The economy lost a net 125,000 jobs in June — the first monthly loss this year. Yet the unemployment rate fell to 9.5 percent from 9.7 percent.
How did that happen? It’s because of how the government calculates who’s employed and who isn’t.
The government does two employment surveys each month.
One is called the payroll survey. It asks companies and government agencies how many people they employ. This survey produces the number of jobs gained or lost during the month. In June, the payroll survey showed a net decline of 125,000 jobs. That total was dragged down by the ending of 225,000 temporary census jobs. Private employers added 83,000 positions. That was higher than May’s total but below the March and April figures.
The other is called the household survey. Government workers ask households about the employment status of adults living there. Those without jobs are asked whether they’re looking for one. If they’re not, they’re no longer considered part of the work force and aren’t counted as unemployed. The household survey produces the unemployment rate each month.
As jobs remain scarce, many people who are out of work and have looked for months give up. These “discouraged” workers were counted as unemployed in the household survey while they were looking. But once they stop, they’re no longer counted as unemployed.
About 2.6 million people were classified as “discouraged workers” last month, up from only 1.4 million when the recession began in December 2007. That exodus, which reduced the number of people officially counted as unemployed, caused the jobless rate to drop to 9.5 percent from 9.7 percent.
Once a recovery gets under way, positive news — like rising stock prices or companies announcing plans to hire — leads discouraged workers to start looking again. As they rejoin the work force and look for jobs, these people are once again counted as unemployed in the household survey. And they drive up the unemployment rate.
That’s why many economists project the unemployment rate could rise again, or at least remain near its current level, even if the economy were to improve.
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