With all of the Democratic candidates claiming that up to three million jobs have been lost during the Bush administration Irwin Seltzer at the Hudson Institute helps to clarify The Fuzzy Jobs Picture.
The trouble is that no one seems to have a clear, unambiguous picture of what is going on in the jobs market. And with good reason. The U.S. Department of Labor regularly surveys employers to ask how many people they are hiring, and how many they have laid off. It also surveys households to find how many people say they are in work. Any sensible person would expect the results of these two surveys to be more or less the same: if employers are hiring, more households should be reporting that their members are finding jobs.
Alas, the world of economic statistics is not so straight-forward. In the past year, employers reported a net loss of over 70,000 jobs, while households reported a net gain of over two million. Believe the second figure. Here’s why.
The survey of employers, which is the more widely reported of the two, is so bleak because of the way it is designed. Assume, for example, that a factory employs some 3,000 workers making widgets, and 300 workers in the on-site canteen. Management decides to outsource the food service. When this employer next responds to the employment survey, he will report a job cut of 300 and, best of all, that he is now producing all of the widgets that he once produced with a workforce of 3,300, but using only 3,000 workers–a bogus productivity miracle.
Even more misleading is the fact that the new firm formed to handle the canteen catering is not picked up in the employment survey, which does not cover new firms or the newly self-employed.
Turn now to the household survey. The canteen worker reports that he most certainly has a job, even though it is with a new employer. And if the new catering firm upgrades the quality of the fare on offer, so that fewer workers bring their own homemade lunches, forcing the caterer to add workers, those newcomers to the job market will not be picked up in the employment survey, but will be recorded in the household survey.
If you take the 300 lost canteen jobs Seltzer talks about, and the 300 jobs that were created by outsourcing the same services, you would think that would create a wash, wouldn't you? The problem comes when you only calculate losses. What you end up with is 300 jobs lost. End of analysis.
This is the one sided approach that the Democrats will take over the next year to try to convince voters (who are living in the midst of a robust economic recovery) that the sky is falling. This is the way they can claim that there have been three million jobs lost.