Much has been made about last week's jobs report numbers and how inconsistent the numbers were relative to the sluggish economic recovery. At first glance it may have seemed inconsistent, but a closer look reveals the drop in the unemployment rate from 8.1% to 7.8% was actually consistent with the slower than normal recovery. First, the collection of employment data is compiled through two surveys, the Establishment Survey, which polls 400,000 companies about the number of employees they have. The second is the Household Survey, which asks 60,000 households each month how many people reside in the home and who is working. The report from last week revealed 114,000 new jobs were created according to the Establishment survey, and that 873,000 new jobs were created according to the household survey. Month to month these two numbers can be vastly different, but historically they are not far apart when compared on an annual basis.
So why is this bad? Of the 873,000 jobs created, 582,000 were part time jobs, meaning those who were looking for full time work settled for a part time job. This is consistent with the structural issues affecting unemployment – people continue to remain unemployed for longer periods, stop looking for work, or are underemployed. The drop in unemployment was largely due to a huge influx of (most likely seasonal) part time workers, which is consistent with a lackluster economy, rather than a strong recovering economy.