The government’s Bureau of Labor Statistics (BLS) reported that payrolls grew by 121,000 in June. With minor revisions to April and May, the total increase in people working was 124,000. The unemployment rate stayed at 4.6%.
The news itself is okay but not great. You would think that at some point if total jobs don’t increase by more than they have during the past few months, the unemployment rate will start creeping back up.
The big question I have is how the ADP report on employment growth that was released Wednesday can differ from the BLS by so much. I noted yesterday that ADP’s total employment numbers were 273,000 higher than BLS’s at the end of May. Adding in the difference between ADP’s reported 368,000 increase in June vs. BLS’s 121,000, the difference is now over a half a million (520,000). BLS says that the average monthly jobs increase so far this year has been 131,000, while the average monthly increase according to ADP has been 218,000 — 66% more than BLS. That’s a ridiculous difference. If BLS is right, employment growth for the first half of 2006 has been okay, but nothing special. If ADP is right, employment growth is on fire.
I believe that ADP and Macroeconomic Advisers, LLC, the company doing the work on ADP’s behalf, carry a heavy burden of proof. I have converted ADP’s cursory explanation of its methodology from PDF to HTML and loaded it at my host, so that those who are interested can take a closer look if they wish. I’d like to see a detailed explanation of the differences at some point. If ADP wants to be taken seriously in the future, they owe us at least that.
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UPDATE: Macroeconomic Advisers’ home page has this defense posted:
The ADP National Employment Report for June, reported yesterday, was correctly calculated. There is no truth to rumors that the ADP National Employment Report released yesterday, signaling a June increase of 368 thousand in private nonfarm payrolls, was erroneously calculated. Macroeconomic Advisers stands behind the calculations. Over the 69 months in which the index is available, from 2001 to May 2006, the standard error relative to the “as was reported” BLS preliminary estimate (for private nonfarm employment) is 91 thousand.
Folks, I don’t care whether it was “correctly calculated.” I want to know why you think your measurement of total employment more accurately reflects reality than BLS’s.
If they believe that the BLS numbers will “catch up” to ADP’s in the future, they need to say so, and tell us why.
Waiting ……
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UPDATE: I am grateful to Chuck Simmins at North Shore Journal for irritating the heck out of me (seriously).
That’s because Chuck points out that the employment numbers used to determine the unemployment rate in June went up by 387,000 (based on a survey of households, the “Household Data”), which is drop-dead great. But the total employment based on calling businesses (the “Establishment Data”) the one that leads the BLS report today, only went up 121,000, which as noted is nothing special.
It gets worse:

Why in the world is there a 9.1 million person difference between the total 144.363 million employment level reported in the Household survey and the 135.230 million in “non-farm employment” in the Establishment survey? (NOTE: See Update 3 for the BLS’s explanation.)
I also just noticed that the ADP-Macroeconomic Advisers total employment numbers are a full 30 million or so below the BLS totals. To say that there’s a mystery here is an understatement…..
Chuck’s central and well-taken point is that George Bush’s record on employment growth is very comparable to the Clinton record, and their comparative unemployment rates are virtually identical through their first 5-1/2 years in office.
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UPDATE 3: Chuck at North Shore sent me an e-mail with an explanation of the differences between the two BLS reports. I found a probably only slightly updated version at BLS. Here’s their explanation:
….. The household survey provides the information on the labor force, employment, and unemployment that appears in the A tables, marked HOUSEHOLD DATA. It is a sample survey of about 60,000 households conducted by the U.S. Census Bureau for the Bureau of Labor Statistics (BLS).
The establishment survey provides the information on the employment, hours, and earnings of workers on nonfarm payrolls that appears in the B tables, marked ESTABLISHMENT DATA. This information is collected from payroll records by BLS in cooperation with state agencies. The sample includes about 160,000 businesses and government agencies covering approximately 400,000 individual worksites. The active sample includes about one-third of all nonfarm payroll workers. The sample is drawn from a sampling frame of unemployment insurance tax accounts.
For both surveys, the data for a given month relate to a particular week or pay period. In the household survey, the reference week is generally the calendar week that contains the 12th day of the month. In the establishment survey, the reference period is the pay period including the 12th, which may or may not correspond directly to the calendar week.
Differences in employment estimates. The numerous conceptual and methodological differences between the household and establishment surveys result in important distinctions in the employment estimates derived from the surveys. Among these are:
- The household survey includes agricultural workers, the self-employed, unpaid family workers, and private household workers among the employed. These groups are excluded from the establishment survey.
- The household survey includes people on unpaid leave among the employed. The establishment survey does not.
- The household survey is limited to workers 16 years of age and older. The establishment survey is not limited by age.
- The household survey has no duplication of individuals, because individuals are counted only once, even if they hold more than one job. In the establishment survey, employees working at more than one job and thus appearing on more than one payroll would be counted separately for each appearance.
UPDATE 4: Larry Kudlow favors the Household survey, and has a lot of other positive things to say about the economy, because the economy is chugging along pretty nicely in the face of some tough obstacles. His claim that GDP is 20% higher since the Bush tax cuts ignores inflation; in real terms, GDP is up 12.5%.
UPDATE 5: Kudlow also has this interesting para at his related blog post:
Of course, big corporations facing high healthcare costs and globalization pressures to downsize are clearly not hiring as rapidly as small entrepreneurial firms. But the reality is that the jobs picture is much better than these corporate payroll numbers suggest. That is one reason why the economy remains stronger than conventional economists would have us believe.