Brookings on Job Numbers

An Upbeat Household Survey and Revisions in Old Payroll Statistics Paint a Brighter Picture of the Job Market

Gary Burtless

In September 2012 the unemployment rate fell below 8% for the first time since January 2009. Though the recovery from the 2008-2009 recession has been heartbreakingly slow, the latest unemployment statistics combined with revisions in old payroll employment numbers offer a brighter picture of job market progress than we have seen in recent BLS reports.

The September employment report shows that private payrolls increased for the 31st consecutive month, rising 104,000 compared with August. While this is a somewhat slower pace of private sector employment growth than we saw earlier in the year, a turnaround in public employment and revisions in estimated job gains in July and August significantly lifted the estimated rate of payroll gains this past summer. Initial estimates showed that government employment fell 21,000 in July and 7,000 in August. The latest BLS revisions suggest government payrolls increased 18,000 in July and 45,000 in August. In addition, preliminary estimates for September show public payrolls increased 10,000 in September.

This is the first time since March–May 2010, when the Census Bureau was adding temporary workers for the decennial census, that we have had three successive months in which government employment increased. Between May 2010 and July 2012, the drop in government payrolls offset more than a quarter of the job gains in the private sector. Private payroll employment rose more than 3.9 million, while government employment fell almost 1.1 million. The latest BLS statistics show that government employment is now adding to rather than subtracting from employment growth. BLS revisions to the preliminary July and August payroll numbers added 86,000 to estimated job gains this past summer. While the overall pace of job growth was not spectacular, it was clearly fast enough to shrink the unemployment rate.

The employment numbers from the latest household survey are even more heartening. The number of employed adults increased 873,000 while the number of adults saying they are either employed or looking for work increased 418,000. The number of unemployed workers thus fell 456,000, and the unemployment rate fell 0.3 percentage points to 7.8%. The number of unemployed workers is now the lowest it has been since January 2009.

The unemployment rate would certainly be higher if workers’ prospects of finding jobs were brighter. Since the end of the last economic expansion in late 2007 the labor force participation rate has dropped 2.3 percentage points. Some of the decline is due to factors other than a lousy job market, however. I estimate that about half of the decline can be traced to an aging population. As the baby boom gets older, a larger percentage of adults is in age groups with low labor force participation rates. Still, we would expect that in a healthy job market the number of labor force participants would be 2½ million to 3 million larger than it was in September 2012. While the September employment report was more encouraging than the ones we have seen in recent months, the job market is still a long way from rosy good health.