The Heritage Foundation

WebMemo #416 on Taxes

February 6, 2004

February 6, 2004 | WebMemo on Taxes

Increased Investment Pushes January Job Growth

Today's Employment Situation report from the Labor Department shows strong growth in employment: 112,000 new jobs by the payroll survey and 496,000 by the household survey. While the two surveys continue to diverge, both show that more Americans are finding jobs and that employment opportunities have been increasing for several months. Strong business investment,[1] evident in last week's GDP numbers, prefigured employment growth in the retail sector and construction. The President's pro-growth economic plan - and his tax cuts, especially - contributed to this increase in employment.

 

Highlights

  • The total number of U.S. workers is at an all-time high of 138.6 million.
  • Unemployment rate of 5.6 percent represents a healthy economy, and is down significantly from 6.3 percent last June.
  • Payroll jobs increased by 112,000 over last month - the biggest gain since December 2000.
  • Payroll jobs have increased by 366,000 since August.
  • Preliminary job growth in December was also revised up from 1,000 to 16,000.
  • Employment increased by 496,000 workers in January, according the household survey.

The Myth of Discouraged Workers

  • There are 4 percent fewer discouraged workers today than one year ago.
  • The rate of discouraged workers is lower today than the mid-1990s.
  • Teenagers account for roughly two-thirds of lower labor force participation rates since the peaks of the late 1990s. Because 10 percent fewer teens are looking for work than in the 1990s, the overall participation rate is down from its peak in the late 1990s.[2]

Two Surveys, Two Revisions

The story of diverging job growth between the two BLS surveys is now familiar, but here is a refresher: before today the BLS survey of establishments showed a decline of 776,000 payroll jobs during the recovery, while the household survey shows growth of the workforce by over 2.2 million. Today's revisions had very little impact on that disparity (see chart).

  • The population estimate from the Bureau of the Census was reduced, lowering the household measure of total employment by 409,000, while the household survey estimate of employment grew by 496,000. The overall effect was a net gain in this measure of employment.
  • Payroll surveys were benchmarked to a complete count of companies, covering 98 percent of the workforce. As a result, original estimates of nonfarm payroll employment over the last year were revised down. Taking into account all revisions, 82,000 more jobs were created from March to December of 2003 than previously estimated.
  • The divergence in total employment between the two surveys was not resolved by today's revisions. Before today, the job growth gap was exactly three million in the raw data. As of today:
  • The revised household survey measure increased by 2.2 million workers since the end of the recession in November 2001.
  • The revised payroll survey measure declined by 716,000 jobs during that time.
  • BLS does not believe that new businesses are being missed by the payroll survey but does acknowledge that "contractors," as a category of workers, are missed by the payroll survey and are not counted among the self-employed, either.


[1] See Rea Hederman, "Tax Cuts Boost Business Investment," http://www.heritage.org/Research/Taxes/wm412.cfm.

[2] See Timothy Kane, "The American Workforce: Strong Facts Trump Weak Myths," http://www.heritage.org/Research/Labor/wm406.cfm.

About the Author

William W. Beach Director, Center for Data Analysis and Lazof Family Fellow
Center for Data Analysis

Alison Acosta Fraser Senior Fellow and Director of Government Finance Programs
Domestic and Economic Policy

Rea S. Hederman, Jr. Director, Center for Data Analysis and Lazof Family Fellow
Center for Data Analysis

Tim Kane, Ph.D. Visiting Fellow
Center for Trade and Economics (CTE)