Is the U.S. job surge slowing down? Here’s what you’re not being told!

Interpreting the economy often resembles the assembly of a complex puzzle. One strives to put together the various elements so that they fit and form a clear picture. Unfortunately, the data do not always cooperate with this effort.

This is exactly what happened with the just-released October employment report. On one hand, we can observe the reported growth of 150,000 jobs in the establishment survey and say that we had another month of very solid job growth, albeit at a slower pace. This figure is particularly impressive when considering the approximately 30,000 workers who were not counted due to the UAW strike. These workers will be reflected in the November data now that the strike has ended.

However, the household survey paints a very different picture. It shows a further 0.1 percentage point increase in the unemployment rate, bringing it to 3.9%. Although this rate remains very low compared to historical standards, it represents a 0.5 percentage point increase from the April level. Additionally, the household survey shows an actual decrease in employment, with 348,000 fewer people reporting being employed compared to September.

This discrepancy continues a trend that has emerged since April. Over the past six months, the establishment survey has reported an increase of 1,234,000 jobs, while the household survey has shown an actual increase in the number of employed people of only 191,000.

Historically, such discrepancies between the two surveys have been observed, but during the recovery from the pandemic, the reported discrepancy last year raised significant concerns. From January 2022 to December 2022, the establishment survey indicated the creation of 4,430,000 jobs, while the household survey reported an increase in employment of only 2,120,000, creating a gap of over 2,300,000 jobs.

This gap was significantly narrowed when the Bureau of Labor Statistics (BLS) introduced new demographic controls in January, based on census data, adding 954,000 to the total employment. Additionally, job growth in the establishment survey was revised downward by about 300,000 in the annual revision process based on state unemployment insurance claims. This still left a significant, albeit smaller, gap than previously reported. (Part of this gap is due to differences in definitions, particularly a decrease in self-employment in 2022, which would have affected the household survey but not the establishment data.)

When the data diverge, it is prudent to prioritize the establishment survey. This is because the establishment survey has a much larger sample size and significantly higher response rate, interviewing 651,000 establishments each month, compared to the household survey’s coverage of 60,000 households.