You can count pollster Gallup as another observer questioning Friday’s job report, in particular the big drop in the unemployment rate. In a blog post, Dennis Jacobe, Gallup’s chief economist, writes that he seriously doubts whether the economy created nearly 900,000 jobs in September, as measured by the Labor Department’s seasonally adjusted household survey.
While the payroll survey of businesses and government showed just 114,000 net new jobs created, the household survey showed a jobs boom, and it’s the latter which is used to calculate the unemployment rate. Jacobe:
The problem is that even though the Household survey tends to be very volatile, this decline seems to lack face-validity, particularly after the prior month’s numbers. The consensus estimate was that the government would report that the unemployment rate was unchanged at 8.1% in September. GDP growth was 1.3% in the second quarter and seems to be no better this quarter. The government’s Establishment survey shows there were 114,000 new jobs created in September — very close to the consensus of 113,000 — and not sufficient to lower the unemployment rate.
A quick comparison of the government’s seasonally adjusted and unadjusted employment data seems hard to reconcile with the weak economy. For example, the government shows the number of employed workers increasing by 775,000 in September from August on an unadjusted basis. This surge in hiring seems surprisingly large given the current economy, not to mention the even larger adjusted increase of 873,000. Similarly, the number of unemployed declined by 954,000 in September on an unadjusted basis. This is reduced to a smaller adjusted decline of 456,000 — but both numbers are also surprisingly large.
His bottom line: “The Household results should be discounted. … The obvious conclusion is that a new employment measure is needed.”
Jacobe’s preferred measure is one Gallup has created, Payroll to Population, or P2P. It is simply “the number of Americans employed full-time for an employer as a percentage of the U.S. population.” P2P is based on 30,000 phone interviews a month. And what did the P2P show for September? This: “The P2P deteriorated slightly to 45.1% in September from 45.3% in August, suggesting the real jobs situation was essentially unchanged last month.”
Here’s why I like this idea: The Gallup measure more or less reflects — accurately I think — what we see in other broad measures such as the labor force participation rate and the civilian-employment ratio. They show a depressed labor market, not one suddenly gaining huge momentum.