and the unemployment rate is determined.

The “establishment” survey on the other hand is conducted by contacting employers directly and focuses on total employment, number of hours worked, and current wage levels. Roughly 146,000 businesses and government agencies are involved in the survey each month, which includes roughly one third of all non-agricultural payroll employees. Data from this survey is what is used to calculate total job growth and changes in average hourly earnings.

For more information on the way the unemployment rate and total employment is calculated check out these links:

http://www.bls.gov/cps/cps_htgm.htm

http://www.bls.gov/ces/

Nicholas Case, CFA®
Senior Investment Analyst

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