The large body of economic data available to analysts and investors can be parsed and examined in many ways according to your perspective and your particular needs. While some information, such as consumer-confidence numbers, focuses on consumer behavior, other releases, like factory orders data, examine the decisions that businesses make in response to changing economic conditions.
For many types of data, multiple releases of statistics provide similar and often overlapping information. Perhaps the best example lies in industrial manufacturing -- several different reports cover nearly every aspect of manufacturing activity, including sentiment numbers, breakdowns by several industries, and data on production divided into groups by the type of good or service produced. On the other hand, relatively few reports look at the ability of consumers to buy the things that businesses produce. One of the most important pieces of information on this topic is the Labor Department's monthly release of employment data.
The basic concept
The Labor Department's employment data represents the first major release of government data for the previous month. Two numbers generally receive the most attention from media outlets: the change in the number of employees on business payrolls outside the agricultural sector, and the percentage of the labor force that does not have a job. Yet these two numbers barely scratch the surface of the broad set of information provided in this report. Other available data addresses issues such as the size of the national labor force, average hourly and weekly earnings for employees, and the average number of hours that employees worked.
Fully understanding the employment report requires knowing that it includes two completely different surveys. The household survey, conducted by the U.S. Census Bureau and the Bureau of Labor Statistics, includes information from about 60,000 households. The establishment survey, on the other hand, is run by the Bureau of Labor Statistics with the cooperation of state labor agencies, and more than 160,000 businesses covering in excess of 400,000 work sites participate.
Because the two surveys collect information from different sources, some important distinctions appear in the resulting data. For instance, the household survey includes a number of categories of workers omitted in the establishment survey, including self-employed workers, agricultural workers, and private-household workers. The establishment survey, meanwhile, focuses on raw employment numbers rather than individuals, and so workers with two or more jobs will be double-counted. The results of the two surveys are given in separate parts of the report.
The true depth of the report becomes apparent in looking through the various breakdowns of the overall data. The Labor Department provides a comprehensive analysis that discusses many different subclasses of the data. Unemployment rates are broken down by age, sex, and race. The number of working people is divided into categories by age, sex, race, marital status, and education level. In addition, the report provides numbers of part-time workers and their reasons for not working full-time; numbers of self-employed workers and unpaid family workers; and numbers of people working in two or more jobs. The report also looks at why the unemployed are out of work and for how long. Extremely detailed breakdowns of employment levels by occupation and industry are also provided.
Evaluating the data
To get full value from the employment data, you really have to take a look not only at the news release but also at the accompanying tables that are hyperlinked at the bottom. The headline numbers in the release are helpful, but you can often find much more interesting data in the supporting tables.
For instance, in the current report, an overall non-farm payroll gain of 51,000 was weaker than many had expected. The manufacturing industry lost 19,000 workers, and there were 11,000 fewer jobs in the retail trade sector than in August. The service industry overall, however, added 62,000 jobs, with financial, professional, and health-related services leading the way. Government employment fell by 8,000.
To verify that comparisons between months are valid, you should always look at any data revisions from previous months. For instance, in this report, revisions to July and August figures indicate that 62,000 more jobs were available than previously estimated. It's easy to make erroneous conclusions in either direction if you fail to take such revisions into account.
As often happens, the household survey indicates a much different picture from the establishment survey. While the establishment survey usually provides the headline number, the household survey for September shows a much higher gain of 271,000 jobs. The second part of this article digs into this disparity in greater detail.
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Even though the establishment survey doesn't count Fool contributor Dan Caplinger among the employed, he doesn't mind. He doesn't own shares of any of the companies mentioned in this article. The Fool's disclosure policy never stops working for you.
