It’s not just about the topline numbers
The U.S. Labor Department’s monthly jobs report is closely monitored by investors, business executives and policymakers for signals about the direction of the world’s largest economy. While the headline numbers for job creation and unemployment draw the most attention, the report contains a raft of other data that provide important insights into the U.S. labor market.
The U.S. government’s monthly jobs report is one of the most closely watched economic data events in the world.1 It can move markets, influence policymakers and shape public perceptions of the economy.
The information is guarded so closely before its release at 8:30 a.m. on the first Friday of every month that journalists covering it are literally locked in a room and cut off from the outside world until the official unveiling.2 A handful of top government officials, including the president, gain access ahead of time; President Trump sent shock waves through the economic world in June when he broadly referenced the results of a jobs report in a tweet more than an hour before its release, raising a host of political and legal questions.3
“Jobs are the holy grail of economic activity, because when more people are employed, consumer spending is going to be higher,” says David Brown, deputy director of the economics program at Third Way, a center-left think tank in Washington. Consumer spending on goods and services accounts for more than two-thirds of GDP, according to government data.4
The roughly 40-page report, compiled by the Labor Department’s Bureau of Labor Statistics (BLS), contains a host of figures regarding the health of the economy. The report is derived from two surveys: Current Employment Statistics (CES), also known as the establishment survey, which questions approximately 147,000 businesses and government agencies at all levels about hiring trends; and the Current Population Survey (CPS), also called the household survey, which samples 60,000 households about their employment status and job-search activities.5
The establishment survey measures every economic sector except agriculture, which is why it is sometimes called the nonfarm payroll report. The household survey does include farm work.6 The establishment survey is considered somewhat more reliable, given its larger sample size. The figures are preliminary and are updated several times as the BLS collects more data.7
Two headline figures capture the most attention: the number of jobs gained or lost and the unemployment rate. In July, for example, the surveys found that the economy added 157,000 jobs and the unemployment rate fell to 3.9 percent.8
The July figures suggested a fairly healthy economy, one with enough jobs available for those seeking work – although observers question whether those topline numbers obscure ongoing problems elsewhere in the labor market.
The information is used instantly to inform trades on stocks and bonds, and later to assist businesses, government officials and economists in tracking longer-term trends. It helps the Federal Reserve make decisions about monetary policy, which in turn aids corporations in strategic planning as they make decisions about future investments and borrowing. Those moves help portfolio managers and longer-term investors decide where to allocate their money based on the health of corporate bonds, Treasury securities and other markets, which are all influenced by signals about the economy’s direction.9
“What’s codified into a couple of small numbers is a lot of knowledge about where the economy is and where the economy is going,” says Michael Farren, a research fellow at George Mason University’s Mercatus Center, a conservative think tank in Arlington, Va.
Take, for example, the figure for jobs gained. That number reflects on-the-ground information from establishments across the country about their hiring, which in turn shapes their business planning based on the economic conditions they are experiencing.
This figure also is significant because it provides a glimpse into whether the rate of jobs added is sufficient to offset population growth among working-age people. There is debate about the level of this minimum number of jobs: A 2016 survey of economists put it at 145,000 a month, while the Federal Reserve Bank of San Francisco pegged it at between 50,000 and 110,000, a lower figure that reflects an aging population and declines in the level of participation in the labor force.10
Some experts look beyond the headline number, which includes both private and government employment, to focus on jobs gained or lost just in the private sector. They say this number better reflects real economic activity.
“The government will hire or lay off workers irrespective of what’s going on in the economy,” says Bernard Baumohl, chief global economist at The Economic Outlook Group, a forecasting and economic intelligence firm in Princeton, N.J. “Companies, however, will hire workers if they believe the economy is growing and that they’ll get a return on that investment.”
The second most important figure in the jobs report is the unemployment rate, which is the number of people who are jobless, actively seeking work and available to take a job divided by the entire labor force. The rate peaked at 10 percent shortly after the end of the 2007–09 recession and has since fallen significantly.11
The unemployment rate is central to both parts of the Fed’s congressionally established mandate for managing the economy. The Fed pursues a so-called dual mandate: to wield monetary policy – principally the manipulation of interest rates – to maximize employment and also to keep prices stable.12 That means Fed officials watch the unemployment rate closely. Low unemployment can put pressure on employers to increase wages in order to attract workers, which can then spur inflation. When inflation begins to exceed the Fed’s target rate of 2 percent, the central bank might raise interest rates, which slows economic growth and cools inflation.
Federal Reserve Chairman Jerome Powell said in late August that the Fed was trying to steer a course between the perils of killing economic growth by raising rates too quickly and allowing the economy to overheat by lifting rates too slowly. “I see the current path of gradually raising interest rates as … taking seriously both of these risks,” he said at the Fed’s annual policy forum in Jackson Hole, Wyo.13
The Fed’s principal lever to control interest rates is the so-called federal funds rate, the rate at which private banks borrow from each other overnight. When the central bank’s Federal Open Market Committee raises or lowers the federal funds rate, the effect ripples through the economy, influencing the interest rates that financial institutions offer to consumers and businesses.14 That is partly why many observers, including investors, banks and economists, watch the jobs report: to get an indication for how the Fed might change monetary policy.
Fed policymakers historically have divided into two camps, known as hawks and doves. “Hawks care more about a stable and predictable rate of inflation, although most admit that the dual mandate means they must also focus on employment data,” says Brandon Barford, a partner at Beacon Policy Advisors, a consulting firm in Washington. “Doves would care more about employment and may have a greater comfort with higher inflation levels in order to get a better employment result.”
The unemployment rate has been hovering near what economists consider “full employment” – the lowest level of joblessness the economy can sustain without triggering inflation. The Fed currently estimates this level, also called the natural rate of unemployment, to be 4.1 percent to 4.7 percent.15
Some observers had hoped that low unemployment would put upward pressure on wages, but so far workers’ earnings have been slow to rise, even though there are more job openings across the country than people looking for work.16 In July, average weekly earnings grew 2.99 percent from a year earlier, while inflation rose 2.9 percent over the same period. This means workers’ purchasing power, the amount they can buy with each dollar, has barely budged after accounting for inflation.17
Liberal and conservative experts debate whether the Fed should be holding interest rates steady to help spur wage growth or whether other factors, including low productivity, might be depressing earnings regardless of monetary policy.18 Even Fed Chairman Powell has called sluggish wage growth a “puzzle.”19
The tepid wage growth suggests to many experts that, despite strong jobs gains and low unemployment, the economy still has some “slack” – essentially, it is not generating goods and services as productively as it could if it better utilized its available workers and resources.20
“If you start to see that wage number move up, it would indicate that we are getting closer to the full employment number and that you are going to see inflationary pressure start to rise,” says Doug Clark, senior vice president and chief portfolio strategist at Prime Advisors, an investment management firm.
Economists and policymakers watch several other indices in the jobs report that provide a sense for how demand for workers is changing. One is average weekly hours worked. Even small variations in this metric can hint at changes in consumer demand – when businesses are busy, employees are more likely to work longer hours. Private-sector employees worked an average of 34.5 hours per week in July, edging down slightly, by 0.1 hours, from a month earlier.21
Baumohl says he also follows trends in overtime hours in the manufacturing sector, which is more sensitive to changes in economic activity than services. “If companies are getting fewer orders, they’re going to slow down their assembly lines, and if they’re slowing down the assembly line, there’s going to be less overtime,” he says.
Economy-watchers have been following another longer-term trend that the jobs report tracks: the decline in the labor force participation rate. Currently, 62.9 percent of the population is in the workforce, down from just over 66 percent a decade ago.22
Experts point to a number of factors that could be reducing the proportion of the population that is either employed or looking for work, including an aging workforce, the opioid crisis, a skills mismatch between available workers and available jobs and an increased incarceration rate, which leaves many potential workers with a criminal record.23
A closer look at the unemployed population provides further clues about the labor market’s health. The jobs report gives information on the length of time that a worker remains unemployed, which is important because the longer people remain out of work, the harder it will probably be for them to find a job. This is especially true for the so-called long-term jobless, those unemployed for 27 weeks or more.24
The BLS also collects information about people who are out of the labor force but say they would like a job. This category, known as marginally attached workers, is defined as those who say they want a job and have searched in the past 12 months, but not in the past four weeks. A subcategory of marginally attached workers is discouraged workers: those who say they want a job but are not actively seeking work because they believe no job is available.25
Treasury Secretary Steven Mnuchin has argued that more attention should be paid to an unemployment rate that includes both discouraged and other marginalized workers, known as the U-5 rate based on BLS coding. “Currently, excessive influence appears to be placed by U.S. policymakers on one metric,” he said last year, referring to the headline unemployment rate.26
Another common measure for broader unemployment includes marginally attached and discouraged workers plus those who work part time but want to be full time. The figure is often referred to as the U-6 measure. It was 7.5 percent in July, nearly twice the headline U-3 unemployment number.27
Yet even the more inclusive U-6 measure tends to disguise variations among different groups, including women and minorities. In July, both white men and women were unemployed at rates lower than the national average: 2.9 percent and 3.2 percent, respectively. During the same period, 6.1 percent of both black men and women were unemployed, as were 3.2 percent of Hispanic men and 4.7 percent of Hispanic women.28
Similar breakdowns are revealed when unemployment figures are examined across levels of educational attainment.
Those with a bachelor’s degree or higher report much lower rates of unemployment than those with a high school diploma or who did not graduate from high school. In fact, while the unemployment rate for those without a diploma has fallen considerably over the past decade – to 5.1 percent in July – that rate is still higher than the one for those with a college degree at the height of the financial crisis.29
Finally, a breakdown of jobs by sector provides another economic snapshot.
Jobs in the mining and logging sector and in construction grew the fastest from July 2017 to July 2018.30 The transportation and warehousing sector also registered strong gains as the economy has expanded, with more consumer goods and manufacturing companies looking to ship or store their products.31
Each measure contained within the jobs report offers one piece of a complex puzzle that economists, money managers and other decision-makers can use to better understand where the economy is headed.
“If you see that employment grows by 200,000 or wages are growing by 2.5 percent year-over-year, what does that mean?” the Mercatus Center’s Farren says. “When you aggregate [survey data] across all businesses, that’s telling you something about the state of the economy in general. There’s a lot that’s influenced downstream by these relatively limited numbers.”
|1884–1966||Early era of job data collection.|
|1884||The Bureau of Labor Statistics (BLS) is founded within the Department of the Interior; it remains an independent bureau before moving to the Department of Commerce in 1903.|
|1913||The BLS is transferred to the newly created Department of Labor, where it remains today.|
|1915||The BLS launches the Current Employment Statistics (CES) program to publish data on employment, hours worked and earnings.|
|1933||The U.S. unemployment rate during the Great Depression peaks at 25 percent.|
|1940||The federal government’s Work Projects Administration begins a survey, the Monthly Report of Unemployment, to assess national levels of joblessness. It becomes known as the Current Population Survey (CPS) eight years later.|
|1943||The number of U.S. jobs grows by 12.9 million between January 1939 and November 1943, most of the growth fueled by World War II.|
|1944||Amid all-out production for the war, unemployment falls to an estimated annual historic low of 1.2 percent.|
|1945||The number of jobs falls drastically from the gains recorded during the war, dropping by 3.7 million through December.|
|1953||Unemployment hits a post-World War II low of 2.5 percent.|
|1966||CES and CPS data are combined for the first time in a single report, called The Employment Situation.|
|1969–present||Monthly reports track volatile job market.|
|1969||Unemployment falls to 3.5 percent in December.|
|1982||Unemployment spikes to 10.8 percent during the 1981-82 recession.|
|1994||The CPS undergoes a major redesign to improve data collection methods and data quality.|
|2000||Unemployment in April falls to 3.8 percent during the peak of the dot-com bubble.|
|2008||Because of the financial crisis and the recession, the United States loses an estimated 1 million jobs, the biggest annual decline since 1945.|
|2009||The unemployment rate tops out at 10 percent just after the end of the recession.|
|2018||The jobless rate drops to 3.8 percent in May.|
Resources for Further Study
Baumohl, Bernard, “The Secrets of Economic Indicators: Hidden Clues to Future Economic Trends and Investment Opportunities,” FT Press, 2012. An economist walks through some of the most important economic indicators used by decision makers and how those indicators work.
Eberstadt, Nicholas, “Men Without Work: America’s Invisible Crisis,” Templeton Press, 2016. A conservative political economist investigates why, even as unemployment has fallen, the proportion of the population that is employed has also declined.
Karabell, Zachary, “The Leading Indicators: A Short History of the Numbers That Rule Our World,” Simon & Schuster, 2014. A money manager and commentator examines the most significant indicators that economists and policymakers use to track financial health and argues that there are limits to how those figures can be used to manage the economy.
Carmichael, Kevin, “The Jobs Report Is Overhyped. Here’s Why That’s A Problem,” FiveThirtyEight, Dec. 8, 2017, https://tinyurl.com/
Casselman, Ben, “Making Sense of the Jobs Report: It’s Not Always Easy,” The New York Times, Feb. 1, 2018, https://tinyurl.com/
Leonhardt, David, “For Wages, a Trump Slump,” The New York Times, Aug. 5, 2018, https://tinyurl.com/
Strain, Michael R., “The Economics and Emotions Behind Slow Wage Growth,” Bloomberg, July 9, 2018, https://tinyurl.com/
Reports and Studies
Baker, Dean, Sarah Rawlins and David Stein, “The Full Employment Mandate of the Federal Reserve: Its Origins and Importance,” Center for Economic and Policy Research, July 2017, https://tinyurl.com/
DeSilver, Drew, “What the unemployment rate does – and doesn’t – say about the economy,” Pew Research Center, March 7, 2017, https://tinyurl.com/
Escobari, Marcela, and Sandy Fernandez, “Measuring American gig workers is difficult, but essential,” Brookings Institution, July 19, 2018, https://tinyurl.com/
The Next Step
Bernton, Hal, “As Washington growers struggle with labor shortage, vote in Congress on farmworker bill remains elusive,” The Seattle Times, Aug. 6, 2018, https://tinyurl.com/
Kusisto, Laura, “Young People Don’t Want Construction Jobs. That’s a Problem for the Housing Market,” The Wall Street Journal, July 31, 2018, https://tinyurl.com/
Talbott, Bruce, “Our fruit is rotting in the trees as laborers are kept out of the country,” The Washington Post, Aug. 24, 2018, http://tinyurl.com/
Galston, William A., “Wage Stagnation Is Everyone’s Problem,” The Wall Street Journal, Aug. 14, 2018, https://tinyurl.com/
Long, Heather, “In U.S., wage growth is being wiped out entirely by inflation,” The Washington Post, Aug. 10, 2018, https://tinyurl.com/
Noguchi, Yuki, “Solving The ‘Wage Puzzle’: Why Aren’t Paychecks Growing?” NPR, Aug. 2, 2018, https://tinyurl.com/
1 Dupont Circle, N.W., Suite 700, Washington, DC 20036
A global think tank that studies the gig economy, among a host of other economic and policy issues.
Georgetown University Center on Education and the Workforce
3300 Whitehaven St., N.W., Suite 3200, Washington, DC 20007
An independent policy institute that researches the labor market and the workforce.
George Mason University, 3434 Washington Blvd., 4th Floor, Arlington, VA 22201
A conservative, market-oriented think tank that studies regulation, financial policy and monetary policy.
1025 Connecticut Ave., N.W., Suite 400, Washington, DC 20036
A center-left think tank that examines the economy, the labor market and trade.
U.S. Bureau of Labor Statistics
Postal Square Building, 2 Massachusetts Ave., N.E., Washington, DC 20212-0001
A Labor Department agency that conducts employment surveys and produces the monthly jobs report.
1. “Employment Situation Summary,” Bureau of Labor Statistics, Aug. 3, 2018, https://tinyurl.com/
2. John H. Cushman Jr., “U.S. Tightens Security for Economic Data,” The New York Times, July 16, 2012, https://tinyurl.com/
3. Jim Tankersley and Matt Phillips, “Trump Touts Jobs Report Before Official Release, Breaking Protocol,” The New York Times, June 1, 2018, https://tinyurl.com/
4. “Personal Consumption Expenditures/Gross Domestic Product,” Federal Reserve Bank of St. Louis, https://tinyurl.com/
5. “Monthly Employment Situation Report: Quick Guide to Methods and Measurement Issues,” Bureau of Labor Statistics, Feb. 2, 2018, https://tinyurl.com/
6. Mary Bowler and Teresa L. Morisi, “Understanding the employment measures from the CPS and CES survey,” Bureau of Labor Statistics, February 2006, https://tinyurl.com/
7. Ibid.; Kevin Carmichael, “The Jobs Report Is Overhyped. Here’s Why That’s A Problem,” FiveThirtyEight, Dec. 8, 2017, https://tinyurl.com/
 “Employment Situation Summary,” op. cit.
8. “Employment Situation Summary,” op. cit.
9. Akane Otani and Ben St. Clair, “U.S. Stocks Tick Higher After Strong Earnings,” The Wall Street Journal, Aug. 3, 2018, https://tinyurl.com/
 Josh Zumbrun, “The New Magic Number for Monthly Job Growth: 145,000,” The Wall Street Journal, April 7, 2016, https://tinyurl.com/
10. Josh Zumbrun, “The New Magic Number for Monthly Job Growth: 145,000,” The Wall Street Journal, April 7, 2016, https://tinyurl.com/
11. “The Recession of 2007–2009,” Bureau of Labor Statistics, February 2012, https://tinyurl.com/
12. “What are the Federal Reserve’s objectives in conducting monetary policy?” Board of Governors for the Federal Reserve System, July 13, 2018, https://tinyurl.com/
13. Sam Fleming, “Fed’s Powell sees few signs of US economy overheating,” Financial Times, Aug. 24, 2018, https://tinyurl.com/
14. Jessica Dickler, “Here’s how the Fed rate hike will affect your finances,” CNBC, June 13, 2018, https://tinyurl.com/
15. Clive Crook, “Full Employment,” Bloomberg, July 6, 2018, https://tinyurl.com/
 Jared Bernstein, “I’ve come to believe that ‘are we at full employment?’ is the wrong question,” The Washington Post, May 24, 2018, https://tinyurl.com/
16. Jared Bernstein, “I’ve come to believe that ‘are we at full employment?’ is the wrong question,” The Washington Post, May 24, 2018, https://tinyurl.com/
 Josh Mitchell, “Rising U.S. Consumer Prices Are Eroding Wage Gains,” The Wall Street Journal, Aug. 10, 2018, http://tinyurl.com/
17. Josh Mitchell, “Rising U.S. Consumer Prices Are Eroding Wage Gains,” The Wall Street Journal, Aug. 10, 2018, http://tinyurl.com/
 Michael R. Strain, “The Economics and Emotions Behind Slow Wage Growth,” Bloomberg, July 9, 2018, https://tinyurl.com/
18. Michael R. Strain, “The Economics and Emotions Behind Slow Wage Growth,” Bloomberg, July 9, 2018, https://tinyurl.com/
19. Josh Boak, “Weak pay growth puzzles Fed chief, just like everyone else,” Associated Press, June 14, 2018, https://tinyurl.com/
20. Mark Thoma, “What do economists mean by slack?” CBS News, Sept. 17, 2014, https://tinyurl.com/
 “Employment Situation Summary,” op. cit.
21. “Employment Situation Summary,” op. cit.
 Catarina Saraiva and Steve Matthews, “What Powell Needs to Know About U.S. Labor-Force Participation,” Bloomberg, Dec. 6, 2017, https://tinyurl.com/
23. Catarina Saraiva and Steve Matthews, “What Powell Needs to Know About U.S. Labor-Force Participation,” Bloomberg, Dec. 6, 2017, https://tinyurl.com/
 Gregor Jarosch and Laura Pilossoph, “The longer you’re unemployed, the less likely you are to find a job. Why?” World Economic Forum, Aug. 8, 2016, https://tinyurl.com/
24. Gregor Jarosch and Laura Pilossoph, “The longer you’re unemployed, the less likely you are to find a job. Why?” World Economic Forum, Aug. 8, 2016, https://tinyurl.com/
 “Employment Situation Summary,” op. cit.
25. “Employment Situation Summary,” op. cit.
26. Josh Zumbrun, “Forecasters See Slow Progress in Labor-Market Measures Favored by Trump Administration,” The Wall Street Journal, Feb. 9, 2017, https://tinyurl.com/
 “Employment Situation Summary,” op. cit., table A-15.
27. “Employment Situation Summary,” op. cit., table A-15.
 “Labor Force Statistics from the Current Population Survey,” Bureau of Labor Statistics, July 2018, https://tinyurl.com/
28. “Labor Force Statistics from the Current Population Survey,” Bureau of Labor Statistics, July 2018, https://tinyurl.com/
29. “Access to historical data for the ‘A’ tables of the Employment Situation News Release,” Bureau of Labor Statistics, July 2018, Table A-4, https://tinyurl.com/
 Conor Sen, “How the Shale Bust Created Trump’s Economic Boom,” Bloomberg, Jan. 10, 2018, https://tinyurl.com/
30. Conor Sen, “How the Shale Bust Created Trump’s Economic Boom,” Bloomberg, Jan. 10, 2018, https://tinyurl.com/
 Jennifer Smith and Bob Tita, “Trucking Companies Ordered Most Big Rigs In 12 Years,” The Wall Street Journal, Feb. 6, 2018, https://tinyurl.com/
31. Jennifer Smith and Bob Tita, “Trucking Companies Ordered Most Big Rigs In 12 Years,” The Wall Street Journal, Feb. 6, 2018, https://tinyurl.com/