The U.S. economy added 175,000 jobs in February, a respectable gain that nearly matched the average monthly increase for the past two years. Yet the unemployment rate rose to 6.7 per cent from 6.6 per cent.
Why did the unemployment rate rise if the job gain was solid?
Because the government conducts one survey to learn how many jobs were created and another to determine the unemployment rate. The two surveys can sometimes produce differing results.
One is called the payroll survey. It asks mostly large companies and government agencies how many people they employed during the month. This survey produces the number of jobs gained or lost. For February, the payroll survey showed that companies and government agencies added 175,000 jobs.
The other is the household survey. Government workers ask whether the adults in a household have a job. Those who don’t have a job are asked whether they’re looking for one. If they are, they’re considered unemployed. If they aren’t looking for a job, they’re not considered part of the workforce and aren’t counted as unemployed. The household survey produces each month’s unemployment rate.
In February, the household survey showed that 264,000 more Americans began looking for work. But few immediately found jobs, so they were counted as unemployed. The unemployment rate rose as a result.
Unlike the payroll survey, the household survey captures farm workers, the self-employed and people who work for new companies. It also does a better job of capturing hiring by small businesses.
But the household survey is more volatile from month to month. The Labor Department surveys just 60,000 households, a small fraction of the more than 100 million U.S. households.
By contrast, the payroll survey seeks information from 145,000 companies and government agencies. They employ roughly one-third of non-farm employees. The employers send forms to the Labor Department or fill out online surveys, noting how many people they employ. They also provide pay, hours worked and other details.
Most Americans focus more on the unemployment rate, which comes from the household survey. But economists generally prefer the jobs figure from the payroll survey.
Still, they note that the two surveys tend to even out over time.