March 2, 2004

March 2, 2004 | News Releases on Jobs, Jobs and Labor Policy

Job-Loss Problem Overstated By Flawed Data, Research Shows

WASHINGTON, MAR. 5, 2004- President Bush's political opponents have held his economic policies responsible for the reported "loss" of 2.2 million jobs, but the real failure - according to a new study from The Heritage Foundation - may lie in the statistics from which those claims are drawn.

Opponents' claims have focused on one of the two major surveys the U.S. Bureau of Labor Statistics uses to analyze employment - the Current Employment Statistics, or payroll, survey, which has reported the 2.2 million in lost jobs. However, the Current Population, or household, survey, has registered an increase of more than 700,000 jobs over the same period, and less partisan analysts have begun to question the stark differences in the results of the two surveys, says Timothy Kane, a research fellow in macroeconomics in Heritage's Center for Data Analysis and author of the paper.

Disparity always exists between the two surveys - more during recessions and less during periods of rapid growth. But the difference has reached 3 million jobs, the highest ever, and it doesn't appear to be decreasing even as nearly every other reliable economic indicator points to recovery, Kane says. Real wages are rising, unemployment is low and declining, jobless claims are down, and the household survey indicates total employment has reached a record 138.6 million.

Analysts, thus, have begun to question the findings of the payroll survey. Kane says much of the problem lies with one big methodological difficulty: When workers change jobs, the payroll survey counts them as an employee for both the former and new employer. When turnover decreases - as it has in the two years since the Sept. 11 attacks - it makes it appear that jobs have been "lost" when, in fact, employees have merely stayed at the same jobs.

Factors unique to this recovery and indicative of the future of the U.S. economy also seem to contribute to the discrepancy, Kane says. The household survey recorded a surge of 650,000 self-employed workers in the last few months. And the number could be higher since some workers - those in limited liability companies and in consulting positions with traditional firms - don't show up on payrolls and don't identify themselves as self-employed.

"Analysts know intuitively that the economy is structurally different than it was five or 10 years ago, but the consequences of the new economy are difficult to predict," Kane says. "Perhaps payroll jobs are weak simply because the modern economy relies less on payrolls for engaging the labor force."

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