The news from the household survey of the drop in the unemployment rate to 8.6 percent is great news — if you believe it. The household survey is the more volatile of the surveys and there are some anomalies that concern me.
First, the drop in the unemployment rate is split between strong employment growth in the household survey and a sharp spike in the category “not in labor force.” The latter category has declined for the past four months as potential workers felt more encouraged about the economy. The increase of those out of the labor force is not because they are too discouraged to look for work. The infamous alternative rates of unemployment, which measures discouraged workers, all declined.
The reason for the increase in individuals outside the labor force led me to my second concern. According to the household survey, it is adult women who left the labor force in massive numbers — 90 percent of the increase of those “not in the labor force” were adult women. If the household survey is correct, employment of adult women declined by 210,000 last month. On the other hand, adult men saw a huge drop in their unemployment rate to 8.3 percent from 8.8 percent, and the adult male employment rose by 474,000. It is unlikely that in the past month there was such a divergence in the labor market between the sexes, especially since some traditional male industries such as construction continue to shed workers.
The establishment survey does not show such strong employment growth. Nor does it show the divergence between male and female employment. According to the establishment survey, employment grew by 120,000 jobs — 65,000 for women and 55,000 for men. This seems more in line with the overall state of the economy, which casts doubt on the household survey’s report.
Make no mistake, this report is still good news. The growth in the labor market continues, despite some turbulent headwinds across the Atlantic. Revisions to previous months continue to be strong and in the upward direction. However, I find this report to be merely good news and I am suspicious that the great data in the household survey will be maintained in future reports.