About Those PA Job Numbers

Sean Brandon, InternBy Sean Brandon, intern

Last week (while Third and State was on holiday), Pennsylvania’s July jobs report came out. The unemployment rate for July jumped from 7.6% to 7.8%, with 493,681 Pennsylvanians out of work.

Before June, the unemployment rate in Pennsylvania had been decreasing or holding steady for 16 straight months. The chart below showing the unemployment rate since 2007 reflects the slow recovery Pennsylvania has been experiencing.

It was also reported that 8,700 jobs were created in Pennsylvania last month. The Pennsylvania economy must produce 7,850 jobs each month over the next three years in order to get back to full employment. In this light, the 8,700 jobs created in July seem to indicate healthy growth.

The stark discrepancies between what unemployment rate data and job count data are telling us are a result of two different surveys which are both conducted by the Labor Department. The Household survey asks a sample of individuals whether or not they are employed, gathering the data for the unemployment figures. The Establishment survey asks companies to report how many employees they have.

Below is a chart depicting each survey’s measured employment levels in Pennsylvania since 2009. As is evidenced by the chart, the disparities between the Household and Establishment surveys are not unusual. Here, the Household survey shows poor performance over the last three months while, relatively, the Establishment survey is showing consistent growth. The BLS states that “data from these two sources differ from each other because of variations in definitions and coverage, source of information, methods of collection, and estimating procedures. Sampling variability and response errors are additional reasons for discrepancies.”

Writing for London’s The Guardian, Ben Goldacre points out that we should not read into the monthly fluctuations of data. Goldacre makes a statistical argument by drawing attention to the way labor market data are collected — sampling. He uses the example of a gumball vending machine that contains thousands of blue and yellow gumballs. We know that exactly 40% of the gumballs in the machine are yellow. However, when taking various samples of 100, sometimes we may pull out 32 yellow gumballs, and other times we may pull out 48, 37, 43, or whatever.

This ‘sampling error’ is a regular occurrence and often means we can’t conclude that a monthly gain or loss in state level employment is a real occurrence or the result of sampling error. In fact, Pennsylvania is not one of the states listed by the BLS as having a statistically significant employment change between June 2011 and July 2011. That is why it is important to not put too much stock in a single month’s data, good or bad. The best we can often do is look back over the course of the last several months and search for patterns in the employment numbers.

The figure below plots the monthly change in employment alongside a three-month moving average of employment. As you can see the monthly employment data has been quite volatile. Although July was a good month overall, employment growth seems to have slowed somewhat recently (the red line).

What we can learn from the data released in July and throughout the year is that a relatively slow recovery is taking place. The chart below indicates that since the start of the Great Recession in December 2007, Pennsylvania has lost 116,400 jobs. These job losses coupled with the 110,700 jobs needed to keep up with the state’s population growth make up the 227,100 job deficit (from pre-recession employment levels) facing Pennsylvania today. In the last year, Pennsylvania has recovered over 70,000 of the lost jobs, a statistically significant employment change indicating that growth has taken place. Policymakers at the state and national levels need to keep putting people back to work if a recovery is to continue.

Sean Brandon served as an intern with the Keystone Research Center and Pennsylvania Budget and Policy Center in 2010 and 2011. Read Sean's bio.


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